How can you create a franchise disclosure document?

1 Understand the FDD requirements

The FDD consists of 23 items that cover various aspects of your franchise system, such as the franchise fees, the initial investment, the training and support, the territorial rights, the financial performance, the contracts, and the litigation history. Each item has specific rules and guidelines on what information you need to disclose and how to present it. You can find the FTC Franchise Rule and the FDD Guide on the FTC website, as well as the state-specific requirements if you plan to sell franchises in states that regulate franchising.

3 Draft the FDD items

Once you have all the data, you can start drafting the FDD items in a clear and concise language that follows the FTC and state formats and standards. You can use templates and samples as references, but make sure to customize them to reflect your unique franchise system and value proposition. You also need to avoid making any false or misleading statements, exaggerations, or guarantees that could expose you to legal liability or damage your reputation. You should review and edit each item carefully and check for consistency and compliance.

4 Include the required exhibits

The FDD also includes several exhibits that provide additional information and documents related to your franchise system. These include the franchise agreement, the receipt page, the state-specific addenda, the list of current and former franchisees, the financial statements, the operations manual table of contents, and any other relevant attachments. You need to ensure that these exhibits are consistent with the FDD items and that they comply with the FTC and state disclosure rules.

5 Register and update the FDD

Depending on where you plan to sell franchises, you may need to register your FDD with the state authorities before you can offer or sell franchises in that state. You also need to update your FDD annually or whenever there are any material changes in your franchise system that affect the information in the FDD. You need to keep track of the registration deadlines and fees, as well as the renewal and amendment procedures for each state.

6 Deliver the FDD to potential franchisees

The final step is to deliver the FDD to potential franchisees at least 14 days before they sign any contract or pay any fee. You can deliver the FDD electronically or in print, as long as you follow the FTC and state delivery rules and obtain a signed receipt from the potential franchisee. You also need to provide a copy of the franchise agreement and any other contracts at least seven days before they sign. You should be prepared to answer any questions or concerns that potential franchisees may have about the FDD and your franchise system.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?