Ensuring Online Signature Legality for Franchise Contract in European Union

How to eSign a document: online signature legality for Franchise Contract in European Union

The FDD, the franchise disclosure documents  the most important tool in franchising it's   the foundation of your franchise offering. It's  the primary vehicle that franchisors use to comply   with the franchise laws and regulations and so  we're going to get into the basics of the FDD,   what's included in it the FDD disclosure period  and even some registration and filing basics.   At the most basic level the FDD is the hub of your  franchise offering, so on the one hand you use the   FDD to comply with federal and state franchise  laws and on the other it's an instrument that   you give to franchisees so you know franchisees  are going to be reviewing the data in the FDD   to validate your franchise and compare it to your  competitors, so the FDD itself it's the hub that   really melds together your franchise regulation  obligations and your franchise sales activities.   From a franchisor's perspective when you look at  the FDD there's a number of things that should be   going on, or are going on. Within the FDD itself  you're complying with federal law right, so you're   complying with all the disclosure items that we'll  talk about and you're giving information that's   going to be required under the federal franchise  rule. You're also complying with state laws and   each state has certain requirements or addendums  that are going to be added to your FDD. But also   from a business standpoint everything that's  involved in your franchise offering, the initial   franchise fees, the ongoing royalties, territory  structures that you grant, whether or not you   offer individual unit franchises or multi-unit  that's all laid out in your franchise disclosure   document itself. And so from a FDD development  standpoint there's two goals going on, one is   compliance with federal and state law and the  other is structuring your FDD so it's competitive   and shows a much more compelling perspective about  your franchise offering than your competitors. Now the items in the FDD, there's 23 items, under  the franchise rules they're really sections but   they're called items and the 23 items cover the  full disclosure process about who your franchise   company is, who's involved in your management  team, the initial fees that a franchisee will   be paying, the estimated startup expenses, supply  chain elements, territory structures, the entire   underpinnings of what your franchise offering is  about and how they legally relate for prospective   franchisees. Some of the most important items in  the FDD, at least from a development standpoint   for the franchisor, it's the initial fees  right, so what are your initial franchise fees,   how do they relate to your competitors, do  you have multi-unit opportunities where a   franchisee could sign a development agreement.  Other fees that's the item 6 is going to tell   information about your royalty structures, all  the ongoing fees that a franchisee will be paying,   things that franchisees care about, what's  the recurring royalty fee, what are brand   development fund fees and what other technology  or ongoing obligations that are going to affect   the franchisee metrics. In item 12 there's  disclosures about the territory structures,   what type of territory franchisee will get,  whether or not it's exclusive and what exceptions   exist where as a franchisor you may or may not be  able to sell within a franchisees territory. One   of the critical items, item 19 is the financial  performance representations and so within item 19,   if you're going to share any financial data with  a franchisee it's going to have to go in your item   19 and and we'll go into all of these in separate  videos and separate materials but at the heart of   the FDD there's 23 disclosure items and they need  to comply with the federal and state disclosure   obligations. When do you have to disclose the FDD  to your to prospective franchisees? So the FDD   itself is important in the franchise sales process  and while there'll be other processes and webinars   you'll be offering to franchisees and information,  the FDD itself needs to be provided to a   franchisee not less than 14 days before they sign  a franchise agreement or before they pay any fees   to you as the franchisee or so we have that 14-day  disclosure period and the important point there is   that 14-day period doesn't start to run until the  franchisee signs the receipt page of the FDD, and   if I would go back a second to the 23 items in the  FDD, item 23 is the receipts right. So at the end   of the FDD is a receipt page and the franchisee  has to sign off on when they received your FDD and   that's going to start your 14-day window. Now how  do you count the 14 days? That's important because   in many ways your 14-day waiting period is really  16 days, because the franchisee receives the FDD   signs the receipt page the clock starts to tick  on the date that the franchisee signs the receipt   page, but the 14 day waiting period is a full 14  days, so that means you don't count the first day   the franchisee received and signed the receipt  page and you don't count the last full day of   the 14-day period, so in actuality the franchisee  if you count the day they sign the receipt and the   day they're signing the agreement it's really 16  days. So you have to have a full 14 day waiting   period and then also as a franchisor you need to  be aware that there's also a mini waiting period   which is a seven-day waiting period from the date  that you give the franchisee a fully completed   franchise agreement so other than items like  filling in the blanks with the franchisees name   and information, if in the franchise agreement you  include a designated territory for the franchisee   or other items that are very specific to that  franchisee there's another waiting period and   there the franchisee needs to have the completed  franchise agreement for seven full days before   they sign off. And now you could run the seven-day  period with the 14-day FDD period so for example   you disclose a franchisee with the FDD if you know  the territory and the specifics of their franchise   agreement you could also disclose to them the  completed franchise agreement itself. In terms of   basics your FDD needs to be updated on an annual  basis right, so there's a couple of triggers at   a minimum every FDD needs to be updated annually  and under the federal rule it needs to be updated   within 120 days from the end of your fiscal year  so if your fiscal year as a calendar year and ends   on December 31, that means your FDD needs to be  updated by April 30th of each year. But there's   also update requirements if there's material  changes in your FDD if things that you disclose   are now different or an event has occurred such  as certain litigation you're going to be required   to update your FDD on a more frequent basis. So  when does your FDD expire? Well at the most basic   level, 120 days after the end of your fiscal  year so if your fiscal year ends on December   31 your FDD is no good as of April 30th and at  that point you need to stop selling franchises,   now keep in mind that's under a federal rule  in states that have regulation in the franchise   registration states you may have to terminate  your franchise sales at an earlier date it   all depends on the state you're in and depends  on the status of your franchise registration.