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Franchising has become a popular business model for many entrepreneurs, allowing them to open and operate their own businesses while still having support from an established brand.

However, before signing any franchise agreement, it is crucial for both franchisors and franchisees to understand the legal implications involved. This is where Franchise Disclosure Documents (FDDs) come into play.

At Warren S. Dank, Esq., P.C., our experienced attorneys specialize in providing franchise legal services for businesses in Long Island, NY, and beyond. As a trusted resource for franchise law, we take pride in helping franchisors and franchisees navigate the complexities of FDDs to ensure a fair and successful business relationship.

What is a Franchise Disclosure Document?

A Franchise Disclosure Document (FDD) is a legal document that must be provided to potential franchisees by a franchisor at least 14 calendar days before signing any agreement or paying any fees. This requirement is set in place by the Federal Trade Commission (FTC) and state regulations.

The purpose of an FDD is to provide all necessary information about the franchise opportunity, including details on the business model, fees, initial investment, ongoing costs, and legal obligations. It also includes essential background information on the franchisor’s history, management team, and franchise litigation.

Why is it Important?

The primary purpose of an FDD is to protect both parties involved in a franchise agreement. Providing a thorough and transparent FDD for franchisors can protect them from potential legal disputes with franchisees. On the other hand, for franchisees, it serves as a vital source of information to make an informed decision before investing in a franchise.

Understanding the Contents

An FDD typically consists of 23 items that cover various aspects of the franchisor-franchisee relationship. Some of the essential items include:

  • The Franchisor’s Background and Experience – Information on the franchisor’s history, business experience, and predecessors.
  • Business Experience – details on the franchisor’s history, including any bankruptcies or litigation
  • Litigation History – provides information on any previous or ongoing legal disputes involving the franchise
  • Bankruptcy History – discloses any past or current bankruptcy filings by the franchisor
  • Initial Fees – outlines the initial fees paid by franchisees to the franchisor
  • Other Fees – includes details on ongoing costs such as royalties, marketing fees, and advertising contributions
  • Estimated Initial Investment – provides a breakdown of all costs associated with setting up the franchise location, including equipment, inventory, and real estate.

Seek Legal Guidance

As an attorney specializing in franchise law, we highly recommend seeking legal guidance when reviewing an FDD. The team at Warren S. Dank, Esq., P.C. has extensive experience in analyzing and negotiating FDDs to ensure that our clients fully understand their rights and obligations before entering into a franchise agreement.

Contact Warren S. Dank, Esq., P.C today to learn more about our franchise legal services and how we can help you navigate the complexities of FDDs. Whether you are a franchisor looking to expand your business or a potential franchisee considering investing in a franchise, our team is here to provide expert legal counsel every step of the way!