FranNet CEO Jania Bailey clarifies that the Franchise Disclosure Document (FDD) must include three years of audited financial statements. An exception might occur with newer franchise brands that have not been in existence for three years, in which case you may only find an unaudited balance sheet. However, if the franchise has one year of operating results, an audit is then mandatory. It’s important to remember that the FDD is a requirement set by the Federal Trade Commission, making these stipulations non-negotiable.
Video Transcript
It is a requirement to have three years audited financial statements in the FDD. The exception to that rule might be if it’s a band new franchise that hasn’t been around for three years. In those cases, sometimes you will see an unaudited balance sheet only. If they have one year of operating results it now requires an audit. Just remember the FDD is a requirement of the Federal Trade Commission – so these things are not optional.