FDD Item 9: Franchisee's Obligations Explained
Item 9 of the franchise disclosure document requires franchisors to list the franchisee’s principal obligations in a table, cross-referenced to the section of the franchise agreement that imposes each obligation and to the disclosure document item where it is described in detail. It is governed by 16 CFR 436.5(i).
What Is Item 9 of the FDD?
Item 9 is the franchisee’s obligations section of the franchise disclosure document. It gives prospective franchisees a single reference table showing what they will be responsible for under the franchise agreement and where to read more about each responsibility. The disclosure requirements are codified under 16 CFR 436.5(i) and enforced by the Federal Trade Commission.
Item 9 works differently from most items in the disclosure document. It carries little narrative content of its own, because the substance behind each obligation is disclosed in other items and in the agreements themselves. What the rule asks for here is format. The franchisor lists the obligations in a prescribed order and points the candidate to the exact section and item where each one is spelled out.
What Must Be Disclosed in Item 9?
Item 9 requires a table with a prescribed title, a prescribed list of obligations, and a cross-reference for every entry.
The Table Format
The title “FRANCHISEE’S OBLIGATIONS” appears above the table in capital letters using bold type. The table has three columns. The first names the obligation, the second cites the section of the agreement that imposes it, and the third names the disclosure document item where the candidate can read the details.
Cross-References
Each obligation is cross-referenced with any applicable section of the franchise or other agreement and with the relevant disclosure document provision. The second column can cite more than one agreement, since obligations often come from a development agreement, a lease, or a guaranty in addition to the franchise agreement.
Not Applicable Entries
When a listed obligation does not apply to the franchise being offered, the franchisor states “Not Applicable” in that row and leaves the row in the table. The prescribed list cannot be shortened. The rule also directs franchisors to add rows when their agreements impose obligations beyond the required list.
Franchisee's Obligations Table Format
a. Site selection and acquisition/lease
b. Pre-opening purchase/leases
c. Site development and other pre-opening requirements
d. Initial and ongoing training
e. Opening
f. Fees
g. Compliance with standards and policies/operating manual
h. Trademarks and proprietary information
i. Restrictions on products/services offered
j. Warranty and customer service requirements
k. Territorial development and sales quotas
l. Ongoing product/service purchases
m. Maintenance, appearance, and remodeling requirements
n. Insurance
o. Advertising
p. Indemnification
q. Owner's participation/management/staffing
r. Records and reports
s. Inspections and audits
t. Transfer
u. Renewal
v. Post-termination obligations
w. Non-competition covenants
x. Dispute resolution
y. Other (describe)
What the 24 Required Obligations Cover
The Franchise Rule prescribes 24 obligations that appear in every Item 9 table, in the order the rule sets them. They follow the arc of the franchise relationship, beginning before the outlet opens and ending after the agreement terminates.
Getting Open
The first five rows cover site selection and acquisition or lease, pre-opening purchases and leases, site development and other pre-opening requirements, initial and ongoing training, and opening. These rows point a candidate to everything required of them before the outlet serves its first customer.
Fees, Standards, and Supply
The next group covers fees, compliance with the franchisor's standards and policies and with the operating manual, use of the trademarks and proprietary information, restrictions on the products and services the outlet may offer, and ongoing product and service purchases.
Running the Outlet
Seven rows cover the duties that continue through the term of the agreement. They address warranty and customer service requirements, territorial development and sales quotas, maintenance, appearance, and remodeling requirements, insurance, advertising, indemnification, and the owner's participation, management, and staffing requirements.
Oversight and End of Term
The last seven rows cover records and reports, inspections and audits, transfer, renewal, post-termination obligations, non-competition covenants, and dispute resolution. They describe what the franchisor may review during the term and what the franchisee owes when the relationship changes hands or ends.
Why Item 9 Matters to Franchise Candidates
Item 9 is often the first section a candidate’s attorney turns to, because it doubles as a reading list for the franchise agreement. A candidate who works down the table can see the full scope of what the agreement asks of them and move directly to the sections that carry the most weight for their situation.
The table also sets expectations early in the sales process. Obligations that surprise a franchisee late in legal review tend to slow a deal or end it, and a complete Item 9 puts those obligations in front of the candidate from the start. A table with missing rows or references that lead nowhere has the opposite effect, since it raises questions about how carefully the rest of the disclosure document was prepared.
How Item 9 Connects to Other FDD Items
Item 9 works as an index to the rest of the disclosure document, which is why the third column matters as much as the first. The fees row points to Items 5 and 6, where initial and ongoing fees are disclosed in full. Ongoing purchases point to Item 8 and its restrictions on approved suppliers. Training, advertising, and compliance with standards point to Item 11. Territorial development and sales quotas point to Item 12.
Trademarks and proprietary information point to Items 13 and 14, and the owner’s participation requirement points to Item 15. Restrictions on products and services point to Item 16. Transfer, renewal, post-termination obligations, non-competition covenants, and dispute resolution all point to Item 17. The agreements cited in the second column are attached as exhibits under Item 22.
Common Mistakes Franchisors Make With Item 9
Broken Cross-References
Item 9 points to the franchise agreement by section number, so any revision to that agreement can leave the table pointing to the wrong place. Renumbered sections make Item 9 inaccurate even when the obligations themselves have not changed. Candidates and state examiners check these references closely.
Removed or Incomplete Rows
Deleting a row for an obligation that does not apply is a frequent error, since the rule calls for "Not Applicable" in that row instead. Listing only the franchise agreement is another, because a development agreement, lease, or guaranty can impose obligations that belong in the table.
Franchise Genesis
How Franchise Genesis Helps Franchisors Prepare Item 9
Item 9 is one of the shortest items in the disclosure document, and the work sits in accuracy rather than in drafting. Getting Item 9 right means the required rows in the required order, correct section citations, and item references that lead a candidate to the right disclosure.
Franchise Genesis works with franchisors to prepare a franchise disclosure document that is accurate, compliant, and built to support franchise sales. Experienced franchise attorneys are included in the development program. They help franchisors align the Item 9 table with the franchise agreement, add the rows a system needs beyond the required 24, and keep the cross-references correct as the documents are updated each year.
Frequently Asked Questions
Item 9 is a table listing the franchisee’s principal obligations, cross-referenced to the section of the franchise agreement that imposes each one and to the disclosure document item that describes it. It is governed by 16 CFR 436.5(i).
The rule prescribes 24 obligations that appear in every Item 9 table, in the order the rule sets. Franchisors add further rows when their agreements impose obligations beyond those 24.
The franchisor states “Not Applicable” in that row. The row itself stays in the table, since the prescribed list cannot be shortened.
No. Item 9 identifies the obligations and tells the candidate where to read about them. The detail sits in the franchise agreement and in the other disclosure items the table references.
Yes. The section numbers in the second column have to match the current agreement, so an amended or renumbered agreement requires a matching update to the Item 9 table.