Franchise Disclosure Document (FDD)

What the FDD Is

The Franchise Disclosure Document (FDD) is the standardized legal document franchisors must provide to prospective franchisees before any agreement is signed. It’s designed to give a clear, transparent picture of the franchise system, including its history, leadership, fees, financials, obligations, and legal background.
Think of it as your roadmap to understanding exactly what you’re investing in.

Why the FDD Matters

The FDD protects buyers by ensuring they have enough information to make an informed decision. It outlines risks, costs, expectations, and historical performance so you can evaluate whether the opportunity aligns with your goals and financial capabilities.

What’s Inside the FDD

The FDD is divided into 23 sections (“Items”). Some of the most important include:

• Item 1: Background on the franchisor

• Item 3: Litigation history

• Item 5–7: Fees and initial investment

• Item 8: Supplier restrictions

• Item 12: Territories

• Item 19: Financial Performance Representations

• Item 20: System growth and turnover

• Item 21: Audited financial statements

• Item 22: Contracts you’ll be required to sign

When You Receive It

Franchisors must provide the FDD at least 14 days before signing a franchise agreement or accepting any payment. Many prospects receive it earlier during the discovery or evaluation process.

How to Use the FDD

Read the full document thoroughly. Many buyers hire a franchise attorney or CPA to review the FDD for red flags, discrepancies, or unusual terms. Use the FDD as a reference point during validation calls with existing franchisees.

Legal Disclaimer

This content is for general informational purposes only and is not legal, financial, or investment advice. Always consult with qualified professionals before making franchise decisions.