Reconsidering Your FDD: The Business Case for Exemption-Based Franchising

Not only are there significant legal costs for drafting, registering, and responding to comment letters relating to FDDs, it takes the time and effort of key business personnel to develop and update the information contained in the FDD - time that would arguably be better used managing the franchise...

Full description

Saved in:
Bibliographic Details
Published inFranchising World Vol. 49; no. 5; p. 48
Main Author Satterlee, Karen Boring
Format Trade Publication Article
LanguageEnglish
Published Washington International Franchise Association 01.05.2017
Subjects
Advantages
Disclosure
Franchisees
Franchising
Law
Sales
Tax exemptions
Online AccessGet full text

Cover

More Information
Summary:Not only are there significant legal costs for drafting, registering, and responding to comment letters relating to FDDs, it takes the time and effort of key business personnel to develop and update the information contained in the FDD - time that would arguably be better used managing the franchise business.[...]of its program design, Starbucks has never maintained an FDD, although it has thousands of stores that meet the legal definition of a franchise in supermarkets, hotels and airports across the nation.First and foremost, there are legal challenges, which can be substantial and complex, in utilizing exemptions.If the franchisor is unwilling to turn down prospective franchisees that do not meet the strict requirements of the federal rule and state statutes, the franchisor should not engage in exemption-based franchising or, at the least, must operate a traditional franchise program as a backup to its exemption-based program.Another best practice is to insert a provision in the franchise agreement that requires the franchisee to acknowledge the basis for the federal and state exemption.
ISSN:1041-7311