understanding franchise disclosure document (FDD)

The Franchise Disclosure Document, also known as the FDD, offers comprehensive information about the obligations of both the franchisor and the franchisee. It is designed to assist potential franchisees in making an informed decision about investing in the business.  However, to truly understand what the FDD does, in the blog below, we will delve into this document in detail and explain its significance for your future franchise prospects.

What Is the Franchise Disclosure Document?

The Franchise Disclosure Document (FDD) is a legal document that the Federal Trade Commission (FTC) requires franchisors to provide to potential franchisees before selling a franchise. The FDD consists of twenty-three sections or “Items,” each outlining specific information the franchisor must disclose. This information is meant to help potential franchisees make well-informed decisions before investing in the franchise. Additionally, the FTC mandates that franchisors must disclose this information to prospective franchise buyers at least 14 days before selling a franchise or receiving any fees.

The Main Sections of the FDD

The FDD provides specific information about the franchise opportunity, the franchisor, and the franchise system. Some of the main sections of the FDD include the following details:

  • The franchisor’s background, including information about the franchisor, predecessors, affiliates, and parent companies
  • The franchisor’s litigation history, including details about previous litigation, settlements, and convictions
  • Information about initial fees, estimated start-up expenses, and other fees
  • Details regarding any exclusive territory and whether any territories will be modified
  • Information about contact details and locations of existing franchises
  • Information about legal obligations of a franchise and franchisee rights
  • Information about public figures whose name or physical appearance is associated with the franchise
  • Details regarding when and whether the franchise can be terminated or renewed

When Is the FDD Issued?

The FDD issuance date refers to the date when the franchisor designates its FDD as complete and compliant with federal franchise laws. However, because no federal agency registers FDDs, the issuance date is determined through a self-certifying process. In comparison, in franchise registration states, the Franchise Disclosure Document must be registered with a state examiner who, after reviewing the document, will grant or deny the registration.

What To Do With the FDD

Although it is not a legally binding contract, the Franchise Disclosure Document contains essential information about a franchise opportunity. On the other hand, the franchise agreement is a legally binding document that individuals sign when they decide to proceed with the franchise. As a result, the FDD serves as a valuable tool for potential franchisees to learn more about the franchise brand.

If potential franchisees find the legal terminology in these documents challenging to understand, seeking guidance from an experienced and qualified franchise attorney can help them review the language used in the paperwork and ensure they comprehend the terms of the agreement.

Contact FortmanSpann Today To Learn More About FDDs 

FortmanSpann is a leading law firm in the United States, specializing in franchise law and dedicated to advocating for the rights of franchisees. We provide high-quality legal representation at reasonable prices, making it accessible for franchisees. Our experienced franchise legal professionals represent clients across the United States in State and Federal Courts, as well as in arbitrations and mediations. We have a successful track record in handling cases that other attorneys have declined. With the necessary skills and experience, we are well-equipped to assist franchisees nationwide in various business matters and disputes.

For further information about Franchise Disclosure Documents and how these documents can impact your future franchise opportunities, contact FortmanSpann today to get your questions answered and learn more about how our skilled and dedicated team can help you.