If you’re an entrepreneur considering a restaurant franchise, you’ll want to ask for a Franchise Disclosure Document from franchisors that interest you.
Franchisors are required by law to provide potential franchisees with a presale Franchise Disclosure Document (FDD), in accordance with the Federal Trade Commission’s (FTC) Franchise Rule. The franchisor is required to give an FDD to a prospective franchisee at least 14 days before the franchise agreement is signed. Here are some things you can expect to see in the Franchise Disclosure Document:
Written in Plain English
The disclosure portion off the FDD is required to be written in plain English, not in legalese, under the Franchise Rule. The purpose of this document is to allow prospective owners the opportunity to make an informed decision before entering into a franchise agreement.
23 Items of Disclosure
There are 23 specific items of disclosure that the Franchise Disclosure Document must address. These areas cover everything that you should know before signing your franchise agreement. The 23 items in their required order are:
- The Franchisor and Any Parents, Predecessors, and Affiliates
- Business Experience
- Initial Fees
- Other Fees
- Estimated Initial Investment
- Restrictions on Sources of Products and Services
- Franchisee’s Obligations
- Franchisor’s Assistance, Advertising, Computer Systems, and Training
- Patents, Copyrights, and Proprietary Information
- Obligation to Participate in the Actual Operation of the Franchise Business
- Restrictions on What the Franchisee May Sell
- Renewal, Termination, Transfer, and Dispute Resolution
- Public Figures
- Financial Performance Representations
- Outlets and Franchisee Information
- Financial Statements
When going through the process of becoming a Samurai Sam’s® franchisee, you will receive an FDD as required by law. The FDD will disclose information about Samurai Sam’s and their parent company and what your rights and responsibilities are, so it’s important to read it carefully. Even though this document is written in plain English, you do have the option of hiring a business attorney for advice before you sign a franchise agreement.
©2017 Kahala Franchising, L.L.C. All rights reserved. All other trademarks referenced are property of their respective owners. The information provided herein is for informational purposes only and is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise; nor is it directed to the residents of any particular jurisdiction within the U.S. or elsewhere. The following states currently regulate the offer and sale of franchises: CA, HI, IL, IN, MD, MI, MN, NY, ND, RI, SD, VA, WA, and WI. If you are a resident of one of these states, or of a jurisdiction that has similar requirements, we will not offer you a franchise until we have completed the applicable registration or obtained the exemption from registration, and completed the applicable disclosure requirements. Regardless of what state you reside in, an offering can only be made by a franchise disclosure document.