There are two official documents that a franchisor may use to comply with the FTC Rule—the FTC Disclosure (FTC Document) and the Franchise Disclosure Document (FDD). The FTC document does not meet the requirements of most state disclosure laws, whereas the FDD is accepted (with minor differences) in all states with franchise disclosure laws. The two documents possess similarities, but the franchisor must pick one or the other. Most franchisors opt for the FDD, because of its wider acceptance. This is the document we will focus on.
The FDD is a document that contains information franchisors must provide to you by law, designed to assist you in analyzing the merits of your potential franchisor. In fact, a franchisor must provide a prospective franchisee with a FDD at their first face-to-face meeting or at least ten business days prior to the signing of the franchise agreement, whichever is earlier.
Keep in mind that neither the FTC nor any of the states has reviewed the disclosure document to determine whether the information submitted is accurate or not. They merely require that the franchisor make representations based upon a prescribed format. If the information provided is false, franchisors are subject to civil penalties. However, it is far less costly to avoid making a mistake in the first place with solid research of your own.
Most franchisors request the following information from you before sending a copy of their FDD:
Try to obtain an FDD before franchisor approval so that you can avoid submitting personal information to a franchise that you may not decide to pursue. Please visit FranchiseDisclosures.com for information on how you can obtain a franchisor's FDD for viewing.
An FDD contains the following required information: