In today’s column we address the issue of “pipeline” franchise sales—that is, sales of franchises to franchisees who received a now (or soon to be) superseded Franchise Disclosure Document (FDD) but who have not yet signed a binding agreement with, or paid any money to, the franchisor. Specifically, what steps must a franchisor take with respect to franchisees in the pipeline once the franchisor has issued a new successor FDD (such as happens every year at franchise registration renewal time).
We need to divide how to handle such “pipeline” franchise sales into two categories: those states featuring no franchise registration/disclosure laws of their own and in which, as a consequence, only the FTC Franchise Rule applies (the “FTC states”), on the one hand, and those states featuring franchise registration/disclosure laws, on the other hand.
