When someone is serious about buying a franchise, one of the first things they’ll want to see is the FDD, or Franchise Disclosure Document. Although this document does not provide all the information needed to make an educated decision, the FDD plays an important role when it comes to laying out the basics of the business model, history and health of the franchise system. The Federal Trade Commission rules that a prospective franchisee MUST receive the franchisor’s FDD at least 14 days before the prospective franchisee signs a franchise agreement or pays any money towards buying the franchise. However, there is no law against a franchisor disclosing their FDD very early in the discovery process, and many of them do!
When it comes to interacting with prospective franchisees, honesty and transparency is always the best policy. Disclosing the FDD earlier than required by law can be advantageous to a franchisor’s business in the long run. Here are 10 reasons franchisors should always share their FDD early in the process:
1. It establishes trust
Sharing the FDD early in the process is a demonstration of honesty and transparency, and reflects well on both the franchisor, as well as the franchise system as a whole. Greater transparency from the franchisor establishes trust between the franchisor and the prospective franchisee, letting them know there is nothing to hide.
2. It fosters good decision-making
Sharing the FDD early on helps prospects make a more informed decision. Unless the franchisor’s goal is to intentionally limit the prospective franchisee’s access to information, they can only benefit from sharing the FDD early. By allowing prospective franchisees the time to make an informed, smart decision for themselves, the franchisor is also minimizing the risk that this prospective franchisee will end up being a poor fit for the franchise.
3. It allows prospects to ask questions
Anyone making an investment knows they need to read all information thoroughly before investing them, and ask about anything that seems unclear. Sharing the FDD early in the process allows prospects the time to ask more , and better, questions. Have you ever been in a situation where you only thought of a great question after you’d already left the room? Giving prospective franchisees all the time they need to look over the FDD, and ask as many questions as they need to, makes prospects feel more comfortable with their decision to move forward in the buying process.
4. It leads to long-term success
It’s clear that sharing the FDD earlier than required leads to better decision-making on the part of the prospective franchisee. This is a win-win for both the franchisor and the prospective franchisee as it heightens the potential for long-term success for everyone involved. If the prospective franchisee is a good fit, they will care about their work, leading to a successfully run franchise location and more profits across the board.
5. It shows people you don’t play games
Not sharing the FDD until the end of the process is a sales game. Franchisors who truly want to find great franchisees won’t play this game. Prospective franchisees are people with goals, just like anyone else, and taking advantage of them from a position of power shows the franchisor is really only after one thing — a quick sale. Sharing the FDD early shows that the franchisor is willing to work with the franchisees, and wants to see them succeed just as much as the franchise system as a whole.
6. It gives you an edge
It may sound surprising after reading this list, but many franchisors don’t share their FDD until they absolutely have to. Not sharing the FDD until the end of the process gives the impression that the franchise is secretive, and this is not a good look as far as prospective franchisees are concerned. It not only frustrates interested prospects, but it makes them wonder what the franchise could be hiding? Providing easy access to their FDD gives a franchisor an edge over their more secretive competitors.
7. It shows pride
Sharing the FDD early in the process demonstrates that the franchisor is proud of the franchise system. It shows confidence in the system, and this confidence will spread to the prospective franchisee, as well. If a franchise system is strong, that will be reflected in the FDD. By proudly displaying the document on the company website for anyone to view, they are telling the world they are proud of what they have created and excited for others to come on board.
8. It shows strength
Not sharing the FDD until the end of the process gives the impression that your system is weak. If you aren’t sharing it upfront, people will wonder why. An easily accessible FDD can serve as confirmation to a prospective franchisee that they are making the right choice, and will assure them that there will be no surprises once they sign the contract. If you are confident in yourself, others will be too.
9. It lets you control the message
Sharing the FDD early on gives the franchisor the ability to control the message. Instead of the prospective franchisee having to search the internet for information that may or may not be correct, they’ll have it all right away, and in the way you want it disseminated. This also gives franchisors a chance to respond to past problems with the franchise or things on the FDD that don’t look so great, and reassure prospective franchisees that this should not sway their decision to buy.
10. It shows respect
Sharing the FDD right away demonstrates respect for the prospective franchisee and changes the discussion from making the sale to developing a relationship with this future franchisee. Businesses work best when the whole team is happy, and the same goes for the franchise-franchisee relationship. The buying process works best when it is a discussion between business partners, not a sales pitch that leaves the prospect wondering what is being left out of the conversation. This is a big investment on the part of the franchisee, and showing respect will go a long way towards establishing a successful relationship from day one.
As a franchise coach, I’ve seen a lot of the good, the bad and the ugly when it comes to FDD disclosure and interactions between franchisors and their prospects. Make sure you’re on the good side of the spectrum, and try for honesty, integrity and respect towards your prospective franchisees. If you do, I guarantee you’ll be more successful for it.
Rick Bisio is the Amazon-bestselling author of The Educated Franchisee, a leading franchise coach with FranChoice, co-host of Rick Bisio’s Franchise Focus, and the creator of the FDD Exchange and the Franchise Glossary.