Continuing in our series of franchising definitions is the Franchise Disclosure Document, or FDD.
The Franchise Disclosure Document (formerly known as the Uniform Franchise Offering Circular or Uniform Franchise Disclosure Document) is designed to give prospective buyers all the information they need in order to make an informed decision about buying into a particular franchise opportunity.
This document is regulated at the state level, as well as by the Federal Trade Commission. If you don’t have extensive knowledge of franchise law, it is recommended that you speak with an expert before trying to draft your own FDD.
The FDD contains extensive information about the franchise and the franchise opportunity. It does not, however, include any sensitive information, such as trade secrets, that would be detrimental if shared with any outside parties. Often, for this reason, all internal information, like trade secrets and business operations, is not disclosed until the franchise agreement is signed by the franchisee, along with a confidentiality agreement and a non-disclosure document.
The FDD contains information that gives the prospective buyer a clear picture of the franchise terms and what is included in the franchise. The document consists of a cover page and a table of contents that includes 23 sections, called items. These items outline everything about the franchise, and even include financial data, and sometimes sales projections.
Examples of some of the items included in the Financial Disclosure Document are franchise fees, territories, trademarks, financing arrangements, the obligations of the franchisee and the obligations of the franchisor. Each item has its own section with an explanation of each.
If you have any questions about franchise disclosure documents, or if you need help drafting an FDD, we can help. We offer a free initial consultation, so call today.