Guide
How to read a Franchise Disclosure Document
The FDD is long, but a handful of items answer most early questions. Start here, then review the full document with a franchise attorney.
By Editorial team · Reviewed
In the United States, franchisors must give prospective buyers a Franchise Disclosure Document before any agreement is signed or money changes hands. It is the most reliable starting point for comparing brands.
Items to read first
- Item 5 and 6 — Fees. The initial fee and every recurring fee: royalties, brand fund, technology and transfer fees.
- Item 7 — Estimated initial investment. The cost table behind the total investment range.
- Item 11 — Franchisor's assistance. Training, site selection and opening support.
- Item 12 — Territory. Whether you receive any protected territory and under what conditions.
- Item 19 — Financial performance representations. Many franchisors provide none. If they do, read the footnotes carefully: which units are included, and over what period.
- Item 20 — Outlets. Openings, transfers and closures over three years, plus contact lists for current and former franchisees.
Next steps
Use Item 20 to call franchisees, and have a qualified franchise attorney review the agreement. This guide is general information, not legal advice.