The Importance of a Franchise Disclosure Document

The Importance of a Franchise Disclosure Document

Maryland’s “World Famous” Chaps Pit Beef is projected to be one of the fastest growing Franchises in recent times. What is going to make this Franchise so successful besides offering the highest quality products, outstanding service and a 100% guest satisfaction you ask? Strong Franchise candidates fully prepared to make a buying decision thanks to a meticulously drafted Franchise Disclosure Document.

The Franchise Disclosure Document, or FDD, is a legal document that the Federal Trade Commission (FTC) requires franchisors to provide to potential franchisees, at least 14 days prior to a sale. An FDD is intended to give potential franchisees the opportunity to fully evaluate a specific franchise company and allow them to make a decision on whether or not to buy a particular franchise. In a nutshell, the Franchise Disclosure Document is part of the due diligence process each potential franchisee must undertake – thoroughly – before signing a franchise agreement.

John Moser, president of MBB Management, says the FDD’s purpose “is to give the person the same knowledge MBB has so they can make an informed decision. Our FDD is about the industry, where it’s going, weaknesses, the competition — generally all the things they wouldn’t find out themselves.”

The FDD contains 23 mandatory sections that provide candidates with information regarding costs and fees, legal issues, turnover rates, and more. These documents can be lengthy, technical and tedious, especially for someone new to franchise world, but MBB is there to help guide you in making a sound decision. Since the FDD is a legal document, you may request the assistance of an attorney familiar in the area of franchising to go through the document for you.

Though the process of reviewing the FDD can be overwhelming, it is a critical step and can greatly affect your success as a new franchise owner. Remember MBB is here to help you review the FDD as well as provide additional coaching while you get established as a new franchisee.

Looking to franchise or invest in a franchise?  Learn more about our franchise consulting services here.

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