If you want to open a franchise, you will need to sign a Franchise Disclosure Document. The FDD will give you information about the franchisor and allow you to make an informed decision about the overall deal.
The International Franchise Association explains there are some specific things for which you want to look before you sign your Franchise Disclosure Document.
Information about the business
Your FDD should provide you with some information about the history of the company and give you a description of it. It will also disclose any legal issues the company may currently have or have had in the past. You will get information also about the leadership in the company.
You will also get information about the company’s finances, including any bankruptcy filings. It should include financial statements for at least the past three years. The FDD will also outline other franchisee locations.
Information about running the business
The FDD will cover various aspects of running the business, including guidelines, restrictions and rules. You will get information about securing products, advertising and intellectual property. The document will also outline your territory. It will explain your duties and any restrictions on what you may sell.
Information on fees and other actions
You will receive various contracts as part of the FDD. You will learn how to terminate, dispute, renew and transfer your franchise.
It will outline the various fees, including the upfront fees and recurring ones. You should get a rundown of the investment you will make initially, and information about any financing agreements between you and the franchisor.