Franchise Disclosure Document (FDD) & Exhibits

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Your Franchise Disclosure Document (FDD) is a legal document, and is required to be prepared in accordance with the FTC Regulations and the myriad of applicable state laws that underpin the relationship between franchisor and franchisee (What is the FDD?). 

In 1978, the Federal Trade Commission (FTC) enacted the “Franchise Rule”. The Franchise Rule, as amended, requires a franchisor’s franchise disclosure document (FDD) provide prospective purchasers with adequate disclosure to make an informed decision before entering into a franchise agreement.

While Franchise-IQ is seasoned in the initial drafting of the FDD and the accompanying exhibits to comply with the Franchise Rule, and the myriad of State laws where you grant franchises, we are not a law firm. No documents we prepare should be considered drafted under the guise of legal advice or services. We understand the importance of obtaining advice from legal counsel regarding your FDD submission. Only upon company authorization are we are able to coordinate the submission of the FDD to the state(s) for review. Upon state approval, the company’s sales agent(s) may offer your franchise business in the approved state through direct sales, and through other sales channels (to be discussed).

Other related FDD documents include, for example:

  • Specific business information
  • General release
  • Non-disclosure and non-compete agreements
  • State addendums
  • Operations Manual table of contents
  • Financial statements
  • Disclosure questionnaire
  • And other related materials

Exhibit “A” – The Franchise Agreement

The franchise Agreement, is a legally binding contract between franchisor and franchisee that governs the relationship between the franchisor and franchisee and is essential for the successful operation of the franchise business. Several sections of the FDD cross reference corresponding sections of the franchise agreement to emphasize material aspects of the franchise agreement. These include, for example:

  • Required fees – initial and ongoing
  • Territory rights
  • Trademark use
  • Term and renewal rights
  • Transfer rights and conditions
  • Non-compete covenants

In summary, the franchise agreement is a vital component of the franchising process, as it establishes the framework for the business relationship between the franchisor and franchisee. The agreement outlines the rights, responsibilities, and obligations of both parties and helps ensure that the franchisor’s business system and intellectual property are used in a consistent and effective manner. By following the terms of the agreement, the franchisor and franchisee can work together to build a successful franchise business that benefits both parties.

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