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The role of disclosure documents in starting a franchise business

On Behalf of | Jul 19, 2023 | Franchise Law |

The Franchise Disclosure Document (FDD) aims to help potential franchisees make informed decisions about investing in a business. Following the Federal Trade Commission (FTC), it is your legal right to receive the disclosure document to understand critical information about the franchisor, franchise system and the franchise agreement 14 days before you sign any contract or pay any money to the franchisor.

What it contains

The FDD includes information about the business, allowing the franchisee to check the franchise’s background, business model and current financial health. It also contains other important details, including:

  • Franchisor’s background
  • Litigation history
  • Initial investment costs, fees and royalties
  • Bankruptcy
  • Supplier, territory and customer restrictions
  • Advertising and training
  • Renewal, termination, transfer and dispute resolution
  • Contracts and others

Having the FDD gives you the time to review these key pieces of information about the business and the perks or drawbacks that come with it. By understanding the costs and risks associated with the investment, you can make a more informed decision about whether to move forward as a potential franchisee.

Moving forward with the business

After consulting the FDD, the decision to move forward with a business investment is yours to make. If you decide to invest in the business, you will need to ensure that you are prepared to manage the business and operate it according to the requirements or conditions of the franchise agreement. While opening and running a franchise location requires hard work and dedication, the rewards of a successful franchise business can be significant and a cause for celebration. Contact Zarco Einhorn Salkowski, P.A. today to schedule your free consultation and get started on the path to franchise ownership.