The new FDD, which replaces the UFOC (Uniform Franchise Offering Circular), is being phased in beginning July 2007, and required of all franchisors as of July 2008.
It is much the same in terms of general disclosure, but reporting methods have been altered. In other words the structure is different.
Now, in as much as I do not sell franchises or represent franchisors in any way during the sales process, a major change from my perspective is that the background of ‘franchise brokers’ is no longer required in the FDD, but it was in the UFOC. This, at least in my opinion, puts the buyer at a distinct disadvantage when performing their ‘franchise due diligence‘. Why is that? Because, in today’s world, the franchise industry is inundated with ‘brokers’ self-titled ‘franchise consultants’, and many prospective franchisees work with these brokers (and rely on these brokers) for trusted, personal information regarding various opportunities. Although there are many fine, upstanding brokers who work honestly in the buyer’s best interest, many may not have such high personal standards. If the buyer places trust in a particular broker (again self-titled ‘franchise consultant’) and that broker has a checkered past (conviction for fraud, as an example), and the buyer is not the beneficiary of that information, then they are not privy to important information during the ‘learning/buying’ process. Obviously, it is easier for a dishonest person to remain anonymous during the sales process, and that creates an imbalance in the favor of the seller.
This is my bias not only because the buyer is at a disadvantage, but because most franchise buyers perform extremely ‘little due diligence’, and they can be easily swayed by salesmanship.