Franchise Disclosure Agreement Update Tips

The franchise disclosure agreement is the backbone document of all franchise operations and procedures. It is this document that guarantees your business is managed just the way you want by all of the franchisee partners as well as protects your business identity.

Preparing the franchise disclosure agreement is not an easy task. Apart from the fact that the document must address a lot of important issues, there are also some state and federal regulations that must be covered. This is why even experiences professionals often seek the help of franchise consultants and lawyers when writing or updating their franchise disclosure agreements.

Updating your franchise disclosure documents is also quite challenging. If need to update your franchise agreement, you surely can use some help. Here are a few useful tips that can help you throughout the process.

The most important aspects of updating a franchise disclosure agreement.

• Check federal and state regulations. The first thing to do when preparing or updating a franchise disclosure agreement is to check the federal and state regulations. Although you may still need to get the agreement reviewed by a legal consultant, this will help you write it or update it without missing any important details. There are many laws governing franchise operations. Although they may differ from state to state, in general you will need to update the agreement 120 days after the first year and than annually. Missing the state regulated deadlines can result in big troubles and huge penalties so check these as well.

• Check which parts of the agreement must be updated. There are some parts of the disclosure agreement that you will need to update even if there are no changes in the way your company works. For example you need to update item 2 for any changes in the key management, item 3 concerning litigation, item 4 – bankruptcy. You need to update the chapters concerning your opening costs based on recent expenses, the chapter regarding payments to suppliers, items regarding trademark and infringement information and the items concerning lists of existing outlets and terminations. All franchisee disclosure forms should also be updated.

• The annual audit. Each update should be accompanied by an annual audit. Call your audit partners as early as possible as leaving this for the last moment usually results in missed deadlines.

• Take advantage of the update. Updating the agreement is a real burden but it is also provides a great opportunity to review closely some of your operations. You are digging in forms and documents so you can easily go through all your franchise units contracts and check if any updates are needed there too. You can do the same with contracts you have with suppliers or other business partners. While updating the trademark section of the disclosure agreement, check the documents that concern protecting your grand names and logos and file or renew any applications to protect existing or new logos, brand names, trade marks or patents.