Introduction to the FTC Franchise Rule and the Franchise Disclosure Document (FDD)
The Federal Trade Commission, or FTC, is the governing body that regulates franchisors in the name of protecting consumers. The Federal Trade Commission (FTC) requires 23 “items” to be disclosed in the Franchise Disclosure Document concerning the franchise company and provisions contained in the Franchise Agreement. The FTC requires that franchisors provide factual information about their businesses to franchise candidates before they sign any contracts or pay any sum of money. The FDD lets the candidate know what to expect as a franchisee and summarizes the legal terms of the franchise agreement. The FTC Rule on Franchising states that Franchisors are required that the FDD (Franchise Disclosure Document) be presented to the prospective franchisee at least fourteen days prior to the signing of the franchise agreement or any related agreements to the franchise.
We consult you and your attorney of your choosing in establishing the business terms of the franchise program to help ensure that aspects of the franchise business are identified and disclosed. As a franchisor, you are required by law to create and maintain this document for distribution to all prospective franchise candidates. The FDD is a legal document, so the information contained in it must be accurate.
The FDD, and other Franchise Documents are prepared by outside counsel of your choice in conformance with the FTC Franchise Rule.
Learn more about the FTC Franchise Rule, click Here.
What's an Accidental Franchise, and Could I Be One? Before licensing your business to others, learn what constitutes a franchise and how to avoid falling into the accidental franchise trap. Click Here to learn more about the Accidental Franchise presented by Fox Rothchild, LLP National Co-Chair of Franchising and Distribution Group; attention: Eleanor Vaida Gerhards (215) 918-3642.
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