What is a franchise disclosure document (FDD)?
Franchise Disclosure Document (FDD) · documento de divulgación de franquicia · وثيقة الإفصاح عن الامتياز · 特许经营披露文件
The FDD is the legal disclosure a US franchisor must give a prospective franchisee at least 14 days before any agreement is signed or money changes hands. Its 23 items cover the franchisor's background, fees, litigation, obligations, financials and franchisee contact lists — the primary due-diligence source for buyers.
The FDD is mandated by the FTC Franchise Rule (16 CFR Part 436). Several countries have equivalent pre-contract disclosure regimes (e.g., Australia's Franchising Code; Vietnam requires franchisor registration with the Ministry of Industry and Trade before offering franchises).
In practice
An FDD typically arrives as a long electronic document with the proposed contracts attached as exhibits and a receipt page for you to sign and return. Signing the receipt confirms that you received the document, not that you agree to buy. Buyers usually work through it with a franchise lawyer and an accountant, starting with fees, litigation, outlet turnover and financial statements. The franchisor may not contradict the FDD in its sales presentations, or require you to waive reliance on what it says.
Not to be confused with
The FDD is a disclosure document; the franchise agreement is the contract you sign, attached to the FDD as an exhibit. Item 19 is a section of the FDD, the only place where US franchisors may make earnings claims. Other countries' pre-contract disclosure documents go by different names and follow their own content and timing rules.
What to check before you sign
- Is the FDD you received the current version, and has the franchisor told you in writing about material changes since its issue date?
- Did franchisees sign confidentiality clauses in the periods reported, which could limit what current and former owners are willing to tell you?
- Does a state-specific addendum or exhibit attached to your FDD change the fees, termination or dispute terms that apply to you?
Questions to raise with the franchisor and your own adviser — general information, not legal advice. Rules differ by country.
📌 Also sourced from
- 16 CFR 436.5 — Disclosure items (Legal Information Institute) ↗ — inPractice and notToConfuse: Item 22 attaches all proposed agreements; Item 23 is a detachable acknowledgment of receipt; checks[1]: Item 20 discloses whether franchisees signed confidentiality clauses
- 16 CFR 436.9 — Additional prohibitions (Legal Information Institute) ↗ — inPractice: prohibits claims that contradict the disclosure document, and disclaiming or requiring waiver of reliance on representations in it
- 16 CFR 436.6 — Instructions for preparing disclosure documents (Legal Information Institute) ↗ — checks[2]: multi-state disclosure documents may include state-specific information in the text or in exhibits
- FTC — A Consumer's Guide to Buying a Franchise ↗ — inPractice: advises using an accountant and a lawyer experienced in franchise matters
Related terms
See it in practice
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