Item 2 of the FDD must disclose a 5-year work history for each of the franchisor’s general partners, directors, officers, and other individuals who have management responsibility relating to the sale or operation of franchises. Management Responsibility means that an individual can exercise discretion in decision-making, without having to first seek approval from a supervisor. For each position, we must include all of the following, and nothing more:
- Name of Employer
- Job Title
- Start Date and End Date of Employment (month and year)
- Location of Employment (city and state)
This content should be very straightforward with no flowery language, awards, or volunteer work. There are other places to puff up your management team, but the FDD is not the best place to do it, so keep it simple.
Good Example:
Batman has been a Team Member of the Justice League in Metropolis since April of 2017. Prior to that, he was an Independent Contractor for Wayne Enterprises in Gotham, New Jersey from September 2005 to April 2017.
Poor Example:
As a Team Member of the Justice League, Batman increased brand awareness by 32% and successfully reduced training deaths by 15%. In his spare time, he has developed a variety of martial arts techniques.
Sample Item 2
ITEM 2: BUSINESS EXPERIENCE
President and Director: Jane J. Doe
Ms. Doe became President of Belmont Mufflers, Inc., in June 2006. From May 2004 until June 2006, she served as our Vice President. From June 2000 until April 2004, Ms. Doe was Vice President of Atlas, Inc., a Houston, Texas, manufacturer of automobile wheels.
Vice President: Henry Moore
On July 1, 2006, Mr. Moore joined Belmont as Vice President. From January 2000 until July 2006, Mr. Moore served as a manager of Belmont Muffler Manufacturers, Inc.
Franchise Coordinator: Phillip E. Smith
On January 1, 2006, Mr. Smith joined us as a franchise coordinator. From July 2001, until September 2005, Mr. Smith was a manager at Bishop Wash, Inc., a Denver, Colorado, manufacturer and distributor of car wash detergents.
Manager of Franchise Development: Ann Howard
Ms. Howard has managed franchise development at our parent company – CFT International, Inc., since 1995. She oversees the development of all franchise systems owned and operated by CFT International, including Belmont Mufflers, Inc.
This is a sample section from a fictional FDD for Belmont Muffler Shops that was prepared by the Federal Trade Commission as a compliance guide for franchisors preparing their FDD. These are used to provide an idea of what these items may look like in an FDD, but keep in mind, your FDD will most likely vary significantly from these examples.
Best Practices
If a franchisor hires a broker or an outside franchise sales organization directly, and that broker/OFSO uses the franchisor’s email address, they can be construed as a franchise salesperson for the franchisor, and they should be included in Item 2. If a franchisor is working with a broker group and those brokers are only referring prospects, they do not need to be included in Item 2.
