Franchise Disclosure Document (FDD)

The document a franchisor must give a prospective franchisee before any contract is signed or money changes hands - what the federal rule requires it to contain, what it does not promise, and the state laws that add registration and relationship rights.

Looking for a lawyer rather than a definition? Skip to the state-by-state list of Franchising law firms.

What it means

Federal law requires a franchisor to give every prospective franchisee a disclosure document, in a prescribed format of twenty-three numbered items, a set number of days before the franchisee signs any binding agreement or pays anything. The items cover the franchisor and its officers, litigation and bankruptcy history, every fee the franchisee will pay, the estimated initial investment, restrictions on suppliers and products, the franchisee's obligations, territory, trademarks, renewal and termination terms, a list of current and former franchisees to contact, audited financial statements, and copies of every contract the franchisee will sign. One item is reserved for financial performance representations; a franchisor that makes any claim about what franchisees earn must put it there with its basis, and a claim made anywhere else is unlawful.

The rule is a disclosure rule, not a fairness rule. It does not require the terms to be reasonable, it does not vet the franchisor's business, and it gives the franchisee no federal right to sue for a violation - enforcement is by the Federal Trade Commission. What it does is put the franchisor's claims and the contract in one place, in a form that can be compared across systems and shown to an adviser, before the franchisee is committed.

A number of states go further. Registration states require the disclosure document to be filed and approved before the franchise can be offered there, and give franchisees a private claim for violations. Relationship states restrict termination and non-renewal without good cause, protect the franchisee's right to sell the business, and limit some contract terms. Whether a state's laws apply generally turns on where the franchisee or the business is located, not on where the franchisor is.

Where this comes from

When people hire a lawyer for this

A prospective franchisee should have the disclosure document and the franchise agreement reviewed by a lawyer who reads them regularly, and should call the current and former franchisees the document lists, before paying a deposit. Anyone told a number about likely earnings should ask where in the document it appears; if it does not, that is the reason to see a lawyer rather than sign. A franchisee facing termination or non-renewal should ask whether the state has a relationship law before accepting the franchisor's position.

Worried about the cost? A lawyer can be hired for one part of a case only (limited-scope representation), may be paid from what a claim recovers (contingency fee), or may be free through a pro bono program or legal aid; a court can also waive its own filing fees.

Find Franchising law firms in your state

Choose your state to see Franchising law firms in the city where we list the most; your city may be under “other cities”, A to Z. A state marked “Business Law” has no Franchising listing yet and opens the broader page.

• Alabama (Birmingham)
• Alaska (Anchorage, Business Law)
• Arizona (Chandler)
  +6 other cities

  • Gilbert
  • Glendale
  • Mesa
  • Phoenix
  • Scottsdale
  • Tucson
• Arkansas (Little Rock)
• California (Anaheim)
  +19 other cities

  • Bakersfield
  • Chula Vista
  • Fontana
  • Fremont
  • Irvine
  • Long Beach
  • Los Angeles
  • Oxnard
  • Riverside
  • San Bernardino
  • San Diego
  • Santa Ana
  • and 7 more with fewer listed firms
• Colorado (Aurora)
  +2 other cities

  • Colorado Springs
  • Denver
• Connecticut (Bridgeport)
• Delaware (Wilmington, Business Law)
• District of Columbia (Washington)
• Florida (Hialeah)
  +5 other cities

  • Jacksonville
  • Miami
  • Orlando
  • St Petersburg
  • Tampa
• Georgia (Atlanta)
• Hawaii (Honolulu, Business Law)
• Idaho (Boise, Business Law)
• Illinois (Chicago)
• Indiana (Fort Wayne)
  +1 other city

  • Indianapolis
• Iowa (Des Moines)
• Kansas (Kansas City, Business Law)
  +1 other city

  • Wichita
• Kentucky (Lexington)
  +1 other city

  • Louisville
• Louisiana (Baton Rouge)
  +2 other cities

  • New Orleans
  • Shreveport
• Maine (Portland, Business Law)
• Maryland (Baltimore)
• Massachusetts (Boston)
• Michigan (Detroit)
• Minnesota (Minneapolis)
  +1 other city

  • Saint Paul
• Mississippi (Jackson)
• Missouri (Kansas City)
  +1 other city

  • St. Louis
• Montana (Billings)
• Nebraska (Lincoln)
  +1 other city

  • Omaha
• Nevada (Henderson)
  +2 other cities

  • Las Vegas
  • North Las Vegas
• New Hampshire (Manchester)
• New Jersey (Jersey City)
  +1 other city

  • Newark
• New Mexico (Albuquerque, Business Law)
• New York (New York City)
  +2 other cities

  • Buffalo
  • Rochester
• North Carolina (Charlotte)
  +5 other cities

  • Durham
  • Fayetteville
  • Greensboro
  • Raleigh
  • Winston-Salem
• North Dakota (Fargo, Business Law)
• Ohio (Cincinnati)
  +3 other cities

  • Cleveland
  • Columbus
  • Toledo
• Oklahoma (Oklahoma City)
  +1 other city

  • Tulsa
• Oregon (Portland)
• Pennsylvania (Philadelphia)
  +1 other city

  • Pittsburgh
• Rhode Island (Providence)
• South Carolina (Columbia, Business Law)
• South Dakota (Sioux Falls)
• Tennessee (Memphis)
  +1 other city

  • Nashville
• Texas (Houston)
  +11 other cities

  • Arlington
  • Austin
  • Corpus Christi
  • Dallas
  • Fort Worth
  • Garland
  • Irving
  • Laredo
  • Lubbock
  • Plano
  • San Antonio
• Utah (Salt Lake City)
• Vermont (Burlington)
• Virginia (Chesapeake)
  +3 other cities

  • Norfolk
  • Richmond
  • Virginia Beach
• Washington (Seattle)
  +1 other city

  • Tacoma
• West Virginia (Charleston, Business Law)
• Wisconsin (Madison)
  +1 other city

  • Milwaukee
• Wyoming (Cheyenne, Business Law)

Related terms

Other entries in the same area of law, each written from the same primary sources.

• Asset Purchase vs Stock PurchaseThe two ways to buy a business - buying what it owns or buying the entity that owns it - and why the choice decides which liabilities come with it, which contracts transfer, and how the price is taxed.
• AsylumProtection for a person in the United States who fears persecution in their home country on account of race, religion, nationality, political opinion or membership in a particular social group, and how it differs from withholding of removal.
• Breach of ContractA failure to do what a binding agreement required - and the question a court actually asks is not whether someone broke a promise but what the loss was and whether it could have been avoided.
• Buy-Sell AgreementThe contract between co-owners of a business that says what happens to an owner's share when they die, leave, divorce or go bankrupt - who must or may buy it, at what price, and with what money.
• DBA (Fictitious Business Name)A registered trade name under which a person or company does business - which tells the public who is behind the name and does nothing else.
• Fiduciary Duties and the Business Judgment RuleThe duties of care and loyalty that directors, officers, managers and controlling owners owe the business, the rule that protects honest decisions that turned out badly, and the derivative suit that enforces them.
• General and Limited PartnershipsA general partnership can be formed by conduct with no paperwork and makes every partner personally liable; a limited partnership requires a filing and shields the partners who do not manage. What each is, and the LLP and LLLP variants.
• Green Card (Lawful Permanent Residence)How a non-citizen becomes a lawful permanent resident of the United States: the family, employment and other routes, the petition and the application, and why the order of the steps matters.
• H-1B Specialty Occupation VisaThe employer-sponsored temporary work visa for jobs that require a specialized degree: the labor condition application, the annual cap and lottery, the employer's wage duties, and what happens if the job ends.
• Indemnification and Hold Harmless ClausesThe contract provision under which one party agrees to cover another's losses and defend it against claims - what it usually reaches, the state laws that void some of it, and why insurance is the other half of the promise.
• Independent Contractor vs EmployeeTwo legal categories of worker with very different consequences for taxes, overtime and liability - and a label in a contract does not settle which one applies.
• Insurer's Duty to DefendThe promise in a liability insurance policy to pay for the policyholder's lawyer when they are sued, why it is broader than the duty to pay a judgment, and what happens under a reservation of rights.
• K-1 Fiance(e) VisaHow a U.S. citizen brings a foreign fiance(e) to the United States to marry, the in-person meeting and disclosure rules, what must happen after arrival, and the alternative of marrying abroad first.
• Letter of Intent (LOI) and Term SheetThe preliminary document that sets out the main terms of a deal before the contract is drafted - which parts of it are usually binding, which are not, and how a "non-binding" letter still creates obligations.
• Limited Liability Company (LLC)A business form that shields its owners from most business debts while staying simpler to run than a corporation.
• Naturalization (Becoming a U.S. Citizen)How a lawful permanent resident becomes a U.S. citizen: the residence, presence, character, English and civics requirements, the interview, and what happens after a denial.
• Non-Compete AgreementA promise not to work for a competitor or start a competing business for a period after a relationship ends - enforceable in some states, sharply limited in others, and void in a few.
• Non-Disclosure Agreement (NDA)A contract restricting what one or both sides may do with information the other shares - and, unlike trade secret law, it binds only the person who signed it.
• Operating AgreementThe private contract among an LLC's owners that decides who controls the company, how money is split, and what happens when someone leaves - or the state's default rules decide it for them.
• Personal GuaranteeA promise by an individual - usually a business owner - to pay a company's debt personally if the company does not, which puts the owner's own assets behind the loan or lease regardless of the entity's liability shield.
• Piercing the Corporate VeilThe exception under which a court holds an owner personally liable for a company's debts, despite the limited liability the company normally provides.
• Registered AgentThe person or company a business entity must designate to receive lawsuits and official notices on its behalf - and the address at which a default judgment can quietly begin.
• Removal (Deportation) DefenseWhat happens when the government seeks to remove a non-citizen from the United States, the hearing they are entitled to, and the forms of relief an immigration judge can grant.
• S Corporation ElectionA tax election, not a kind of company - what electing S status does to how a corporation or LLC is taxed, who is eligible to make it, and how it is lost.
• Starting a Nonprofit (501(c)(3) Status)How a nonprofit is formed under state law, how it gets federal tax exemption as a charity, and the rules it must follow to keep it.
• Tax Debt Relief (IRS Collection, Installment Agreements and Offers in Compromise)What the IRS can do to collect a tax debt, the rights a taxpayer has at each step, and the programs that let a debt be paid over time, settled for less, or put on hold.
• U Visa for Crime VictimsImmigration status for non-citizen victims of certain crimes who help the police or prosecutors, how the law enforcement certification works, and the related T visa and VAWA protections.
• UCC Financing Statement (UCC-1)The public notice a lender files to stake its claim on a borrower's equipment, inventory, receivables or other business property - the filing that decides who gets paid first when a business fails.

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