What is the FDD?

Request a Free Franchise Disclosure Document to support researching a business opportunity.

The FDD disclosure document is a legal document required by the FTC that franchises must provide in order to get franchise investors better information to use in making the best franchise investment decisions.

The FDD defines what the franchisor will do for you and your obligations to the franchise. When you get serious about potentially buying any franchise, you should review the FDD first with your attorney.

The Franchise Disclosure Document includes 23 sections (called "Items") .

• Items 1 through 4 – describe the franchisor, his background, business ethics and possible bankruptcy history.

• Items 5 through 10 – deal with the fees, royalties, advertising fees and all financial arrangements including restrictions as to sources of products and services.
  

• Items 11 through 19 – detail the franchisee’s obligations and provisions in the agreement. These are very important as they define what restrictions there are on products that can be sold, transfer assignments, terminations, dispute resolutions and the like.

• Items 20 through 23 – provide a list of existing franchisees, both active and those who have left the system. They also provide financial statements of the franchisor and copies of contracts used in connection with the franchise offering, including the Franchise Agreement.

Click the links below for further information on any of these items:

FDD Items:

• Item 1 - The franchisor (and any predecessor’s) background includes any affiliates
• Item 2 – Business Experience
• Item 3 - Bankruptcy
• Item 4 - Litigation history
• Item 5 - Initial franchisee fees
• Item 6 - Ongoing fees
• Item 7 - Franchisees required initial investment
• Item 8 - Restriction on sources of products and services
• Item 9 - Franchisee’s obligations
• Item 10 - Financing agreement
• Item 11 - Obligation of the franchisor – training, support, marketing, etc
• Item 12 - Exclusive/designated territory
• Item 13 - Trademarks
• Item 14 - Patents and copyrights
• Item 15 - Obligations of the franchisee to participate in the actual operation of the franchise business
• Item 16 – Restriction on what the franchisee can sell, i.e. goods and service
• Item 17 - Renewal, termination, transfer, and dispute resolution
• Item 18 - Arrangements with public figures
• Item 19 - Financial performance representations - actual, average, projected or forecasted franchise sales, profits or earnings.
• Item 20 - Current franchisee/franchise outlet information.  Includes contact information of franchisees past and present
• Item 21 - Financial statements
• Item 22 - Contracts
• Item 23 - Acknowledgement receipt