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How Spadea Lignana Can Help Franchisors Renew Their FDD

By staying ahead of the pack, franchisors can position themselves for long-term, exponential growth and success in an unprecedented year.

Are you a franchisor ready to renew your FDD? Is this the year you'll be ahead of FDD renewal, or will you wait until the last minute? Who will be the FDD hero this year by taking responsibility for it being done early? These are all questions that franchisors are asking themselves as the new year approaches.

“This year, more than ever, there is a timeliness factor where some states are still approving last year's renewals,” said Tom Spadea, one of Spadea Lignana Law Firm’s founding partners, who has a long and diverse history in the franchising industry. “Now, it is more important than ever to be ahead of the pack. In certain states, waiting one day to file could mean a month delay in getting approval. Franchisors need to be on top of it and implement the necessary changes.” 

Spadea notes that there are a few factors that franchisors should focus on when renewing their FDD this year. “First, franchisors should be scheduling time for the accountant to come in and start their audit,” he said. “That is always a factor that can cause a holdup. If I was a franchisor, I'd be on the phone asking the accountant if they could schedule for two weeks earlier than last year. Once it is on your calendar, set some deadlines, start compiling and get organized.”

In almost half the states, you have to comply with specific state laws to sell franchises legally. Each state has its own unique rules and fees associated with filings your renewed franchise disclosure document or FDD. Most franchisors have their attorney handle this registration process annually, or handle it internally. For those not outsourcing to their franchise law firm, they need to ensure that they are complying with any new rules, updating the documents in 2021 incorporating the impact of the pandemic and being aware of any shifts in franchise jurisprudence that can have a significant impact on their system in the long and short term.

Spadea Lignana’s CORE program for franchisors is a cost-effective and practical solution for the ongoing legal needs of franchisors, including, but not limited to, FDD updates, state registrations and franchise agreement executions. Through its proprietary cloud-based system, Spadea Lignana can effectively and efficiently manage FDDs and franchise agreement executions for a fair flat monthly fee. By thinking deeply about the endgame, Spadea Lignana ensures that when the franchisor sells to private equity in 7 to 10 years, all franchise agreements, state registrations, legal correspondence, trademarks and more will be in one place ready for a rigorous due diligence dive by their prospective investors. The foundation for the future deal room is built from day one, so when the time comes to harvest the business, everyone is not scrambling to put together documents and fill in missing pieces. 

In 2017 the firm launched an innovative, cloud-based proprietary map system after Spadea saw an election night graphic in which all of the states were the same size and divided into two simple categories: red or blue. A lightbulb went off in his head — that would be a great way for franchisors to show where they could sell and where they couldn’t. 

“There are a lot of good software platforms, but franchisors are leaving it up to franchise sales people to update the information, and as a recovering franchise sales person myself, I know they won’t always get it right because that is not their primary job or how they are judged or compensated,” said Spadea. “I realized that if we showed maps that were either red or green in terms of up-to-date state registrations, it would be much more efficient and simple, and would be one single version of the truth. We worked with a good friend of mine who is a very experienced software programmer to create a web-based platform that we could manage internally. The platform not only gives up-to-date state registration information, but it allows the candidate to download and sign for the FDD through the platform specific to the state in question.” 

This software separates Spadea Lignana not just from other law firms, but from most IT systems in franchising as well. “We have an experienced franchise attorney responsible for managing the back-end portal to determine which state is red or green and which document will be delivered to the candidate,” said Spadea. “We become the compliance team for our franchisors without slowing down the process. I ran franchise sales and understand that time kills deals. If we can take the friction out of a sale while ensuring all the t’s are crossed and the i’s are dotted, it will help our clients grow in a sustainable way quickly.”

While Spadea Lignana can act as a valuable partner for the franchisor, at the end of the day, Spadea notes that someone has to be the FDD hero at the brand. “As lawyers, we can only do so much,” he said. “It's like getting your taxes done — if someone is responsible internally, the process will go much smoother. We can point to certain milestones or relevant information, but until it is 100% complete, the franchisor can’t issue the FDD.”

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