Franchise Disclosure Document

How To Read A Franchise Disclosure Document


A Franchise Disclosure Documnet (FDD) is the document that a franchisor will send once you've filled out an application to become a franchisee. The FDD will outline all of the items that the franchisor will do for you in order to help you succeed. It is important to read through this document very carefully and possibly have it reviewed by an attorney before signing it. The FDD should outline any previous lawsuits or bankruptcies that the franchisor may have faced as well as how the franchisor expects the franchisee to run their business. The document will contain an explanation of the contract, the operations agreement, all proprietary and confidentiality statements and often maintenance requirements. The Federal Trade Commission (FTC) will not acknowledge the agreement as a binding document until the sales is complete. Once that transaction is solidified the franchisee's business will be recognized as an independent business.

Here are some more helpful documents provided by the FTC:
     • Buying A Franchise: Consumer Guide
     •
Franchise Rule Compliance Guide
     •
Amended Franchise Rule FAQ's

For more information, please visit: www.ftc.gov

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