As you look at competing to be awarded a franchise, you should become familiar with and “gather” the documents of this process.
One of the most important documents is called the Uniform Franchise Disclosure Document (FDD). The FDD always has 23 items, they are:
Item 1. The Franchisor, its Predecessors, and Affiliates
Item 2. Business Experience
Item 3. Litigation
Item 4. Bankruptcy
Item 5. Initial Franchise Fee
Item 6. Other Fees
Item 7. Initial Investment
Item 8. Restrictions on Sources of Products and Services
Item 9. Franchisee’s Obligations
Item 10. Financing
Item 11. Franchisor’s Obligations
Item 12. Territory
Item 13. Trademarks
Item 14. Patents, Copyrights, and Proprietary Information
Item 15. Obligation to Participate in the Actual Operations…
Item 16. Restrictions on What the Franchise May Sell
Item 17. Renewal, Terminations, Transfer, and Dispute Resolution
Item 18. Public Figures
Item 19. Earnings Claims
Item 20. List of Franchises
Item 21. Financial Statements
Item 22. Contracts and Agreements
Item 23. Receipt.
While ever Item is important and should be reviewed, after working with thousands of potential franchisees, the following Items seem to be the one’s focused on: 5,6,7,9,11,12,15,19, and 23.
Item 23, the Receipt will be requested by the Franchisor to establish two key rules called the 7 and 14 day rules. The rules state that you cannot purchase the franchise until you have had the FDD for 14 calendar days. Second the 7 day rule requires you have the Franchise Agreement in its final form for at least 7 days. As a result, the Franchisor typically delivers the FDD and the Franchise Agreement as one document. Expect this document to be 120 to 150 pages. The more mature the franchise concept, the larger these documents might be.
Ask the Franchisor or Broker to cover each item with you before you purchase any franchise.