A Franchise Disclosure Document (FDD) is a legal document given to prospective buyers of a franchise. The purpose of the FDD is to provide the prospective buyer with essential information about the franchise. Since the purchase of a franchise requires a significant investment, it is important for the buyer to have extensive information about the franchise so the buyer can make an informed decision about whether or not to invest in the franchise.
FDD’s are generally several hundred pages long. FDD’s will include background information about the franchisor, fees the franchisee will be required to pay, a list of the franchisee’s obligations, any exclusive territory that comes with the franchise, a description of the assistance the franchisor provides franchisees, copies of contracts the franchisee will be required to sign, financial performance expectations, and more.
A prospective franchisee must receive the franchisor’s FDD at least 14 days before they are asked to sign any contract or pay any money to the franchisor. The franchisor may provide the franchisee a copy of its FDD on paper or in electronic format such as on a disc or via email.
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