What is a Franchise Disclosure Document (FDD)?
A necessary requirement for franchising
The Franchise Disclosure Document (FDD) is a legal document that the Federal Trade Commission (FTC) requires franchisors to provide to prospective franchisees before selling a franchise. The FDD contains important information about the franchisor, the franchise system, and the agreements that franchisees will need to sign.
What information is included in an FDD?
The FDD is a long and complex document, but it typically includes the following information:
- The franchisor’s business history and financial information.
- The franchise system’s operations, including its products or services, marketing plan, and training program.
- The fees that franchisees will be required to pay.
- The franchisee’s obligations, such as the location of the franchise and the use of the franchisor’s trademarks.
- The franchisor’s dispute resolution procedures.
Federal Trade Commission (FTC)
The Franchise Disclosure Document (FDD) is a legal document that the Federal Trade Commission (FTC) requires franchisors to provide to prospective franchisees before selling a franchise.
Why is it important to read an FDD?
The FDD is an essential tool for prospective franchisees. It provides them with the information they need to make an informed decision about whether to purchase a franchise. By reading the FDD, franchisees can learn about the franchisor’s business history, financial condition, and operations. They can also learn about the fees that they will be required to pay and the obligations that they will be required to fulfill.
Where can I find an FDD?
Franchisees can request an FDD from the franchisor. The franchisor is required to provide the FDD to prospective franchisees at least 14 days before they pay any money or sign any franchise agreement.
How do I read an FDD?
The FDD is a complex document, but there are a few things that franchisees can do to make it easier to read. First, they should read the FDD carefully and ask questions if they do not understand something. Second, they should compare the FDD to other FDDs from different franchisors to get a sense of what is typical in the franchise industry. Finally, they should consult with an expert who specializes in franchising to get help in understanding the FDD and negotiating the franchise agreement.
Let Sparrow create your Franchise Disclosure Document (FDD)
At Sparrow Franchising, we not only know the importance of this part of franchising, we love doing it. That’s not the case with other franchise consultants or experts. In short, Sparrow provides all the materials you need to not only be franchise ready, but to actually sell and open your franchises with new owners. Having this done as one complete service doesn’t just save you time and effort bouncing from one company to the next to get franchised, it is the reason we are the most affordable way for you to franchise.
Need Help With Your FDD?
While we can be your all-in-one stop for everything you need to franchise, we can also help out case by case with one specific part of the process – such as creating a franchise business plan. Contact us today for a FREE consultation.
The basics of how to franchise
This is the first stage of the process and an important one. You are learning the basics and making sure your business is even franchisable.
Here are five of the most frequently asked questions with the answers you need to know. We offer a free consultation and no question is off the table.
What is a Franchise?
At its most basic level, franchising is simply a specific form of distribution for goods and services. But that’s a pretty generic and wholly unhelpful definition. So let's dig a little deeper...
Why should you Franchise?
With other expansion options available, how do you know if franchising is the right way to expand your business?
Alternatives to Franchising
There are other options to expanding your business other than franchising.
Is my business Franchisable?
You have a successful business and you’ve decided you want to franchise it. How do you know if your business would make a good franchise system?
How to Franchise a business
A good franchisor should train, guide and support a franchisee in every aspect of their business. That means a good franchisor’s training and support infrastructure will never stop expanding and evolving. But, when you start, here are the 6 foundational pillars you’ll need to legitimately consider yourself ready to franchise.