Category: The Legal Side of Franchising

During the meetings with your franchisor, you will hear them make promises and you are likely to verbally agree to things. You’ll also read the FDD and the franchising agreement and will have to sign parts of both. All these experiences culminate into the end result of owning a franchise, but later down the line, […]

There’s a lot of debate on what to do if an FDD doesn’t present franchisees with the financial performance representation or if they do and it’s something small. If the franchisor you’re working with doesn’t provide you with any information on it, another good source to go to is the earning potential information for the […]

While all parts of the FDD are important to not only read, but to understand, you’ll want to pay particular attention to these sections:   Item 7: Because it talks about how much the business will cost and the initial investment, it should be 100% understood, especially that these costs are only estimates and not […]

The Cover Pages of the FDD Every formal document will always start out with a cover page. On this (these) page(s) you should look forward to this information:   Summary of the franchise’s offerings and initial investment required. State that no government agency has verified the information in the document. Remind the franchisee to read […]

In short, the information you’ll find in the FDD includes:     A directory of franchisees in the system Audited financial statements Company’s key staff and their qualifications Company-owned locations, how many are open, how many have closed Franchisor’s financial history, including any bankruptcies or litigations Information on system-wide growth Information on the franchise Legal […]

You should feel some security in knowing the law requires franchisors to inform franchisees about the systems they run in their companies. The information that the law requires franchisors to share should be found in the FDD and if it’s not, back away from the company because they are not in compliance with the law. […]

When you’re getting into franchising, you should know the term Franchise Disclosure Document (FDD) indefinitely. You should always receive an FDD when you sign up with a franchisor for information and you need to make sure that you understand the FDD because it holds all the important information you will need to know about the […]