Is Your Franchise Disclosure Document Ready for 2026? 

Proactive Steps Franchisors Can Take Now to Prepare for 2026 Updates

For franchisors, Q4 isn’t just about closing the books—it’s a strategic opportunity to prepare your Franchise Disclosure Document (FDD) for 2026. Waiting until January to begin updates can delay filings, slow approvals in registration states, and limit your ability to sell franchises early in the year. Instead, use year-end to align your FDD with your business goals, operational changes, and legal obligations. Here’s how to get ahead.

What to Update Now: Proactive FDD Prep in Q4

Franchisors don’t need to wait for audited financials to begin preparing their 2026 Franchise Disclosure Document. Many updates can, and should, start now. But this isn’t just about compliance; it’s about aligning your FDD with your broader strategic goals for the year ahead.

As you plan for 2026 growth, operational improvements, and revenue targets, your FDD should evolve in tandem. Here’s how to use Q4 as a strategic window to get ahead:

1. Align Core Disclosures with Organizational Changes

Use Q4 to update the foundational items that reflect your company’s structure and leadership:

• Item 1 (Franchisor Description): Incorporate any changes to your corporate entities or affiliated companies.
• Item 2 (Business Experience): Reflect new executives, leadership transitions, or expanded roles.
• Item 3 (Litigation): Disclose any lawsuits, settlements, or anticipated legal matters from 2025.

These updates ensure your FDD accurately represents your organization heading into the new year.

2. Reassess Startup Costs with a 2025 Lens

Your Item 7 (Estimated Initial Investment) should reflect current realities:

• Have tariffs, inflation, or supply chain disruptions affected costs?
• Are you changing vendors, buildout specs, or layout standards?
• Are there opportunities to reduce costs or improve efficiency?

Gather updated estimates now so your FDD reflects realistic, defensible numbers that support franchisee success.

3. Integrate Operational Planning into Disclosure Updates

As you set 2026 goals, consider how operational changes affect your FDD:

• Are you introducing new systems, platforms, or brand standards?
• Have franchisee challenges in 2025 prompted changes in support or obligations?

Begin revising:

• Item 8 (Restrictions on Sources of Products and Services)
• Item 9 (Franchisee Obligations)
• Item 11 (Franchisor’s Assistance, Advertising, and Training)
• Item 15 (Obligation to Participate in the Actual Operation)
• Item 16 (Restrictions on What the Franchisee May Sell)

These updates ensure your FDD reflects your evolving business model and sets clear expectations for franchisees.

4. Forecast and Justify Fee Adjustments

If your 2026 financial plan includes changes to fees, start documenting now:

• Item 5 (Initial Fees) and Item 6 (Other Fees) should reflect any adjustments to franchise fees, royalties, brand fund contributions, or technology fees.
• If fees will vary over time, define the justification and calculation method clearly.

Early planning helps you communicate changes transparently and avoid regulatory delays.

5. Protect Your Brand Through IP Updates

Your intellectual property strategy should be reflected in Item 13 (Trademarks):

• Have you filed new trademark applications in 2025?
• Are there changes in ownership, licensing, or enforcement strategy?

Update this section to ensure your brand assets are properly disclosed and protected.

6. Plan Your Financial Performance Representations Strategically

If you include earnings claims in Item 19, now is the time to plan:

• What metrics best reflect your system’s performance?
• Are your historical formulas still relevant?
• What data do you need to collect and verify?

By preparing your methodology now, you’ll be ready to run the numbers quickly once year-end financials are available.

7. Monitor Regulatory Changes and State Addendum Requirements

Franchise disclosure regulations continue to evolve, especially at the state level. States like California, New York, Illinois, and others often require state-specific addenda or impose unique filing and disclosure mandates beyond the federal Franchise Rule.

Use Q4 to:

• Review recent regulatory updates in registration states to identify new disclosure obligations or formatting requirements.
• Prepare state addenda early to avoid delays in approval and sales activity.
• Coordinate with legal counsel to ensure your FDD meets both federal and state-specific standards, including any new financial statement requirements, relationship disclosures, or cover page formats.

Staying ahead of these changes helps you avoid compliance gaps and ensures your FDD is ready for multi-state filing as soon as audited financials are complete.

Common Mistakes Franchisors Make with FDD Updates

Even seasoned franchisors can overlook key elements when updating their Franchise Disclosure Document. These common missteps can lead to regulatory delays, franchisee disputes, and missed growth opportunities:

• Waiting Until Q1 to Start
  Delaying updates compresses timelines and pushes your FDD further down the regulator’s review queue—leading to longer approval times and extended “dark” periods in registration states.
  
• Disconnecting Strategy from Disclosure
  Operational changes, fee adjustments, and territory expansions often happen without corresponding FDD updates. If your business evolves, your disclosures must evolve too.
  
• Rushing Financial Performance Representations
  Item 19 requires careful planning and data validation. Waiting until year-end to decide what to include can result in incomplete or risky disclosures.
  
• Missing Lessons from the Past Year
  Franchisee challenges or compliance issues from 2025 may reveal areas for improvement. If those lessons aren’t reflected in your FDD, you miss the chance to strengthen your system.

Treat your FDD as a living document that supports your growth strategy. Proactive updates build trust, reduce risk, and position your brand for a confident start to 2026.

The Role of Legal Counsel in FDD Updates

Legal counsel should be more than a last-minute reviewer—they’re a strategic partner in your year-end planning. Involving franchise counsel early helps you:

• Audit all 23 FDD items for accuracy and compliance
• Identify risk areas before they escalate
• Align disclosures with your 2026 business goals
• Manage the update process and timeline, coordinating input from finance, operations, and marketing to ensure nothing falls through the cracks

With the right legal guidance, your FDD becomes a proactive business tool—one that protects your brand, supports growth, and keeps your filing on track for early submission.

Preparing Your FDD for 2026 Success

Your FDD is more than a compliance document—it’s a strategic asset. As discussed earlier, preparing it in Q4 positions you for faster filings, shorter review times, and uninterrupted sales in registration states.

With legal counsel involved early, you not only ensure accuracy and compliance—you also gain a project manager to keep updates on track and aligned with your 2026 goals.

Proactive franchisors treat year-end FDD reviews as part of their growth strategy. With the right planning and support, you’ll enter 2026 ready to file, ready to sell, and ready to grow.