If you remember our five course meal analogy, the Franchise Disclosure Document (FDD) is the third course in our meal; the soup. It provides a tremendous amount of depth and due diligence about the business you’re considering buying.
The FDD is federally-mandated by the Federal Trade Commission (FTC) and makes access to your due diligence incredibly convenient. The FDD is for your awareness and protection. The franchisor will send you the FDD and you’ll need to provide a signature that verifies that you received it. This is mandated by law because you’ll have to wait 14 full days from FDD receipt before you can purchase a franchise. The FDD is a very large document with 23 items but it is purposefully written in plain language so a layman can understand it. Your franchisor should schedule time to go over the FDD with you after you read it and you should ask lots of questions for clarification and understanding.
Some franchisees will choose to have their accountant or other professionals review the FDD and your Coach can recommend some if you’d like. But keep in mind that the FDD is for clarification; not negotiation. The terms of an FDD give the franchisor a lot of control. But that is to your benefit as well. Part of the value of a franchise is the consistency in the product, service, culture and overall customer experience, regardless of which franchise you’re dealing with across the country. The FDD and later, the franchise agreement, must be one-sided in terms of control in order to maintain that consistency and value.
What You’ll Gain
Required Tasks to Complete
You’ll need to provide a signature verifying you’ve received it.
Start by watching the video “About the FDD” above to gain some understanding about this important document. Select the “Item Definitions” and “What to Look For” tabs above. This will give you a list and some guidance and understanding on what each item will offer.
We recommend you go through this document with your partner or spouse if you have one.
You may want a lawyer & accountant to review it with you. Your franchise coach can refer you if you’d like.
Keep track of specific information you want to take note of to compare against your other franchise options.
Use your Franchise Organizer to compare Items to really drill down on the things that matter to you.
When you are finished taking notes, click the save button and the note will be saved below the form. You will then be able to start a new note.
* For the best experience when taking notes, we recommend doing so while you are on a laptop or desktop computer.
Now you get to talk with other Franchise Owners in your chosen franchise. We recommend that you talk to as many as you need to to be comfortable. In general, this is done by talking with 1-3 franchisees or more. Talk to enough until you’ve validated everything you’ve learned up until this point. You are very close to the final step in your due diligence process.