What U.S. document gives required pre-sale information to prospective franchise buyers?

The U.S. document that gives required pre-sale information to prospective franchise buyers is the Franchise Disclosure Document (FDD).

The FDD is a legal disclosure document required under the Federal Trade Commission’s Franchise Rule. It is intended to help a prospective franchisee evaluate the costs, risks, obligations, and business history of an offered franchise before committing money or signing an agreement.

Its disclosures cover subjects such as the franchisor’s business experience, litigation and bankruptcy history, initial investment, recurring fees, territory, trademarks, training, franchisee contacts, contracts, and financial statements. A financial performance representation, when provided, appears in Item 19.

The FDD is not the same as the franchise agreement. The agreement creates the ongoing contractual relationship, while the FDD supplies standardized information for evaluating the opportunity before purchase. It is also not a generic prospectus or an operating lease.