Three Permitted Communications with Probable Franchisees

Communications with Probable Franchisees

Before you furnish the franchisor's FDD to a prospect, you may communicate in writing and orally to a prospect on a regular basis, as long you and the franchisor are properly registered or on file with any involved regulatory state (see Appendix A), and as long as your statements are consistent with the standards for advertising discussed above (truthfulness, consistency with the FDD, etc.).

After you have furnished the franchisor's FDD or final agreements to a prospect, you may continue to communicate in writing and orally to a prospect on a regular basis during any 14-calendar-day, 7-calendar-day or 10-business-day period that may be running.

You are not required to observe a "cooling-off" period during which you must cease all communications with the prospect.

Confidentiality with Probable Franchisees- FTC Franchise Rule

Under the FTC franchise rule, you or the franchisor may require a prospect to sign a confidentiality agreement before you furnish the franchisor's FDD to the prospect, or before you grant the prospect access to the franchisor's proprietary information or operations manual.

This type of agreement does not trigger any disclosure obligations under the FTC franchise rule, as long as it does not contain any other type of agreement that triggers disclosure.

The franchisor is not required to include the confidentiality agreement as an exhibit in its FDD.

Confidentiality with Probable Franchisees- State Laws

For a prospect covered by a state law, the franchisor may be required to include any required confidentiality agreement as an exhibit in its FDD; and you and the franchisor may be required to furnish the FDD to the prospect and observe a 14-calendar-day or 10-business-day waiting period, before requiring the prospect to sign the confidentiality agreement.

State prohibitions and requirements vary in this area, so check with the franchisor's lawyer or compliance manager.

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