Franchise Disclosure Document Generator

What is a Franchise Disclosure Agreement?

A Franchise Disclosure Agreement (typically called a Franchise Disclosure Document or FDD) is a legal document that franchisors are required to provide to prospective franchisees that contains comprehensive information about the franchisor, the franchise system, and the terms of the franchise offering. This document, mandated by the Federal Trade Commission (FTC) in the United States and similar regulatory bodies in other countries, ensures that potential franchisees have sufficient information to make an informed investment decision before purchasing a franchise.

Key Sections Typically Included:

• Franchisor Background and Business Experience
• Business Experience of Key Executives
• Litigation History
• Bankruptcy Disclosures
• Initial Franchise Fee and Other Initial Investments
• Ongoing Fees and Expenses
• Territorial Rights and Restrictions
• Obligations of Franchisor and Franchisee
• Financing Arrangements
• Franchisor Support and Training
• Product and Supply Restrictions
• Marketing and Advertising Requirements
• Financial Performance Representations
• Outlet Information and Franchisee Statistics
• Franchise Agreement and Related Contracts
• Renewal, Termination, and Transfer Provisions
• Dispute Resolution Procedures

Why Use Our Generator?

Our Franchise Disclosure Agreement generator helps franchisors create a comprehensive document that complies with regulatory requirements while clearly communicating the nature and terms of the franchise offering. By providing complete and accurate disclosures, franchisors can establish transparency with potential franchisees while reducing legal risks associated with the franchise sales process.

Frequently Asked Questions

• Q: What financial information must be disclosed?

  • A: The disclosure should clearly outline the initial franchise fee and payment terms, provide a detailed investment chart showing the full range of initial investment costs, and specify ongoing fees including royalties, advertising contributions, and technology fees. It should address estimated initial operating expenses until break-even, detail any required purchases or leases from designated suppliers, and specify transfer fees, renewal fees, and other periodic charges. The agreement should also disclose financing options offered by the franchisor or affiliates, provide historical data on average initial investments by existing franchisees, and outline any performance-based fee adjustments. If providing financial performance representations, it must include the factual basis, underlying assumptions, and percentage of existing units achieving stated results.

• Q: How should territorial rights and operational requirements be addressed?

  • A: The disclosure should clearly define whether territories are exclusive or non-exclusive with precise boundaries, outline any population or demographic requirements for territories, and address the franchisor's rights to operate or license competing businesses within the territory. It should specify required operating hours and days, outline quality control standards and compliance inspections, and detail required participation in system-wide promotions or programs. The agreement should also address site selection criteria and approval processes, specify required renovations or upgrades to facilities during the term, and outline internet and e-commerce restrictions or requirements. It should disclose the franchisor's rights to modify the system standards over time and specify the franchisee's obligation to implement changes.

• Q: What information about the franchise system and historical performance should be included?

  • A: The disclosure should provide a complete history of the franchise system including years in operation, detail the business experience of key executives and directors, and outline the litigation history involving the franchise, its officers, and affiliated companies. It should disclose any bankruptcies involving the franchisor or its principals, provide statistical information about franchise turnover rates and closures, and list contact information for current and former franchisees. The agreement should also detail the franchisor's training programs including duration, location, and costs, outline the ongoing support services provided to franchisees, and address the franchisor's financial statements showing its ability to fulfill obligations. It should specify the franchisee's participation requirements in test marketing or product development and disclose any restrictions on goods or services offered to customers.