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Decoding the Franchise Disclosure Document, from A-Z – Item #22 & 23

This week, we’re wrapping up our series on the Franchise Disclosure Document by featuring Items #22 and 23 combined! While many of the FDD items seem to be placed in random order, these last two were a bit more methodical in their placement.

The last two items will summarize every other item of the FDD with something you should get used to as a franchisee – signing your name on the dotted line.

What you’ll find:

• Copies of all proposed agreements between you and the franchisor, including

  • Franchise Agreement
  • Lease Agreements
  • Loan Agreements
  • Personal Guarantees
  • Etc.

Basically, if you have to sign it, you’ll find a copy of it here.

Why is this important?

Why isn’t this important?!

Everything that you’ve seen so far in the FDD – every Item on the list, every cross-referenced form, every unfamiliar legal term you had to look up – has all led up to this. If you’ve made the decision to join this franchise family, then get your attorney and accountant on speed dial because now you’ve got to make it official.

As you’re sifting through the forms, be patient with the process and do it right. Don’t just start signing away! Make sure that for every form you’re being asked to sign, there is a corresponding Item in the FDD. In other words, the subject of each form should be covered somewhere in the FDD so that you have a full understanding of what you’re about to sign. If you can’t find an explanation for a form, don’t sign it until you get one.

Item #23 is markedly related but while it may not seem as important, it is a vital piece of documentation. #23 is simply a signed receipt verifying that you received the Franchise Disclosure Document. This is critical because franchisors are required by law to provide all prospective franchisees with an accurate and complete Franchise Disclosure Document. This receipt is yours – and their proof – that you received this critical packet. Do not lose that receipt!

The bottom line is that Items #22 & 23 will bring you full circle in your initial franchise research. Items #1 – 21 gave you a lot of information on your prospective franchise. It is now your duty to be diligent with that information – read it thoroughly, go over it with a franchise attorney and accountant, use it to do your own digging, and take advantage of what’s been given to you. FDD’s serve a purpose and there is a reason they are required.

If you have any questions about an FDD or purchasing a franchise, visit our blog to see the full series or give us a call today.