Franchise Disclosure Document (FDD)
The Franchise Disclosure Document (referred to as the FDD or disclosure document and formerly called the UFOC) is the document that a franchise company is required by law to give to a prospective franchise buyer before the franchise can be purchased, and includes a wealth of information about the franchise, including:
- The history of the franchise and its officers and directors.
- A complete description of the business to be franchised.
- All costs and fees that you will be subject to under the agreement.
- All obligations of either party to the other during the term of the agreement and thereafter.
- Any relevant litigation history of the company or its officers.
- Any business failures, ownership transfers, franchise agreement terminations or other potentially adverse information relating to the success rate of the existing units in the system.
- Audited financial statements for the previous three years for the franchise company.
- A list of the existing franchisees.
- A complete copy of the actual franchise agreement document is usually attached to the FDD but may be provided under separate cover at the option of the franchisor.
As you read the offering circular it will be helpful for you to read it from the “inside out”. This means that you should read it as if you already were a franchise owner. You undoubtedly will find a few clauses that seem very restrictive. However, remember that FASTSIGNS needs to protect the quality and integrity of its entire system. For example, a restaurant franchise may have a clause that allows the franchise company to make unscheduled inspections and “tag” offenses involving restaurant cleanliness or food quality. A franchise owner may have only twenty-four hours to fix these violations. Sound harsh? What if you were a franchise owner in the territory adjacent to the transgressor, and you kept hearing complaints about how the other restaurant always was dirty, or the food quality was poor. Wouldn’t you want that franchise owner to “clean up his act?” Wouldn’t you feel that the franchise company had an obligation to protect its image—thus protecting your investment? That is why it is beneficial to you to read the FDD “from the inside out”. You will have a better understanding of what systems and policies are in place to protect you.
In our online process, you will get to hear from franchise owners talking about using the FDD as part of their due diligence on FASTSIGNS.
We have a Financial Performance in Item 19.
FASTSIGNS believes in transparency when it comes to our business model. Because of this we choose to fully disclose not only our company performance in our FDD but also the performance of our FASTSIGNS centers. You will be able to download the Item 19 in our due diligence process.
Together will will go through this document and I will be able to answer all of your questions.
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