Providing Final Agreements to Prospect

The franchisor or you will be preparing and providing to the prospect the final agreements to be executed by the parties.

If the final agreements differ from those in the FDD only to the extent of "fill-in-the-blank provisions" (see definition in Appendix B) or changes made in response to negotiations initiated by the prospect, then you are not required to observe a waiting period before having the prospect sign the agreements, assuming that the minimum disclosure period for the FDD has expired.

If the final agreements differ from those in the FDD in other ways, you must observe a 7-calendar-day waiting period before having the prospect sign the agreements.

The types of changes that trigger a 7-calendar-day waiting period include, for example:

• specifying the geographic scope of a protected territory that was not specified in the FDD;

• specifying the initial franchise fee if it can vary;

• specifying sales quotas or interest rates if they can vary,

• specifying the number of outlets to be opened under an area development agreement;

• or changing any terms in the agreements unilaterally.

When providing final agreements with these types of changes, you must highlight the changes to the prospect in some manner, such as a cover letter or black-lined document.

When counting calendar days, you may not count the "action days"---the day the final agreements are delivered or the day the prospect signs them. If the prospect negotiates additional changes during the waiting period, you are not required to re-start the waiting period.

As a matter of policy, the franchisor may require you to obtain a dated and signed receipt for the final agreements from each prospect and to observe 7-business-day waiting period with every prospect.

Check with the franchisor's lawyer or compliance manager.

You may provide the final agreements on the same day that you furnish the FDD, or you may provide the final agreements at a later time.

If you provide the final agreements when or shortly after you furnish the FDD, the 7-calendar-day waiting period for the final agreements runs concurrently with the 14-calendar-day minimum disclosure period or any 10-business-day minimum disclosure period.

(This was the eighth post in a series of 11 posts on making compliant franchise sales.)

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