What is a Franchise Disclosure Document (FDD)?

Being an educated franchisee (or franchisor) means gathering all relevant information needed before making a solid business decision. And when it comes to the process of sorting through franchising opportunities for your business (or potentially becoming a franchisee yourself), one of the most critical pieces is the Franchise Disclosure Document, or FDD.

A Franchise Disclosure Document, in the simplest of terms, is a legal document that must be given to individuals that are interested in buying a U.S.-based franchise as part of the pre-sale “due diligence” process. The Federal Trade Commission (FTC) created these guidelines in 1978 that required franchisors to share information prior to allowing a new franchisee to join their business.

What does a compliant FDD entail?

A compliant Franchise Disclosure Document consists of over 23 items that are critical to beginning the franchising process, providing information on a variety of areas such as franchise history and background, costs, fees, etc. Some of the more specific areas of a compliant FDD include:

  • Business Experience
  • Litigation
  • Estimated Initial Investment
  • Territories
  • Financial Statements
  • And more…

You need a franchise lawyer

While a Franchise Disclosure Document may seem relatively straightforward, it’s always important that potential franchisors (or franchisees) have a franchise agreement lawyer review the Franchise Disclosure Document before any agreements are made.

“The Franchise Disclosure Document is the document that a franchise is required to have,” said Mike Drumm, attorney and founder of Drumm Law. “We will work to primarily create that for franchisors, and will help update the FDD every year. We will also review (the FDD) for potential franchisees.”

About Drumm Law

At Drumm Law, we understand that today’s law firms are inefficient and outdated. That’s why, as a virtual law firm, we’re proud to offer franchisors and potential franchisees expert services in the area of franchising and Franchise Disclosure Documents.

Learn more about how Drumm Law’s franchise lawyers can help with your franchising processes.

You can read more about what an FDD is in our Franchise Education Section here:  What’s an FDD?