The Franchise Disclosure Document (FDD) is a critical document that prospective franchisees need to understand. It provides detailed information about the franchisor and the franchise system. Here’s what to look out for:
Franchisor’s Background: This section provides information about the franchisor’s history and executives.
Litigation History: Details about any past or ongoing lawsuits involving the franchisor.
Initial and Ongoing Fees: Details about all the costs involved in starting and operating the franchise.
Franchisor’s Assistance: Outlines the training and support you can expect.
Territory: Information about the territory rights you’ll get as a franchisee.
Financial Performance: This section, also known as Item 19, may provide information about the financial performance of existing franchise units.
Franchisee List: A list of current and former franchisees, who can be contacted to get firsthand insights.
The FDD is a complex document, and it’s recommended to have it reviewed by a franchise lawyer. As your franchise advisor, I can help you understand the key points and guide you through the process.