What is the FDD and why is it so important?
The FDD, or “franchise disclosure document,” is one of the most important documents franchisees will review when deciding to franchise with a company. It’s also one of the most important documents a franchisor will produce. It lays out everything a franchisee should know about the company: Number of locations, profits, annual growth, and any legal issues are all contained in the FDD. The FDD also lets franchisees know what will be expected of them in terms of policies and procedures, fees, and so forth. Because this is such an important document, it’s essential that you walk franchisees through it carefully, when they come to you for franchise consulting services. The ACCC has very specific guidelines for FDDs, so as a franchise consultant it’s very important that you adhere to the law when it comes to helping your clients to comprehend this document.
Why should franchisees take their time to review this document?
It’s important that franchisees are able to take about two weeks to review the FDD, as its contents are crucial and deserve the necessary time and attention to review. The FDD is a complex document for many franchisees to understand, so they’ll need your guidance along with time to reflect and consider its contents. Once a franchisee signs a franchise agreement, they’ll be held accountable for their end of the bargain. As a provider of franchise consulting services, it’s important that they understand these obligations fully.
Why can’t franchisors just break the FDD down for franchisees on their websites?
FDDs include sensitive information- they want to be sure that only potential buyers who are truly interested have access to it. For instance, franchises are required to include information such as pending litigation that buyers need appropriate context to understand. As a franchise consultant, you’ll be able to help deliver and explain the contents of the FDD to just the right potential franchisees and help them to better understand valuable contextual information about the market they are considering buying into.
In short, the FDD is an important legal document that franchisees need to understand thoroughly before signing any franchise agreements. As a franchise consultant, you’re in the unique position of being able to help franchisors craft their FDD, so that it is as clear and comprehensive as possible. You’ll be able to help your franchisor be as honest and transparent as possible, while still entrusting their sensitive information to the perfect potential franchisees.
If you’re interested in helping build relationships between franchisors and franchisees by offering franchise consulting services, reach out to Transworld today!