The FDD is divided into 23 sections and the potential franchisee must check each of them before signing. The disclosure document must also include a table of materials. If the disclosure document contains other documents, these documents must be included in the table of materials. It is recommended that every time you look into a franchise, you call as many franchisees as possible to align the full offer. The FDD is a complete overview of a franchise that includes 23 items with additional parts after the items. When evaluating and comparing franchise systems, potential franchisees and franchise brokers will compare your FDD from a business perspective and evaluate your franchise`s ability to stack up against your competitors. Consider some of the following business points: In addition, this section should also list whether the franchisor sued one of its franchisees last year. An example would be a franchisor who pursues unpaid licence fees, which could be an indicator of the unsuccessfulness of franchisees. When updated financial data (including Schedule 1 statements, statements or documents) becomes available after a potential franchisee has received a publication document, but this information is available prior to the conclusion of a franchise agreement, this information should be made available to the potential franchisee as soon as possible.
You can only enter into the franchise agreement after providing the updated financial data to the potential franchisee. Purchasing a franchise offers the right to use a corporate brand for a given period of time (this is an exciting feature of franchising). Section 13 of the FDD contains a summary of the company`s trademarks and their use by the franchisee. Franchisors are invited by the Federal Trade Commission (FTC) to present potential franchisees with the latest version of their FDD at least 14 days before signing a contract. A franchise agreement is a legal document that connects franchisors and franchisees. This document explains what the franchisor expects from the franchise when managing the business. The franchise agreement is designed to ensure that all franchisees are treated fairly within an organization. Expectations must be consistent across the system; However, agreements with new franchisees may differ somewhat from the franchisor`s agreements with existing franchisees. The FDD provides comprehensive information on the role of both parties to the franchise – the franchisor and the franchisee – and should enable the potential franchisee to make an honest and informed decision about their investment in the business.
