How to Read the FDD
The Franchise Disclosure Document (FDD) is a dense legal document, but it contains the most critical information about the opportunity.
While you must have a franchise attorney review the FDD before signing, you should read it closely yourself. Pay special attention to:
- Item 7 (Initial Investment): The estimated total cost to open.
- Item 19 (Financial Performance Representations): Data on how existing locations are performing financially (though not all franchisors provide this).
- Item 20 (Outlets and Franchisee Information): The number of locations opened, closed, or transferred over the last three years. A high closure rate is a major red flag.
Common Questions
When do I receive the FDD?
By law, a franchisor must provide you with their FDD at least 14 days before you sign a binding agreement or make any payment to them.
Should an attorney review the FDD?
Yes. Use a qualified franchise attorney to review the disclosure document and agreement, explain obligations, and identify terms that need closer attention before you sign.
Choose your next step
Move forward with a clearer plan.
Assess your readiness now, or schedule a call with Charlie to discuss where you are in the process.