What Is an FDD?
A Franchise Disclosure Document (FDD) is the legal document required by the Federal Trade Commission (FTC) under the Franchise Rule. It provides a prospective franchisee with essential and detailed information about the franchise opportunity, your company background, your business experience, your fees, and how your franchise system operates. This ensures every potential buyer can make an informed decision based on transparent and accurate facts, not assumptions.
The FDD is designed to set the foundation for a clear franchise relationship by outlining the legal obligations of both the franchisor and the franchisee. Every franchisor in the U.S. must provide this disclosure document before signing any franchise agreement or accepting fees. Providing the FDD correctly helps prevent legal disputes, supports compliance with applicable laws, and gives candidates the important information they need before investing in a franchise business or franchised business.
What the FDD Covers: A Complete Breakdown of All 23 Disclosure Items
Your FDD contains 23 required disclosure items that explain your history, your fees, your initial investment, your support, and the structure of your system.
Items 1–4: Company Background & Leadership
These opening items disclose:
- Company identity and affiliates
- Executive business experience
- Litigation history
- Any bankruptcy events
Items 5–10 & 21: Fees, Costs & Financial Stability
This section outlines the main fees, payment obligations, and financial details a candidate should review, including:
- Initial franchise fee
- Royalties, brand fund, and other ongoing fees
- Initial investment range
- Supplier or purchasing restrictions
- Whether the franchisor offers financing
- Audited financial statement information
Items 11–18: Support, Obligations & Operational Rules
These items describe how your system works day-to-day and what the franchisee’s obligations include:
- Training, onboarding, and required computer systems
- Territory rights and constraints
- Franchisee obligations after opening
- Renewal terms, transfer rules, and dispute resolution processes
- Brand assets, intellectual property, and filings with the trademark office
- Copyrights, patents, and proprietary information
- Whether franchisees must operate the location themselves
- Restrictions on what franchisees may offer
- Any public figures involved in the promotion
This section ensures candidates understand the operational model of your franchise business.
Items 19–20: System Performance & Validation
These items help a buyer evaluate your system objectively:
- Optional franchise financial performance representation
- Historical openings, closures, transfers, and contact information for franchisees
Items 22–23: Contracts & Receipt
These final items include:
- All agreements a franchisee must sign (including the franchise agreement)
- The receipt page confirming delivery of the FDD
This guarantees proper disclosure and documentation.
Quick Reference Table of All 23 Items
Item # | Category | What It Covers |
1–4 | Background | Identity, affiliates, experience, litigation |
5–7 | Fees | Initial fees, franchise fee, and other charges |
8 | Restrictions | Purchasing and supplier rules |
9 | Obligations | Franchisor duties |
10 | Financing | Whether financing is offered |
11 | Training | Programs, systems, technology |
12 | Territory | Rights and geography |
13 | Trademarks | Registrations, IP, brand assets |
14 | IP | Patents, copyrights, proprietary tech |
15 | Participation | Franchisee operational requirements |
16 | Products | Sale restrictions |
17 | Renewal | Transfer, termination, disputes |
18 | Public Figures | Endorsements and involvement |
19 | FPR | System performance data |
20 | Outlets | System growth and closures |
21 | Financials | Audited financial statements |
22 | Contracts | All agreements |
23 | Receipt | Proof of disclosure |
Why Work With a Franchise Attorney
A qualified franchise attorney ensures your FDD:
- Complies with the FTC and state franchise laws
- Reflects how your system actually operates
- Contains accurate and complete disclosures
- Reduces risk of legal disputes
- Prepares your system for long-term growth
How the FDD Must Be Delivered
A franchisor must provide the FDD at least 14 calendar days before signing any agreement or accepting payment. If the contract is changed, an additional 7-day review period applies.
Providing timely and accurate disclosures ensures franchisees receive the important information they need before entering the franchise relationship.
Build a Strong, Compliant FDD With Franchise Genesis
Your FDD shapes every future interaction with a candidate. It outlines the required fees, describes your operational expectations, explains your intellectual property, clarifies your support, and presents the structure of your franchise system. A strong FDD leads to a more confident franchise buyer and a healthier franchised business.
Franchise Genesis works with expert franchise attorneys to help build a compliant FDD that is easy for candidates to understand while meeting every regulatory requirement. Our process turns your concept into a clear, structured franchise model ready for expansion.
As part of our development process, Franchise Genesis shows you the benefits of franchising and how a well-structured FDD supports growth, confidence, and long-term system success. Our process turns your concept into a clear, organized franchise model ready for expansion.
Contact us today to build your compliant FDD and start your franchise journey.
How often must my FDD be updated?
The document must be updated annually at the end of April each year and whenever material changes occur under state or federal applicable laws.
Does the FDD disclose required technology?
Yes. Required software, hardware, and any feature-driven development or platform-specific tech must be disclosed.
What information matters most to candidates?
Most buyers focus on the initial investment, the fees, the franchise financial performance representation, the litigation history, and the operational requirements.
Is the FDD the same as the franchise agreement?
No. The FDD is the disclosure document that outlines all the obligations (for franchisee and franchisor) and costs for the franchise. The franchise agreement is the final, binding contract.