Joel Libava
By law, every Franchise Disclosure Document (FDD) must include 23 disclosure items that provide essential information about the franchise opportunity. These items are standardized by the Federal Trade Commission (FTC) in the United States. However…
The 23 items in the FDD are not verified. What? Huh?
That’s right. Although the U.S. government (via the Federal Trade Commission), requires every franchise company (franchisor) registered to offer and sell franchises here to provide information under each of the 23 items, that information won’t be verified by the FTC.
That means only one thing.
You’re the person who needs to verify that the information contained in the FDD is factual. But don’t worry, it’s not difficult to do if you know how.
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With those things in mind, let’s take a look at the 23 items that are included in the FDD.
Note: You should never have to pay to get a Franchise Disclosure Document. Get them free here.
The 23 Items In The FDD
Here they are, in order:
- The Franchisor, its Predecessors, and its Affiliates
- Business Experience
- Litigation
- Bankruptcy
- Initial Franchise Fee
- Other Fees
- Initial Investment
- Restrictions On Sources Of Products And Services
- Franchisee’s Obligations
- Financing
- Franchisor’s Obligations
- Territory
- Trademarks
- Patents, Copyrights and Proprietary Information
- Obligation To Participate In The Actual Operation Of The Franchise Business
- Restrictions On What The Franchisee May Sell
- Renewal, Termination, Transfer And Dispute Resolution
- Public Figures
- Earnings Claims-Financial Performance Representations
- List Of Outlets
- Financial Statements
- Contracts
- Receipt
There you have it.
The 23 items in the FDD.
While it’s important for you to go through each and every one of them, it’s even more important to hire a good franchise attorney to help you figure them out.
Because franchise lawyer’s write and read FDD’s all the time. They know what to look for. And they can quickly spot red flags for you to be aware of.
Finally, for details on each FDD item, head on over to the FTC website.
About the Author
Joel Libava is The Franchise King® — an independent franchise advisor with 25+ years in the industry, two published books on franchising, and his writing has been featured in The New York Times, Forbes, CNBC, Entrepreneur® Magazine and others. In addition, he wrote exclusively for the U.S. Small Business Administration blog for eight years. He doesn't sell franchises. Instead, Joel helps you figure out if franchise ownership is actually right for you — and if it is, teaches you his powerful, proven-to-work franchise research techniques, so you can make a smart, informed decision on a franchise to own and be your own boss.
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