Why should an investor read the Franchise Disclosure Document before investing in a franchise?

Alexander Springs, FL—There are a number of things an individual should consider before they invest in a franchise. One of those things is the Franchise Disclosure Document (FDD). A FDD contains some very important information that can help an investor make an informed decision as to whether they should buy into a franchise or if they should consider other options.


What information is included in a FDD?


FDD’s contain a substantial amount of information about a franchise. Some things a potential investor can learn from a FDD include:

  • How long the franchise has been in business.
  • The legal requirements a potential investor might need to meet in order to legally operate the business.
  • Who the executives of the franchise system are and their level of experience. This can help an investor determine how much experience the executives have and how long they’ve been working with the franchisor, according to the Federal Trade Commission (FTC).


The other information an investor will find in a company’s FDD includes:

  • Whether any of the franchise executive officers have been convicted of felonies or if they violated one or more franchise laws.
  • Whether the franchise has ever filed for bankruptcy.
  • Initial and ongoing costs they will incur. It is very important for an investor to review Items five through seven in the FDD as they are going to outline some of the costs associated with starting and operating the franchise, according to the FTC. If the franchise charges royalties and advertising fees, this is where an investor can find out how much they are.
  • If a franchise limits where an investor can buy supplies or goods from, this, along with any other limitations, will be outlined in the FDD.
  • The types of advertising programs that are used and the training the franchisor will provide a franchisee.
  • Obligations to the franchise once the contract ends.


To learn more about what a FDD contains, click here to visit the Federal Trade Commission’s website.


Are companies required to provide an investor with a copy of their FDD?


If an individual has submitted their franchise application and the company is willing to consider it, then they are required to provide the investor with a copy of their FDD upon request. The FTC says the franchisor must provide the document to an investor at least 14 days prior to them being asked to sign any contracts or pay any fees.


Consult with an Alexander Springs, FL Business Law Attorney Before Investing in a Franchise


Before an individual signs any documents affiliated with a franchise they are considering investing in they should discuss with a business lawyer the risks associated with doing so. The Alexander Springs, FL business law lawyers at Legal Counsel P.A. always look out for their clients’ best interest and will be sure the decision they make is the best one possible.


Legal Counsel P.A. is located at:


189 S. Orange Avenue, Ste. 1800

Orlando, FL 32801

Phone: 407-395-2653

Website: www.legalcounselpa.com

Email: [email protected]

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