What is the Franchise Development Disclosure (FDD)?
Prior to purchasing any franchise, a potential franchise owner must be given a copy of the franchisor’s Franchise Development Disclosure (FDD) at least 14 days prior to the completion of the franchise purchase. But what exactly is the FDD and why is it required?
In short, buying a franchise is a complex investment, and the FDD provides buyers with the necessary information to make a well-informed buying decision. According to Jim Stapleton, the Vice President of Franchise Development for Caring Transitions, “every franchise has to disclose all facets of franchise ownership, positive and negative within their FDD.”
Created by the Federal Trade Commission in 1978, and made a requirement for franchisors in 2008, the FDD exists for two primary reasons:
- To protect potential buyers as a candidate
- To protect the franchisor against allegations of misleading claims