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What is a Franchise Disclosure Document (FDD)?

 

A: The Federal Trade Commission (FTC) governs franchising. The FTC Rule requires that franchisors provide potential franchisees with a Franchise Disclosure Document (FDD). Before a franchisor is legally permitted to sell a franchise, the franchisor must comply with certain rules by the FTC and/or statutes enacted by the state the franchisor is selling from or the state the franchisor is selling into. The purpose of these rules and/or statutes is to require the franchisor to information for the franchisee to use to make an informed decision about whether or not to purchase the franchise.

Previously, franchisors prepared a disclosure document known as the Uniform Franchise Offering Circular (UFOC), which contained all of the material information necessary for the franchisee to make an informed decision. The franchisor was then required to provide the UFOC to each potential franchisee. In 2007, the FTC revised its rule on franchising. Franchisors are permitted to use the UFOC format until June 30, 2008. As of July 1, 2008, all franchisors must use the FDD format. When deciding on whether or not to purchase a franchise, it is best to have an attorney review the franchisor's disclosure document.




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The Kramer Law Firm LLC represents small business clients throughout Washington, D.C. and Montgomery and Prince George's Counties in Maryland, including the communities of Bethesda, Bowie, Chevy Chase, Gaithersburg, Germantown, Laurel, Potomac, Rockville and Silver Spring and all of the surrounding areas.

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