The Anatomy Of An FDD

Entrepreneur:

Reading the Franchise Disclosure Document, or FDD, might not be as entertaining as curling up with a good mystery novel, but it does provide most of the clues you’ll need to find the best franchise for you. And you definitely don’t want mysteries when you’re looking at franchises–you want the most important facts presented to you in plain English so you have what you need to make a good decision.

For just that reason, the Federal Trade Commission requires that all franchise companies provide prospective buyers with an FDD organized into a common format to allow for reasonably easy comparison between franchises. Just think of this as the most valuable written tool you’ll receive in your franchise research stage.

The FDD has 23 sections (referred to as “Items”), as well as exhibits that provide a ton of supplemental information. Here’s a guide to understanding the FDD…