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4 key elements of a Franchise Disclosure Document 

On Behalf of | Feb 7, 2023 | Franchise Agreements

Contracts are crucial when you run a business. As a franchisee, one of the most crucial will be your Franchise Disclosure Document.

It covers 23 specific elements. Here are some of the most essential areas they cover:

Who are you getting into business with?

You need to know who is getting your money. Are they a stand-alone franchise, or do they have affiliations to something larger that could hinder (or help) your efforts? The document should also tell you about the experience of those in charge and any previous bankruptcies involving the franchise or its associates. That can help you assess the risk of joining.

1. What do you need to pay?

You need to be clear about the total cost you will pay over the years. Franchisors may break things down into several different forms of fees, which can make things confusing. 

2. What support will you get?

You need more than just their name and logo. Understanding whether they offer training, advertising and other forms of help lets you know what you need to do yourself.

3. What restrictions do you have?

Your potential market might not be as big as you think at first. You need to understand your territory and if anyone else can sell to the same clients, whether through a physical presence or online. You also need to understand where you can expand to.

4. How do you end the relationship?

You need to understand when your agreement expires and the renewal terms. You also need to know what will happen if things do not work out. Can you leave early, and if so, what penalty would you face? What if there is a dispute? How will that be handled?

If you are unsure about everything contained in the Franchise Disclosure Document that the franchisor is asking you to sign, seek legal help to review it before proceeding. 

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.