In a sign of its growth responsible franchise initiative — and accompanying movement at the base in industry – of International Franchise Association releasing RECOMMENDATIONS to enhance and strengthen exclusivity through increased transparency in all aspects of the sales process.

“Strong pre-sale discovery is the foundation of responsible franchising and critical to setting clear expectations at the start of a long-term relationship between brands and franchisees,” IFA President and CEO Matthew Haller said in a statement. “These policy recommendations would modernize current disclosure requirements.”

Read the full list of responsible franchise the following principles and recommendations.

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Recommendations for franchisors

or franchise disclosure document (FDD) is a legal document consisting of 23 articles that franchisors must provide to prospective US franchisees. of Federal Trade Commission (FTC) regulates the use of FDDs through Rule of exclusivity. FDD contains detailed information about the franchisor and the franchise opportunity, helping prospective franchisees make informed franchise investment decisions.

Despite its importance, many investors are confused from the complexity of the FDD. In fact, a recent US Government Accounting Office STUDY showed that many entrepreneurs fail to read the FDD before investing.

IFA's FDD recommendations for franchisors include:

• Shifting to a communication style, questions and answers of discovery
• Adding an executive summary to help with comparison exclusivity opportunity within an industry
• Replacing tables with illustrative examples and explanatory text
• Presentation of information such as initial investment (item 7), representation of financial performance (item 19), franchise right information (item 20) and financial statements (item 21) to better indicate the health of the franchise system
• Using multimedia to modernize the presentation

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Franchise recommendations

Proper care is key when making any investment, and franchising is no exception. The IFA recommends that franchisors focus pre-investment due diligence on a number of factors, including:

• Protecting their potential investment by comparing multiple brands, reading the FDD and keeping a franchise attorney
• Validation of each opportunity (as well as the franchise salesperson presenting the franchise opportunity, as discussed further below) through interviews with existing franchisees
• Understanding the risks of business ownership in general and the obligations they will have to suppliers, owners and lenders

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Recommendations for Third-Party Sellers

IFA defines “third party vendors” as “individuals or companies that are engaged (either directly or indirectly) in the business of providing franchises on behalf of a franchisor.”

These salespeople have various titles, including brokers, franchise agents, brokerage organizations, franchise sales organizations, business coaches, advisors, franchise experts, and sales consultants.

The IFA recommends that all third party vendors disclose the following information:

• Their last professional experience
• Their court history
• The services they perform on behalf of franchisees – and the compensation they receive
• The industries they represent – and the number of brands they represent within each industry
• Franchisees to whom franchises were sold during the previous calendar year
• Information about the different categories of third-party franchise vendors and questions that a careful prospective franchisee would ask their third-party franchise vendors

According to the IFA, franchisors, franchisors and third-party vendors must actively adhere to these principles in order to practice responsible franchising. Adherence to these guidelines will ensure the integrity of franchise modelprovide access to more entrepreneurs and preserve the financial well-being of the parties involved.

“By providing more accessible information early in the franchise sale process, we can better ensure both franchisor and franchisee are determined to succeed,” said David Humphrey, Planet Fitness franchise and past chairman of IFA, in a statement.