Joseph Gottlieb: A franchises closure document which is commonly known as an FDD is a document that is required by the Federal Trade Commission to be furnished to any potential franchisee at least 14 days before that franchisee can pay any money to the franchisor. And what it is, is as the name implies, it is a disclosure document and it is a fairly lengthy document that provides material information or information that the Federal Trade Commission be used as being material to a potential franchises decision to purchase. It contains a lot of information about the franchisor, about the people involve with the franchisor and about its franchisees. It is really that most important part of the franchisees do diligence process.
It contains a information that would include the franchisors financial statements information about the fee structure, about the initial investment that would be required by franchisee in order to enter the franchise system. Discusses whether there is any litigation either by the franchisor or against the franchisor. Talks about what the franchisor will do for the franchisee, or also very importantly provides the names and addresses and telephone numbers of not only the current franchisees but those who had left the franchise system within the pass year. Also another very important factor in helping a franchisee you make a in a form decision to purchase or not.
It also has information about the system as a whole as to how many units in the franchise system they are in over the pass three years whether they are been termination or cancellation or whether have left the system. Which really helps a franchisee get an idea as to disability of the franchise system, also part of the FDD is copies of all of the documents that the franchisee might be required to sign. Most importantly of course the franchise agreement and other unsalaried contracts in such that might be part of the franchise offering.
For more information contact: Joseph Gottlieb, Franchise & Corporate Law, Cohen, Goldstein, Port & Gottlieb; 678-775-3545, jgottlieb@cgpglaw.com.