Franchise Glossary
Franchise Disclosure Document (FDD)
What is Franchise Disclosure Document (FDD) in franchising?
A federally mandated document, typically 200–400 pages, that every franchisor must provide to prospective buyers before any agreement or payment. Organized into 23 items, it covers the franchisor's history, leadership, litigation history, fees, investment requirements, territory rights, franchisee obligations, financial performance data (Item 19), and a contact list of all current franchisees (Item 20). Reading the FDD, especially Items 5, 6, 7, 19, and 20, is one of the most important steps in franchise due diligence.
What is an FDD document?
The Franchise Disclosure Document is the legally mandated disclosure every US franchisor must give a prospective buyer before any money changes hands. It runs to 23 numbered items covering fees, obligations, litigation, territory, outlet turnover, and any financial performance the franchisor chooses to publish. It is the single most useful document in the whole process.
When do you receive the FDD?
At least 14 calendar days before you sign anything or pay any money, under the FTC Franchise Rule. That window is yours to use: it exists so you can read it, take it to a franchise attorney, and call existing franchisees without pressure. A franchisor pushing you to sign inside those 14 days is telling you something.
Which FDD items matter most?
Item 5 and Item 6 for what you pay upfront and ongoing, Item 7 for the total investment range, Item 12 for territory, Item 19 for any financial performance the brand is willing to state, and Item 20 for the outlet turnover that shows whether franchisees stay. Item 3 for litigation history is worth a careful read too.