7 Tips to Improve your FDD

If you’re interested in selling or purchasing a franchise, one item you need to understand is the Franchise Disclosure Document (FDD). This document is regulated by the Federal Trade Commission (FTC) and is required for the sale of a franchise. While the structure and requirements are set in stone by the FTC, there are ways to ensure that your FDD stands out and gives potential franchisees the best view of your company.

Here are a few ideas to consider when you want to improve how you present your FDD.

Be very descriptive in the description of your business. Kay Ainsley, CFE, and managing director of MSA Worldwide, suggests making your description as robust as possible and including everything the business does. Ainsley advises against using lots of adjectives, instead favoring to paint a picture of the brand. For example, if you own a pizza franchise, don’t just say you sell pizza; make sure to include everything you sell and what you make in-house.

Include an Item 19. An Item 19 is the section in the FDD that provides potential franchisees with information about the company’s earning, costs and other factors that could have an impact on future finances. When someone is looking to buy a franchise, they are oftentimes interested in knowing how much money they could potentially make. Without an Item 19, franchisors are limited to what they can say about the financial performance of a business.

Offer your FDD electronically. While there are specific rules associated with how to offer an FDD electronically, Ainsley suggests this as a way to improve how potential franchisees interact with the document. As a benefit, offering an FDD online is that it is less expensive and bulky to produce.

Be consistent with your copy. When writing your FDD, make sure to keep your brand’s messaging consistent on all fronts. This is a great way to have the sales and marketing material reinforce each other instead of causing confusion.

“Another way to use your FDD more effectively is to have the same language in your marketing materials on your website as you do in the FDD,” said Ainsley. “You want to make sure there is no disconnect between the marketing materials and the FDD.”

Don’t play the quiet game. “The 14-day period is not quiet time,” said Ainsley.

After sending a potential franchisee your brand’s FDD, make sure to stay in contact with them during that time. It will keep communication open and not let any leads slip through the cracks.

Show that you have support. Make sure to include your staff in Item 2 of the FDD. Ainsley says that this part is especially important if a franchise brand is just getting started. Including the staff in an Item 2 shows potential franchisees that there is strength and support in the organization to help franchisees.

Don’t ignore the negatives. If you do have negatives in your FDDs, don’t just send it out. Ainsley suggests walking prospective franchisee through the FDD and explain any negatives like is someone important left the company or any lawsuits. This gives the franchisor an opportunity to explain what happened and lets the potential franchisee see what happened.

“Let them know what they can do to improve it so they don’t see it as a negative,” said Ainsley.