Most franchisors renewed their franchise offering registrations and updated their Franchise Disclosure Documents (FDD) in March or April 2020. At the same time, the COVID-19 pandemic was making landfall in the United States. State governments initially took a cautious approach, before typically requiring widespread business closures or limitations on the number of individuals in a business establishment. Some of the hardest hit industries from these closures and restrictions were the restaurant, hospitality, and fitness industries. Over the summer, franchisors had to refocus to support struggling franchisees faced with closures and restrictions.
At the time of renewing and registering the 2020 FDD earlier this year, most franchisors could not have predicted the scope and duration of these closures and restrictions, or their affect on the franchise system. But several months into the pandemic, it is now clear that there have been or may be changes to the franchisor and franchise system. If your system has had any of these changes or has suffered any other material changes in the FDD since filing of your renewal application, you may be required to amend the FDD at this time, notwithstanding the short time the document has been in use.
Now that we are more than 8 months into the COVID-19 pandemic, franchisors need to review whether there have been any material changes to the franchisor or franchise system that will require the FDD to be amended under state and federal law.
Here are a couple common changes that many franchisors or franchise systems have faced as a result of the pandemic. If the change is material, state and federal franchise law require that the FDD be amended immediately or within a certain number of days.
If your system has had any of these changes or other material changes, you should contact your franchise attorney to discuss whether an amendment filing is required to continue selling franchises.