The Franchise Disclosure Document (FDD) is a format for disclosing franchisor information to prospective franchisees. The purpose of the FDD is to protect the public by providing information about the franchise company.
The FDD format was adopted by the North American Securities Administrators Association (NASAA) in 1993, which was approved by the Federal Trade Commission (FTC) in 1995. The "registration states", which require franchisors to use the FDD format (versus the FTC Rule format) include, California, Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia and Washington. Because the registration states do not accept the FTC Rule format, which is less stringent than the FDD format, the usage of the FDD format is most widely used. The FTC requires that a FDD or FTC disclosure document be used in all non-registration states.
There are 23 categories of information that must be provided by the franchisor to the prospective franchisee at least 10 business days prior to the execution of the franchise agreement. These categories include:
© Franchise.com 2003