The purpose of the Franchise Disclosure Document (FDD, formerly known as the UFOC or Uniform Franchise Offering Circular) is to provide prospective franchisees with information on the franchisor, the franchise system, and the agreements
they will need to sign so that they can make an informed decision.
In addition to the disclosure portion of the document, the FDD includes copies of
the franchise agreement and other agreements the franchisee will be required to
sign, together with the franchisor’s financial statements.
What appears in the FDD? In a nutshell, it includes information on the franchisor,
the company’s key staff, management’s experience in franchise management, the franchisor’s bankruptcy and litigation history, and the initial and ongoing fees involved in
opening and running a franchise.
Also included is information on the required investment, purchases you will be required
to make from the franchisor or from approved suppliers, and territory rights you
will be granted. You also find information about your legal responsibilities as
a franchisee and the responsibility of the franchisor to you.
In addition, the FDD presents information about the company-owned locations and
on the franchisees in the system, including the number of franchises opened, the
number closed and transferred, and most important, a list of existing and former
franchisees with their contact information.
It’s important that your client fully understand the franchise agreement and any
other agreements they need to sign. If they don’t understand what they’re signing,
they may find themselves locked into a business relationship that doesn’t wear well