A franchise disclosure document is a crucial document that is necessary when starting a franchise. It provides important information about the franchisor and the franchise relationship. When entering a franchise, franchisees pay an initial franchise fee and ongoing franchise fees for marketing and royalties. Before signing an agreement with a franchisor, prospective franchisees must review the franchisor’s Franchise Disclosure Document (FDD). The FDD is a legally-required document that outlines the franchise relationship and includes information such as the use of trademarks, franchisee fees, obligations of the franchisor, restrictions on goods and services, and renewal and termination of the franchise agreement. The FDD is important because it helps prospective franchisees analyze the franchise opportunity and understand their obligations as a franchisee. It should include 23 disclosure items as required by law, such as information about the franchisor, business experience, litigation history, bankruptcy, initial and recurring fees, estimated initial investment, restrictions on products and services, franchisee’s obligations, and financing options.
What does a Franchise Disclosure Document entail and what should be included in it?
