What is a Franchise Disclosure Document (FDD)?

If you’re considering investing in a franchise, it’s important to understand the Franchise Disclosure Document (FDD) and how it can benefit you as a prospective franchisee.

Understanding the Franchise Disclosure Document

An FDD is a legal document that franchisors are required to provide to prospective franchisees by the Federal Trade Commission (FTC). The FDD is designed to give you detailed information about the franchise, including its history, operations, and financial performance among other important information about how the franchise outlines and runs its opportunity. It also outlines the terms and conditions of the franchise agreement, such as fees, royalties, and advertising requirements.

The FDD is divided into 23 sections, called “items”, and one of the most important sections for many prospective franchise owners is Item 19, which provides financial performance representations and is a valuable tool for understanding the potential earnings of the franchise system.

The Importance of Item 19

Item 19 provides information about the financial performance of the franchise, including data on revenue, and profits. This information can help you evaluate the potential profitability of the franchise and make an informed investment decision.

It’s important to note that the information provided in Item 19 is not a guarantee of future earnings. Franchisors are required to include a disclaimer that the information provided is only an estimate and may not be representative of the actual financial performance of the franchise.

If you’d like to learn more about the Item 19 for Benjamin Franklin Plumbing owners, let’s connect, click here to get in touch.

Conclusion

The Franchise Disclosure Document is an essential tool for anyone considering investing in a franchise, and Item 19 can be especially valuable for understanding the financial performance of the franchise system and thus your opportunity in it! However, it’s important to approach the FDD with a critical eye and ask any questions you have. Our Franchise Development team is here to help you have a clear picture of the franchise opportunity.

To learn more about our FDD, contact our Franchise Development team today!