1851

In a few months, many franchisors will begin working on next year’s <a href="https://1851franchise.com/what-is-an-fdd--2705192">Franchise Disclosure Document</a>, a comprehensive record of information about the organization that is shared with franchise prospects. The FDD contains several hundreds of pages of franchise information, which includes <a href="https://1851franchise.com/how-to-read-an-fdd-101-a-basic-introduction-to-the-franchise-disclosure-document-2712016">23 sections, or items, and numerous additional exhibits</a>.<a href="https://www.forbes.com/sites/forbescoachescouncil/2020/07/20/covid-19-raises-questions-about-the-upcoming-franchise-disclosure-document/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=covid-19-and-item-19-how-the-pandemic-might-impact-upcoming-franchise-disclosure-documents-2713537#1e4cbee16dd3" target="_blank" rel="nofollow">As a recently posted article in Forbes points out</a>, “Due to the negative impact on many industries caused by the Covid-19 pandemic, the information shared in the 2020 FDD will be significantly different from previous years. What the FDD will look like and how it should be interpreted will be one of the big questions in the franchise community over the next year.”Several sections of the FDD will likely be impacted, including what many consider to be the most important section, <a href="https://1851franchise.com/the-franchise-bible-item-19-2703090">Item 19</a>.&nbsp;<blockquote>“Franchisors in the restaurant, hotel, beauty and fitness industries have been profoundly impacted," the article said. "A lot of these locations were forced to close for several months, and therefore will not have a full year of earnings. Even though some restaurants remained open for carryout or delivery or have reopened their dining rooms at partial capacity, their sales numbers took a substantial hit over that time and do not represent the normal volume of sales that would be expected. This is going to create a complex set of challenges that franchisors have never faced when putting together Item 19 of the FDD.”</blockquote>Since the pandemic may have forced some franchise locations to close while delaying plans for opening new units, the brand’s Item 20, which outlines the number of operating units, will be significantly different than previous years. <a href="https://1851franchise.com/tipsforbuyingafranchise/understanding-fdd-item-21-audited-financial-statements-2703110">Item 21 presents the audited financial statements</a> for the franchisor for the past three years, and there is no doubt 2020 will prove to be an outlier.&nbsp;Much of the language in a brand’s FDD will also likely need to be altered to better reflect a post-pandemic landscape, the article notes. Moving forward, franchisors will need to work hard to update their FDD and meet the needs of prospective franchisees.&nbsp;<blockquote>“These are new and unexpected challenges and there is no precedent for handling the challenges that the upcoming FDD will present," the article continued. "One option is to essentially mark an asterisk next to everything in 2020 and recognize the data is an outlier. In Item 19, they could share the 2018, 2019 and 2020 numbers, thereby showing the norm of the previous years and then disclosing the unusual year of 2020. Either way, franchisors work hard to present a linear progression of growth and stability for the benefit of their business and the disclosure. That linear path will likely be shattered in 2020.”</blockquote>To read the full Forbes article, <a href="https://www.forbes.com/sites/forbescoachescouncil/2020/07/20/covid-19-raises-questions-about-the-upcoming-franchise-disclosure-document/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=covid-19-and-item-19-how-the-pandemic-might-impact-upcoming-franchise-disclosure-documents-2713537#1e4cbee16dd3" target="_blank" rel="nofollow">click here</a>.

COVID-19 and Item 19: How the Pandemic Might Impact Upcoming Franchise Disclosure Documents

1851 Franchise

Putting together the FDD for 2021 will present an unprecedented challenge for many franchisors, especially those who operate in the hardest-hit industries.


covid-19-and-item-19-how-the-pandemic-might-impact-upcoming-franchise-disclosure-documents

Pet Wants

Recession-Resistant Business Opportunities in the Pet Industry: Why Pet Wants Stands Out

recession-resistant-business-opportunities-in-the-pet-industry-why-pet-wants-stands-out

Layne's Chicken Fingers

From Garage Doors to Chicken Fingers: How This Layne’s Franchisee Found Success

from-garage-doors-to-chicken-fingers-how-this-laynes-franchisee-found-success

CapitalSpring

Restaurant Dive: Why More Restaurant Chains Are Catering to Travelers

restaurant-dive-why-more-restaurant-chains-are-catering-to-travelers

What Makes Pet Wants a Low-Risk Franchise Investment?

what-makes-pet-wants-a-low-risk-franchise-investment

TruBlue Home Service Ally

TruBlue Celebrates a Milestone Year in 2024 With 100th Location Opened

trublue-celebrates-a-milestone-year-in-2024-with-100th-location-opened

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

Login

facebook

instagram

twitter

linkedin

youtube

Yum Brands - KFC - Pizza Hut - Terminates Franchise Agreements in Turkey - 1851 Franchise

Yum! Brands Terminates Franchise Agreements in Turkey Due to Non-Compliance

yum-brands-terminates-franchise-agreements-in-turkey-due-to-non-compliance

Recent Franchise News - Why Franchisors Churn Through Marketing Suppliers - 1851 Franchise

Forbes: Four Reasons Why Franchisors Churn Through Marketing Suppliers

forbes-four-reasons-why-franchisors-churn-through-marketing-suppliers

QSR Magazine: Big Chicken Targets Global Expansion

qsr-magazine-big-chicken-aims-for-global-growth

Starbucks Strike Brews Opportunity for the Next Coffee Franchisee

starbucks-strike-brews-opportunity-for-coffee-franchise-hopefuls

I Heart Mac and Cheese - Franchisees Sue I Heart Mac and Cheese - Franchise News - 1851 Franchise

Restaurant Business Online: Franchisees Sue I Heart Mac and Cheese

restaurant-business-online-franchisees-sue-i-heart-mac-and-cheese

Two Attorneys, Restaurant Professionals To Serve Germantown Community With New Paris Baguette Café

two-attorneys-restaurant-professionals-to-serve-germantown-community-with-new-paris-baguette-cafe

COVID-19 and Item 19: How the Pandemic Might Impact Upcoming Franchise Disclosure Documents

MORE STORIES LIKE THIS