What is a Franchise Disclosure Document (FDD)?
A. Before a franchisor is legally permitted to sell a franchise, the franchisor must comply with certain rules promulgated by the Federal Trade Commission (FTC) and/or statutes enacted by the state the franchisor is selling from or the state the franchisor is selling into. The purpose of these rules and/or statutes is to require the franchisor to provide the potential franchisee with information for the franchisee to use to make an informed decision as to whether or not to purchase the franchise. Previously, franchisors prepared a disclosure document known as the Uniform Franchise Offering Circular (UFOC), which contained all of the material information necessary for the franchisee to make an informed decision. The franchisor was then required to disseminate the UFOC to each potential franchisee. In 2007, the FTC revised its Rule on Franchising. The FTC Rule requires that franchisors provide potential franchisees with a Franchise Disclosure Document (FDD) rather than the UFOC. The FDD
