This All Important Document Gives Your Prospects Vital Information
Writing, updating, and distributing the franchise disclosure document, or FDD, is a key part of growing your business with new franchise locations. This important legal document is chock full of information that your franchise partners need to know before they invest in your brand. The experts at Accurate Franchising, Inc. can help you compile the data into your FDD so that it covers every required point and shows your prospects why yours is a great brand.
Want to know more about it? Here are some FAQs about the FDD.
Q: Does My Business Have to Have a Franchise Disclosure Document?
In the United States, the FDD is required by the Federal Trade Commission, or FTC, which is the government agency that regulates franchises. The FTC requires that franchisors be upfront with their prospects and not give misleading information just to try to sell franchises, and the franchise disclosure document is one way they do that. Creating the FDD is one of the first things you will do when you start franchising your business.
Q: When Do I Give Franchisee Prospects the FDD for Review?
A: Before they sign the franchise agreement.
Your prospects need to be able to review all the information in the disclosure document before they sign the franchise agreement. In fact, one of the items included in the FDD (listed below) is an acknowledgement of receipt.
Q: What Does the FDD Include:
A: There are 23 items that need to be in your document.
Item 1: The franchisor (your company) and any parent companies or affiliates
Item 2: Business experience, biographies, and backgrounds of the franchise’s owners and officers.
Item 3: All current and previous litigation that the franchisor and its leaders are involved in.
Item 4: If the company or any of its management have been through bankruptcy, the details are in item 4.
Item 5: List of the initial feels and any factors that determine the amount of these fees.
Item 6: Any other recurring fees
Item 7: The total estimated initial investment, including all the investor’s expenditures to get the franchise established.
Item 8: Any restrictions on sources of the products and services.
Item 9: The franchisee’s obligations and where in the franchise agreement those obligations can be found.
Item 10: Information, terms, and conditions regarding any financing agreements that you will provide your owners.
Item 11: All the assistance, advertising, and training provided by the franchisor to the franchisee.
Item 12: Territory information, including exclusivity of territories and whether territories can be modified.
Item 13: All trademarks owned by the franchisor.
Item 14: Patents, copyrights, and proprietary information and how the franchisee can use them.
Item 15: Franchisee’s obligation to participate in the franchise’s operations.
Item 16: Any restrictions on what the franchisee may sell.
Item 17: The timeline and rules on renewal, terminations, and transfers. Also specifies how any disputes between franchisor and franchisee will be handled.
Item 18: If your company works with any public figures, this item discloses how much they are paid.
Item 19 (optional): Financial performance of franchise units.
Item 20: List of operating franchise locations and their contact information.
Item 21: Financial statements from the last three years.
Item 22: All contracts and agreements that the franchisee will sign.
Item 23: Acknowledgement of receipt, must be signed by the franchisor.
Q: How Often Do I Need to Update my Franchise Disclosure Document?
The FTC requirement is that franchisors update their FDDs within the first four months (120 days) of their fiscal year. Additionally, some individual states have their own deadlines, so it is essential that you know when you need to have your update complete in your territory.
Q: Do I need an FDD if I am Franchising Internationally?
A: You need to follow the laws of the country/countries in which you are franchising.
Your responsibility as an international franchisor is to learn the laws of the country or countries in which you are expanding, and then follow those laws. Every country regulates franchises differently, so depending on your targeted country’s rules you may have to create a different document with slightly different points. The good news is AFI is the expert in international franchising, and we can help you navigate all the regulations you will face.
Have Franchising Questions You Need Answered?Make an appointment with a member of our team of specialists.Schedule Now
blog / latest news
When you’ve made the decision to convert your business to a franchise, it can be hard to figure out where to start. You’ll want to know how much it will cost, how long it will take, and you may even be wondering if it’s a good idea in the first place. Fortunately, a reputable franchise…Read more
Are you asking yourself, is my business ready to franchise? It’s something many would-be franchisors wonder when starting to research the subject. At AFI, we can help you answer that question. We’ve been in business for 30 years and have helped hundreds of clients decide if the day has finally come to franchise their brand…Read more
If today is the day you decide to franchise your business, you should know that you will be required by law to provide prospective franchisees with a legal document known as a Franchise Disclosure Document (FDD). Item 19 – the section that provides a representation of future financial performance – is often said to be…Read more
To Learn How to Grow a Franchise, You Need to Connect with the Right Franchisees Anyone can claim to be a franchise development consultant but Accurate Franchising, Inc. is the only franchise development firm with first-hand franchise experience. We know how to grow a franchise because we’ve done it ourselves. In fact, we’ve done it…Read more
Let Us Show You How to Go Global At Accurate Franchising, Inc. we know how to take a franchise global because we’ve done it ourselves. In fact, our founder Ray Titus has opened 800 franchises in more than 70 countries. Our team of international franchising experts is ready to help you explore new markets that…Read more
It’s a big decision to franchise your business. It’s your baby, after all, and you don’t want to take that next step before you understand the opportunities and challenges of franchising. Accurate Franchising, Inc. is a leading franchise consulting company with more than 30 years of experience helping emerging brands build successful franchises of their…Read more
If you’re a business owner who wants to grow, and you’re asking yourself, “How can I build my franchise?” we have the answer — partner with Accurate Franchising, Inc. We’ve got 30 years of experience helping countless businesses grow their names and their brands and helping them stay competitive and viable in ever-changing conditions and…Read more
Franchising a business is an exciting and challenging process, one that requires a solid understanding of the important steps involved. It doesn’t happen by itself and it doesn’t happen overnight. Furthermore, if you type in “how to franchise my business” as a search engine query, you’re going to come up with pages and pages of…Read more