500 New & Refreshed Posts, Postings Daily
Over 8,000 Postings & 2,500 Resources
Assisting Buyers & Sellers Over 25 Years!

Franchise Disclosure Document FDD

Tags: franchising

Comments & Replies: 2     Views:     Post ID:     Comments About This Glossary Term

Contributor: Business Broker, Northern California
Before a franchisee or seller puts their business on the market they should read their Franchise Disclosure Document or FDD. The FDD will state any fees the franchisor charges to process the sale of the franchise to a new buyer and hopefully outline any training the buyer needs to attend. Some franchise agreements are not friendly to the franchisee or franchise buyer so know the rules before putting the franchise on the market so disclosures can be made correctly to a buyer.

The FDD (Franchise Disclosure Document) is the document that Federal law requires franchise companies' franchisors, to provide to prospective purchasers of a franchise before the agreement is signed and the purchaser pays money to the franchisor, becoming a franchisee of a fast food outlet, retail store, service firm or other kind of business in a franchisor's business system. Until July 2007, the disclosure form was called the UFOC (Uniform Franchise Offering Circular). Its use was required in connection with all franchise offerings under rules enforced by the Federal Trade Commission. The law was created in 1979 after many complaints about predatory practices by some companies exploiting the booming interest in franchise ownership by American consumers.

The FDD, an updated version of the UFOC, must be provided by a franchisor at least 14 days before the prospective franchisee is required to pay any money or sign any contracts. Among key requirements for the FDD are:

--Disclose the names of any businesses and principals having ownership of the franchise company, defined more explicitly for franchisors with publicly traded stock;

--Disclose names, business experience and litigation history - if it pertains to criminal or civil actions related to business dealings--of executives and principals of the franchise company;

--Provide details about the franchise including years in business, legal requirements, licenses and permits needed to operate the business;

--Disclose the amount of initial investment required and the amount of franchise fees and other costs imposed by franchisor, such as for training and advertising;

--Provide details about the privileges and responsibilities of franchisees such as definition of territory, limitations on purchasing, methods and rules regarding operation of the business and requirements pertaining to use of trademark;

--Provide list of franchise outlets, information about terminated, cancelled or non-renewed franchises, names of any former owners, over the past five years, of an existing outlet offered to the purchaser;

--Disclose substantial financial information about the franchisor including audited financial statements;

--Disclose sizes and average gross revenues of franchises in the system along with information about relationships between location and financial performance;

--While there is no requirement to disclose net earnings of franchises, if such information is provided it must be accompanied with details substantiating any claims.

Other Related Blog Posts, Articles, And Discussions You May Be Interested In

Free Live Podcast Sessions Weds Noon Next Live Podcast Online Session For Buyers & Sellers: Weds 8/18 At Noon

Part webinar, part live podcast these BizBen Sessions are held on Weds at Noon. These FREE live sessions consist of topics related to buying and selling small to mid-sized businesses. Online topics regarding buying and selling small businesses are discussed by the top professionals in the industry.
How To Price Sell A Landscaping Business How To Value And Sell Your Landscaping Business: New Blog Post On BizBen

Landscaping businesses usually have clear dividing lines. Residential customers vs. commercial customers. Maintenance revenues vs. construction revenues. This blog post looks at how to improve, the value of your landscaping company. Brian Loring, CBB, ARM, CVB explores this topic with BizBen users.
8 Questions To Sellers 8 Questions You Most Likely Will Be Asked When Selling Your Small Business

When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous. You need to be prepared. Here are some of the key questions you can expect to be asked. Tim Cunha (SF Bay Area Business Broker) reviews many of these possible questions from potential buyers.
Ryan Clark Business Broker Southern California Ryan Clark, Business Broker: The Veld Group Brokerage - Southern California

The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan, Business Broker at 310-652-8353.
LA County Montrose Gift Store For Sale Montrose, LA County, CA Toy, Nostalgia, Clothing, Specialty Store For Sale

The most charming and historic shop in the lovely city of Montrose, LA County, CA. Well established business is at the epicenter of the Montrose Shopping District and Community. Specializing in children's boutique clothing, toys, gifts, and nostalgic items. Contact Peggy (Agent) at 626-290-2869 Cell
Giving Buyers Tax Returns Should Sellers Of Small Businesses Give Potential Buyers Their Tax Returns?

Should small business owners/sellers or brokers/agents give potential buyers direct access to past company tax returns and financials (profit & loss statements) either before or pre the due diligence process? Multiple ProIntermediaries and ProAdvisors discuss this topic on this BizBen Discussion.
Chuck Post Webinar Buying A Laundry FREE Online Webinar For Laundry Buyers: Weekly Webinar For Laundry Buyers

Chuck Post hosts this live FREE online webinar on Buying A Laundry business. The next online webinar is coming soon. Have your questions ready for an open and honest discussion about both the Pro & Cons of the Vended Laundry Business. RSVP or for more info phone Chuck at 619-227-5711 direct.
Business Broker Likes Purchase Agreements Advantages Of An Asset Purchase Agreement (Contract) Over A Letter Of Intent

An LOI may very well be appropriate for lower middle market transactions of $5,000,000 or more; but, for deals less than that an Asset Purchase Agreement ("APA") with contingencies on the actions of the buyer (and seller) is much more efficient & effective. Tim Cunha, JD (Business Broker) explains.
Business Buyer Feedback On Postings 8 Items Buyers Of Small Businesses Find Critical When Reviewing Businesses

In this month's Business Buyer survey for, we asked participants in our ProBuy Program and 250 other random business buyers what they look for and avoid when looking at a business for sale postings online. Of the 20 potential posting characteristics we asked about, 8 stood out with most.
Business Buyers Biggest Mistakes What Are Buyers Biggest Mistakes? The Pro's Examine 25 Of The Most Common

A business buyer in our ProBuy Program searching to buy a small business asked me to sum up what I thought the biggest mistakes business buyers make when they search for and bought a small business. I asked ProIntermediaries on BizBen their thoughts on the matter and received a diverse response.