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Franchise Disclosure Document
Franchise Disclosure Document (FDD) is a legal document that is used in the franchising process in the United States. It was originally known as "Uniform Franchise Offering Circular"(UFOC), prior to being renamed. Franchisors must give a FDD to franchisees at least 10 business days before any contract is signed and before any money changes hands. It contains extensive information about a franchisor, which is intended to give potential franchisees enough information to make educated decisions about their investments.
The information is divided into 23 categories:
- The Franchisor, its Predecessors and Affiliates
- Identity and Business Experience of Key Persons
- Litigation History
- Bankruptcy
- Initial Franchise Fee
- Other Fees and Expenses
- Franchisee's Initial Investment
- Restrictions on Sources of Products and Services
- Obligations of the Franchisee
- Financing Arrangements
- Obligations of the Franchisor
- Territory
- Trademarks
- Patents and Copyrights
- Obligation of the Franchisee to Participate in the Actual Operation of the Franchise Business
- Restrictions on Goods and Services Offered by the Franchisee
- Renewal, Termination, Repurchase, Modification and/or Transfer of the Franchise Agreement
- Public Figures
- Earnings Claims
- List of Franchise Outlets
- Financial Statements
- Contracts
- Acknowledgment of Receipt
NOTE: The new FTC rule does more than change the name of the document—it imposes new requirements for its contents, too. Franchises whose FDDs are not fully compliant with the July 1, 2008, rule change risk FTC penalties, lawsuits, and more.
