Understanding a Franchise Disclosure Document

FDD Study Guide

What is a Franchise Disclosure Document (FDD)?

As obvious as it may sound, the best advice anyone can give you before you buy a franchise is just three simple words: Do your homework.

By definition, a franchise disclosure document (FDD) is a formal report that franchisors are legally required to provide before they can sell you a franchise. Cover to cover, the document contains 23 mandatory sections, meant to give you enough details about the franchise to make an informed decision about whether to invest.

In practical terms, a franchise disclosure document plays a much bigger role than its name implies, because it’s more than just a document. In many ways, it’s more intuitive to think of an FDD as a franchise textbook, given its value in helping you make educated investment decisions.

By design, the franchise disclosure document is a comprehensive source of facts and figures that you can not only learn from, but also compare to other similar franchises to determine your ideal investment.

Simply put, reading an FDD can help you identify a good franchise to invest in, but by comparing and benchmarking a variety of different opportunities, you can find the best.