Updated Franchise Disclosure Document

The franchisor’s disclosures may change between the time you receive the Franchise Disclosure Document (FDD) and the time you sign the franchise agreement. For example, the franchisor may have updated its FDD each calendar quarter and must update the FDD after its fiscal year ends.

You have the right to ask for a copy of any updated information before you sign the franchise agreement. An updated FDD may reveal new lawsuits were filed by or against the franchisor, changes in the franchisor’s management or training teams, more current financial performance data, or other useful information.

Additional Sources of Information

Accountants and Lawyers

In addition to reading the franchisor’s FDD—including any updates—and speaking with current and former franchisees, consider talking to an accountant and a lawyer. An accountant can help you understand the franchisor’s financial statements, develop a business plan, assess any earnings projections and the assumptions they’re based on, and help you pick a franchise system that is best suited to your investment resources and goals.

A lawyer can help you understand your obligations under the franchise contract. These contracts usually are long and complex. A problem that comes up after you have signed the contract may be very expensive to fix—if it can be fixed at all. Choose a lawyer who is experienced in franchise matters and rely on your lawyer or accountant for a recommendation about whether to buy a particular franchise.

Banks and Other Financial Institutions

If you need financing to buy a franchise, a bank lender may be able to provide you with a Dun & Bradstreet report or similar financial profile of the franchisor. The bank may also obtain sales and profit information from the franchisor, even if the franchisor won’t give you that information. But some franchisors give banks unrealistic, overstated profit projections so the bank will provide financing to expand the franchise system. Remember that bank approval of a franchise loan doesn’t necessarily mean the franchise is a safe or good investment.

Better Business Bureau

Check with the local Better Business Bureau (BBB) in the cities where the franchisor has its headquarters and the city where you’re thinking of buying a franchise. Ask whether there are complaints on file about the franchisor’s products, services, or personnel.

Government

Several states have registration or disclosure laws that regulate the sale of franchises. Some states have laws meant to protect franchisees after they buy. The FDD should include information about any such laws in your state. If the information isn’t in the FDD, check with your state Attorney General’s office, office of consumer affairs, or state securities division.

In Montana (MT), franchise operations are subject to both federal law and specific state statutes regarding the disclosure of information to potential franchisees. The Federal Trade Commission (FTC) requires franchisors to provide a Franchise Disclosure Document (FDD) to prospective franchisees at least 14 calendar days before any agreement is signed or any payment is made. This document must be updated annually, and franchisors are also required to update the FDD within a quarter after any material change occurs. As a potential franchisee in Montana, you have the right to request the most current FDD, which may include updated financial data, changes in management, or new litigation involving the franchisor. While Montana does not have a specific franchise registration law, it's important to consult with an attorney experienced in franchise law to understand your obligations under the franchise agreement. Additionally, consulting with an accountant can help you assess the financial aspects of the franchise. It's also advisable to check with the local Better Business Bureau and your state's consumer protection agencies for any complaints or information about the franchisor. Keep in mind that while banks may provide financing based on franchisor information, this does not guarantee the franchise's profitability or viability.