When it comes to selling a franchise, documenting your disclosures properly isn’t just a good idea — it’s a legal requirement.
Failure to follow the Federal Trade Commission (FTC) Franchise Rule and state requirements can lead to delays, disputes, or worse, enforcement actions. At Zors, we help franchisors document these disclosures the right way every time.
Whether you’re working with individuals or business entities, it's critical to ensure that the Franchise Disclosure Document (FDD) and franchise agreement are delivered and signed correctly — and that you can prove it.
Here’s how to do it right, and how Zors makes it seamless.
The FTC Franchise Rule includes two specific recordkeeping mandates that every franchisor must follow:
You must keep a sample copy of each materially different version of your FDD for at least 3 years after the close of the fiscal year in which the document was last used.
If you use nearly identical FDDs for multiple registration states (e.g., CA, WA, HI), only one version (e.g., California's) needs to be retained.
But if any version contains substantive differences, each version must be saved.
For every completed franchise sale, franchisors must retain the signed and dated FDD receipt (Item 23) for a minimum of 3 years.
👉 Instructions for preparing disclosures and retaining these documents can be found in the Franchise Rule at at 16 C.F.R. § 436.6
Before you send an FDD or franchise agreement, you need to confirm who must be disclosed and who must sign.
If the prospective franchisee is an individual, that person must:
Receive the FDD directly
Sign and date the Item 23 receipt
Sign the franchise agreement
If the franchisee is a business entity:
The legal entity is the contracting party, but
If you want owners to also be franchisees under the franchise agreement or guarantee the performance of the entity then each individual should receive the FDD and be tracked for compliance
💡 Tip: Failing to disclose a signer or key principal can invalidate the deal or trigger a regulatory issue — especially in registration states.
Zors was built with these compliance hurdles in mind — here’s how we make documenting disclosures seamless and audit-ready:
Zors lets you associate each prospect territory with both:
The legal entity (LLC, Corp, etc.) that will be the franchisee, and
The individuals who will sign, own, or manage the business
Zors includes an electronic signature capture platform
Zors includes integrated file storage
Electronic storage of these key documents allow franchisors and FranDEV teams to keep files accessible well beyond the FTC's time periods, which is essential in some states that may impose longer record keeping requirements. For example, Washington state requires brokers to retain copies of all records for a minimum of six (6) years.
Identify who gets disclosed and who must sign — every time
Track and retain material FDD versions and signed Item 23 receipts for at least 3 years
Use Zors to manage it all — disclosures, signers, documents, and territories — in one secure, searchable platform
Franchise sales are complicated. Disclosures don’t have to be.
👉 Ready to simplify your franchise compliance? Schedule a demo with us today and see how we help franchisors close deals faster — and with confidence.
💡 Learn more about franchise disclosure requirements and how mapping a franchise territory can trigger the FTC's 7-day disclosure rule
🛑 Disclaimer:
The information provided in this blog post is for general informational purposes only and is not legal advice or a substitute for consulting with a qualified attorney. Franchise law is complex and highly nuanced, governed by both federal regulations and varying state-specific laws. Proper legal guidance requires a detailed understanding of these rules as applied to your specific circumstances. You should not act—or refrain from acting—based on anything in this post. You should consult your franchise attorney for legal advice.
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