Understanding the 23 Items of the Franchise Disclosure Document (FDD)

The Franchise Disclosure Document (FDD) is a legal document required by the Federal Trade Commission (FTC) to be provided to prospective franchisees. It contains 23 specific items of disclosure designed to help the buyer evaluate the franchise opportunity.

The 23 Disclosure Items

• Item 1: The Franchisor and any Parents, Predecessors, and Affiliates - Background on the company.
• Item 2: Business Experience - Professional background of the franchisor's management team.
• Item 3: Litigation - History of certain types of legal actions involving the franchisor.
• Item 4: Bankruptcy - Disclosure of any past bankruptcies by the franchisor or its management.
• Item 5: Initial Fees - Fees paid to the franchisor before opening.
• Item 6: Other Fees - Ongoing fees such as royalties and marketing contributions.
• Item 7: Estimated Initial Investment - A range of costs to open the franchise.
• Item 8: Restrictions on Sources of Products and Services - Required suppliers or standards.
• Item 9: Franchisee's Obligations - A reference table of the franchisee's contractual duties.
• Item 10: Financing - Disclosure of any financing offered by the franchisor.
• Item 11: Franchisor's Assistance, Advertising, Computer Systems, and Training - Support provided to the franchisee.
• Item 12: Territory - Description of any exclusive territory rights.
• Item 13: Trademarks - Information on the franchisor's intellectual property.
• Item 14: Patents, Copyrights, and Proprietary Information - Additional IP disclosures.
• Item 15: Obligation to Participate in the Actual Operation of the Franchise Business - Owner-operator requirements.
• Item 16: Restrictions on What the Franchisee May Sell - Product and service limitations.
• Item 17: Renewal, Termination, Transfer, and Dispute Resolution - The rules for ending or changing the relationship.
• Item 18: Public Figures - Disclosure of any paid celebrity endorsements.
• Item 19: Financial Performance Representations - Factual data on unit performance, if provided.
• Item 20: Outlets and Franchisee Information - Statistics on system size and turnover.
• Item 21: Financial Statements - Audited financials of the franchisor.
• Item 22: Contracts - Copies of all agreements the franchisee will sign.
• Item 23: Receipts - Evidence that the FDD was properly delivered.

Reviewing these items with legal counsel can help prospective franchisees understand the legal obligations and business risks associated with a franchise investment. For a deeper understanding of specific high-impact disclosures, see our guides on Item 7 estimated initial investment, Item 12 territory rights, and Item 17 renewal and termination. If you are considering buying a franchise, have an attorney review the FDD and franchise agreement before signing.