“FDD” stands for Franchise Disclosure Document.
The franchise regulators think that this is a plain English term for “prospectus”.
Webster defines a prospectus as a preliminary printed statement that describes an enterprise (such as a business or publication) and that is distributed to prospective buyers, investors, or participants.
If you thinking of buying a franchise, then you are a prospect and the target for which an FDD is intended to help you understand the deal offered.
An FDD is not a contract!
Its purpose—among other things– is to give you:
- an overview history of the franchise company,
- the franchise business being offered, an estimated range of the costs you will incur to get into the business,
- a summary of certain of the contract terms included in the franchise agreement, some general information about training,
- management of the franchise company,
- the company’s obligations to the franchisee and the franchisee’s obligations to the franchise company, some statistical history on the growth rate (or decline) of the number of franchised units in the US
- the franchise company’s financial statements for its last three fiscal years–if it has been around that long; and
- sample contracts that you would be required to sign as a franchisee.
The Contract is the Franchise Agreement
The contract is the franchise agreement which is included as an exhibit in the FDD.
It is the heart of the franchise relationship.
Doesn’t matter what is said…by anybody, even the CEO.
What matters is what is in the franchise agreement.
That’s the deal and nothing more.
