What’s Inside the 23-Item Franchise Playbook?
Ah, the Franchise Disclosure Document (FDD). It’s the holy grail of franchise transparency, the document that tells you—sometimes in painstaking legalese—what you’re getting into before you sign on the dotted line.
As franchise consultants, we’ve seen too many people skim this thing like it’s an iTunes terms of service agreement. Big mistake.
So, let’s break it down. The FDD contains 23 required items, each one loaded with crucial details.
(cough…cough… you can also ASK us for help – it’s free!)
If you are a skimmer – not an in-depth reader – we think THE most important items to check out are 3,5,6,7,19 and 20.
Here’s the CliffsNotes version so you know what to look for:
The Franchisor and Its History – Who are these people? This section lays out the franchisor’s history, business model, and any parent or predecessor companies. Get additional details from our YouTube breakout of Item 1 of the FDD
Business Experience – Who’s running the show? You’ll find bios of the key executives here, so you know whether you’re dealing with seasoned pros or enthusiastic amateurs. Get more info on our YouTube breakout of Item 2 of the FDD
Litigation – Any lawsuits in the mix? This section spills the legal tea on past or pending litigation involving the franchisor or its executives. Learn more about what to look for on our YouTube breakout of Item 3 of the FDD
Bankruptcy – Have they crashed and burned before? If the franchisor or key execs have declared bankruptcy, you’ll find the dirt here. Find out what to look for in our YouTube breakout of Item 4 of the FDD
Initial Fees – What’s the cover charge? This details your upfront costs, including the franchise fee and any initial expenses. Learn more about the types of fees in our YouTube breakout of Item 5 of the FDD
Other Fees – The fine print on your financial commitment. Think royalties, marketing fees, tech fees—basically, where your money is going. Learn more about important things to look for in our YouTube breakout video covering the FDD Item 6
Estimated Initial Investment – The real price tag. This section gives a range of expected costs, so you don’t go in thinking you’re buying a franchise on a shoestring budget. Learn more about what's included in the typical initial investment figures in our YouTube breakout video covering FDD Item 7
Restrictions on Sources of Products and Services – Who gets your business? Some franchisors require you to buy from approved vendors only. Here’s where you learn the rules. Learn more about how this can affect your bottom line as a franchisee in our YouTube breakout video of Item 8 of the FDD
Franchisee’s Obligations – What’s your job description? This outlines what’s expected of you, from daily operations to required purchases.
Financing – Can they help you with the money? Some franchisors offer financing options, and this section breaks it all down.
Franchisor’s Assistance, Advertising, Computer Systems, and Training – What support are you getting? From training programs to marketing guidance, this tells you what the franchisor provides.
Territory – Where’s your turf? This section spells out whether you get an exclusive area or if you’ll be battling another franchisee next door.
Trademarks – The brand name game. This details the franchise’s trademarks and whether they’re legally protected.
Patents, Copyrights, and Proprietary Information – The secret sauce. If the franchise has proprietary methods, recipes, or tech, this is where they claim their ownership.
Obligation to Participate in the Actual Operation of the Franchise Business – Can you be a hands-off owner? Some franchises require owner-operators, while others allow absentee ownership.
Restrictions on What the Franchisee May Sell – Stay in your lane. Franchisors often dictate what products and services you can offer.
Renewal, Termination, Transfer, and Dispute Resolution – The fine print of your exit strategy. This outlines your rights and the process if you want to renew, sell, or—worst case—get terminated.
Public Figures – Any celebrity endorsements? If a big name is attached to the brand, they’re listed here.
Financial Performance Representations – The numbers game. If the franchisor makes earnings claims, they have to show their work.
Outlets and Franchisee Information – How many locations exist? You’ll see a breakdown of open and closed units and contact info for current franchisees (which you should absolutely call!).
Financial Statements – Are they financially stable? Franchisors must provide audited financial statements so you can assess their fiscal health.
Contracts – The legal handshake. Here you’ll find sample agreements, so you know exactly what you’ll be signing.
Receipt – Proof that you got the FDD. Franchisors are required to have you sign this, confirming they gave you the document at least 14 days before you sign anything.
Now that you know what’s in an FDD, do yourself a favor—read it! Every single item matters, and understanding it could mean the difference between franchise success and regret.
Need help deciphering it? That’s what franchise consultants are for. (Hint, hint.)
