Like shades of hair color and nail polish, there are many choices when it comes to selecting and investing in […]
What is the Franchise Disclosure Document (FDD)?
The Franchise Disclosure Document (FDD) was previously called the UFOC, or Uniform Franchise Offering Circular. This document gives a thorough description of a franchise’s history, the nature and extent of its products or services, the fees charged by the franchisor, the operational requirements, and the financial calculations involving prior sales, real estate, and profit objectives.
The FDD should also state that past success does not guarantee future success, nor can the FDD make promises as to future profits or revenues. It should, however, provide a detailed account of the business up to date.
The FDD is required by the industry’s “FRANCHISE RULE,” and must include a number of disclosures pursuant to the Code of Federal Regulations, Volume 16, Part 436. The Franchise Rule Compliance Guide can be found at www.ftc.gov/bcp/edu/pubs/business/franchise/bus70.pdf
In most states it is also illegal to offer or sell a franchise until the franchisor has registered the FDD with the appropriate state agencies.
If you wish to review FDD's, we would suggest you visit the FDD Exchange.
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