Joel Libava
The Franchise Disclosure Document, commonly referred to as the FDD, is something you need to get your hands on when you’re investigating a franchise.
Period.
It’s not negotiable.
Unless the franchise development department forces you to negotiate in order to get it.
Let me explain…
Getting The FDD
You may find it hard to believe in this day and age-the age of transparency in business, but some franchisors wait an awful long time before they send interested parties the Franchise Disclosure Document.
I work with a lot of prospective franchise owners. They pay me to guide them through what can sometimes be a confusing and frustrating process.
Confusing because of:
A. So many franchise choices
How do you choose one? How do you know if it’s the right one for you? How do you know if it’s a legitimate business opportunity?
B. The massive amount of information available online
How do you know who to believe? Is Wikipedia the place to go for answers? A franchise blog? A government website?
C. Franchise consultants and brokers
Unless you understand (completely) how franchise brokers work, it can be difficult to determine if they’re helping you, or themselves. Franchise brokers aren’t bad people. I refer people who want to talk with brokers all the time. I know a few good eggs, so contact me if you want to connect with one…maybe even one that lives in your local area. It’s just that when money is involved…a lot of money for them if they succeed in “matching” you to a franchise they work with, things can get a bit dicey. All sales relationships that involve big commissions are dicey. It’s about trust. You need to trust the person you’re working with. If you do, things usually work out just fine.
Now, back to the question at hand.
Why Won’t They Send You The Franchise Disclosure Document?
Several times a year, my clients tell me that they’re having trouble getting the Franchise Disclosure Document sent to them, which really frosts my…
It’s like my clients have to negotiate to get the FDD.
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After my blood pressure ticks down a bit, I ask my clients why they’re having a hard time getting their hands on the FDD. The answer is almost always the same.
“My salesperson told me that I’ll get it at Discovery Day.”
When I hear that, I’m inclined to tell my client to
Okay. Not always. But why won’t the franchisor give the disclosure document when someone ask for it?
Here’s what I actually tell my clients to say when they can’t get the Franchise Disclosure Document sent to them.
“I’m not sure why you wait until I attend your Discovery Day to give me your FDD, but there’s a lot of research I need to do before I book a flight to come visit with you. I like your concept, but this is a big deal for me. I need to have your FDD sent to me now, so I can learn all I can about your opportunity and talk with some franchisees. Will you do that for me, please?”
It hardly ever works.
That’s because there’s usually (but not always) something in the FDD that not real pretty.
It could be that there were (or are) a lot of lawsuits.
Or
A lot of franchisees may have recently left the system.
Or
One of the executives at headquarters could be in legal trouble for something unrelated to the franchise.
Whatever it is…and those are only a few examples, the executives have made the decision to share whatever it is in-person.
Well, I don’t like it. And, you shouldn’t either.
Keep reading.
The Franchise Rule
It’s the law. It’s known as The Franchise Rule.
The franchisor has to send you the FDD.
“Under the Franchise Rule, which is enforced by the FTC, you must receive the document at least 14 days before you are asked to sign any contract or pay any money to the franchisor or an affiliate of the franchisor. You have the right to ask for—and get—a copy of the disclosure document once the franchisor has received your application and agreed to consider it. Indeed, you may want to get a copy of the franchisor’s disclosure document before incurring any expenses to investigate the franchise offering.” – From FTC.gov
Read the rest of the FTC’s Buying a Franchise: A Consumer Guide.
If You Like The Franchise Concept
Here’s the deal.
If you really like the franchise concept you’re investigating, and the research you’ve been doing is revealing mostly positive stuff…in other words, the franchisees in the system are pretty happy and they’re making good money, the things in the FDD that are negative probably won’t stop you from moving forward.
So, get the FDD before you visit headquarters.
Ask for it nicely, but don’t beg.
If the franchisor won’t give it to you when you want it, move on.
There are 2,999 other franchise concepts to explore.
And, you can explore these opportunities with confidence if you read my comprehensive article on how to buy a franchise.
