Are you looking to start your own embroidery, screen printing, design, or promotional products company…
A franchise disclosure document (FDD) is lengthy and complicated with its 23 items full of legalese, so reading it can seem like a daunting task. To help make the valuable information it contains more digestible, we’ve put together a reader-friendly breakdown of a typical FDD.
Items 1 – 4: Franchisor Information
These items tell you about the franchisor and the individuals who direct and operate the company. You’ll find the trade name, business entity type, address, details of any predecessors or affiliates and a franchise description. Also included are the names and business experience of the executives, directors, officers and high-level employees, as well as any lawsuits or bankruptcies involving the company and these individuals.
Items 5 – 7: Costs and Fees
The next three items cover the costs a franchisee pays, such as the franchise fee, royalties and advertising fees, how they’re paid and whether they’re refundable. You’ll also find an estimated initial investment table that breaks down the franchise’s anticipated operating costs for a specified period.
Item 8: Product and Service Restrictions
In this section, you’ll learn about the various expenditures the franchisee needs to make for products and services, and whether they’re sourced directly from the franchisor or specific suppliers.
Item 9: Franchisee Obligations
Item 9 is a table listing the principal franchisee obligations and exactly where you can find detailed information on these obligations in the FDD and franchise agreement.
Item 10: Financing
If the franchisor offers any financing options, you can learn about them in this section, along with the terms such as finance charges, interest rates, number of payments and penalties for default.
Item 11: Franchisor Obligations
Here you’ll learn the types and amount of support provided to franchisees by the franchisor. This can include site selection, advertising fund uses, training program details and more.
Item 12: Territory
This item details a franchisee’s exclusive rights to a specific territory, as well as potential franchise relocations and any franchisor plans for establishing competing franchise systems.
Items 13 and 14: Intellectual Property
In this section, you’ll learn about the franchisor’s registered trademarks, copyrights and patents that you can use as a franchisee.
Item 15: Participation Obligations
Here you can learn whether the franchisor allows their franchisees to hire a manager or supervisor, or if you need to be personally involved in day-to-day operations.
Item 16: Restrictions on Goods or Services
This section lists any franchisor restrictions on the goods and services your franchise can sell.
Item 17: Summary of Franchise Agreement
Here you’ll find a summary of franchisee rights per the franchise agreement, details about renewals, transfers and extensions, and whether the original terms are extended or subject to change.
Item 18: Public Figure Involvement
This section discloses whether any public figures such as actors, athletes or musicians manage, control or are invested in the franchisor or use their image and/or name to endorse the franchise.
Item 19: Financial Performance
This item covers projected or historical financial earnings for current and former franchises. Earnings information isn’t a requirement, so some franchisors choose not to include it.
Item 19: Franchise Outlets
Tables in this section show the number of franchise and company-owned locations during the prior three years. Also included are contact details for current and prior franchisees and whether they’ve signed a confidentiality agreement.
Items 22 & 23: Contracts and Receipts
These final two sections include copies of pertinent contracts such as the franchise agreement, options, leases, purchase and financing agreements, and the disclosure document receipts.
To learn more about the Fully Promoted screen printing and custom embroidery franchise opportunity, contact us today, or call (877) 959-8087.