Franchise disclosure documents, or FDDs, describe your relationship as a franchisee with your franchisor. The documents detail out the benefits of working together as well as information about the opportunity.
The franchise disclosure document is present before you have the opportunity to decide if you want to become a franchisee. It allows you to do your own due diligence to make sure that the opportunity is right for you.
What kind of information can be found in the Franchise Disclosure Document?
Your franchise disclosure document is very important because it spells out much of what you can expect if you decide to move forward. The FDD contains:
- Details about the company’s history and background
- Financial data related to the company’s economic health
- A history of bankruptcies or lawsuits involving the business
- Distribution channel information
- Confidentiality information
All of these aspects of the business may influence your decisions. As a potential franchisee, you have the right to review this document with your attorney and to discuss if it’s a good opportunity to pursue.
You should not make the mistake of signing or agreeing to this document if you do not understand it or haven’t taken the time to meet with your attorney. Though these documents are long and complex, they lay the groundwork for your business agreement. Skimming them, or reading them over and thinking you understand when you have missed an important element of the agreement could result in serious problems later on.
Is your franchise agreement the same as the FDD?
The FDD is reviewed before you sign a franchise agreement. It is worth taking the time to review the FDD and then to have the franchise agreement reviewed as well so that you know you’re doing your due diligence in protecting your rights.
