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What Does a FDD Contain?

 

A:

The Franchise Rule states what must be disclosed and provides its own disclosure format. It is published in the Code of Federal Regulations, Volume 16, Part 436 (16 CFR § 436), which may be found by link to the following page:www.ftc.gov/ftc/legal.htm.

The FDD is similar to a stock prospectus in that the purpose is to provide sufficient accurate information so that you can make an informed investment decision. Among the items of information contained in the FDD are the history of the franchisor and its founders, information about the types of products offered under the franchise and the general condition of the marketplace for those types of goods, a description of the initial franchise fees and all other fees you will pay during the course of the franchise relationship, a description of the kinds of assistance the franchisor will supply to you, an explanation of the system standards for advertising development and placement, site selection and build out and computer systems.

The FDD also details the size and scope of the territory granted to the franchisee and will discuss the rights retained by the franchisor. Franchisors may choose to disclose information relating to the financial performance of the franchise system or franchisees operating within the system.

You can also find the current state and federal guidelines in the Business Franchise Guide, published by Commerce Clearing House, Inc., in many law libraries.




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