Most franchisors today spend hundreds, if not thousands, of dollars and hours of time printing, binding, packing and mailing their Franchise Disclosure Documents to current and potential franchisees all around the country. These franchisors then wait for those franchisees to make a copy, sign the documents and either mail it back or scan and email it.
Wouldn’t it be so much easier to simply click send and receive a confirmation online that the document had been signed?
Not only does this kind of technology exist, but it has been legal for several years now. Since July 1, 2007, the FTC has permitted electronic disclosure of the Franchise Disclosure Document. Additionally, in 2000, Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN) which affords electronic signatures the same effect as pen and paper ones.
There are now several E-signature providers that verify the authenticity of signatures for a monthly fee. Adobe offers software and a service called EchoSign that completes this entire process through email. EchoSign has different rates based on the number of users sending documents and the volume of documents sent so it can be cost-effective for both large and small franchisors.
Even if E-signatures do not end up being the most economical solution for your franchise, electronic delivery of FDDs almost certainly will save money. Instead of mailing a paper copy to each potential franchisee, FDDS can now be delivered via email, a webpage download, or a mailed CD-ROM. This can be done by the franchisor himself or there are several online services such as FDDPlus or FranConnect that deliver the documents for a fee.
For franchisors that wish to E-deliver their FDD themselves, there are only a few minor adjustments that need to be made to the FDD. First, the cover page and the receipt page should be amended to provide for possible electronic delivery. Second, somewhere in the FDD, the franchisor must disclose the different formats in which the FDD is available, the conditions for receiving the FDD in each format, and any requirements for viewing the FDD in certain formats. The franchisor should also state that a prospective franchisee has the right to receive the FDD in paper or other format.
Once these two adjustments are made, the FTC and NASAA permit electronic delivery as long as the disclosure document (1) is delivered as a single, integrated, document or file; (2) has no extraneous content beyond what is required or permitted by law, but which may include customary devices for manipulating electronic documents in machine readable form and tools or access to tools that may be necessary or convenient to enable the recipient to receive and view the disclosure document; (3) has no links to or from external documents or content; (4) is delivered in a form that intrinsically enables the recipient to store, retrieve, and print the disclosure document; and (5) conforms as to its content and format to the requirements of law.
Finally, the franchisor must be able to prove that it delivered the FDD electronically and must keep records of the electronic delivery. These are small steps that any franchisor could implement in their franchise systems. While franchisors benefit by saving money on printing, shipping and storing paper FDDs, franchisees receive their documents faster and can more easily share them with their advisors.
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