What Does a Franchise Disclosure Document (FDD) Contain?

When it’s time to get serious about forming a franchise, one of the final steps is creating the Franchise Disclosure Document, or FDD. This legal document is required by the Federal Trade Commission (FTC) to provide prospective franchisees with the information they need to make an informed decision.

Key Components of the FDD

The FDD is standardized under the FTC Franchise Rule and must contain 23 specific items of information. These include, but are not limited to:

• The Franchisor's Business Experience: Detailed background on the company and its key executives.
• Litigation History: Any prior legal issues or bankruptcies involving the company or its leadership.
• Initial Fees and Estimated Costs: A clear breakdown of what it costs to open the franchise.
• Obligations of the Franchisee: Detailed operational requirements.
• Financial Performance Representations: Earnings claims (if the franchisor chooses to provide them).

Because these documents are highly regulated and contain complex legal language, it is highly recommended that you consult with a franchise attorney before finalizing or signing an FDD.