The New Franchise Disclosure Document
Beginning this past July 1, franchisors were required to provide information to would-be franchisees in a new format. The Franchise Disclosure Document (FDD) has now replaced the Uniform Franchise Offering Circular (UFOC) as the vehicle by which potential franchisees are told of the benefits and risks of a particular franchise.
Here is the complete text of the new amended new rule. For those with less familarity with franchising who want to fully understand the rules, the Federal Trade Commission's Statement of Basis and Purpose may be especially helpful.
I've previously posted on The Franchising Route to Starting a Business, including several links to general resources for evaluating franchise opportunities and specific information about how the new FDD differs from the old UFOC. In this post, i want to focus more specifically on the new FDD.
The Federal Trade Commission's website offers a helpful FAQ about the new rule. In addition, this past May, the Federal Trade Commission (FTC) issued a lengthy, but very comprehensive and informative Amended Franchise Rule Compliance Guide.
The Compliance Guide begins by explaining what sort of business relationships constitute a franchise subject to the FTC Amended Rule and the process required for furnishing the required documentation. It also explains the sort of information which must be included and that which is prohibited. The lion's share of this 154 page document consists of an explanation of each of the FDD's required items and includes specific examples of how each item should be completed with sample disclosures and disclosure formats. It also specifies the differences between the UFOC and the FDD with respect to the information now required, In short, whether franchisor or franchisee, this is an extremely useful publication.
Here is another example of a sample Franchise Disclosure Document.
>>>>> UPDATE>>>>>
For a more detailed examination of the contents of the new Franchise Disclosure Document, read these posts on my blog:
