NLIPW Patents Law Volume 2 Number 12
(Contents of Franchise Disclosure Documents)
January 14, 2015
A few weeks before a potential franchisee signs a franchise agreement, he will receive a Franchise Disclosure Document (FDD) drafted by lawyers on behalf of the franchisor. The FDD is different from the franchise agreement as it is presented prior to the signing of the agreement and gives the potential franchisee the opportunity to review detailed information about the franchise.
Not only is it crucial for the potential franchisee to thoughtfully study and research the franchise opportunity, it is important for him to carefully read and understand the FDD before signing or investing any money. Below are some of the contents of a typical FDD:
1. Information relating to the franchisor, its subsidiaries and directors.
The FDD will include an overview of the Franchisor’s history and ownership. Information provided will specify the length of time the franchisor has been involved in the type of business offered and that the business format being offered has been tested over an extended period of time in specific territories.
2. Full details of criminal or civil proceedings against the franchisor, directors and arbitration awards.
The FDD will provide detailed information about any litigation involving the franchisor and its directors. Any felony or fraud convictions of the franchisor’s top executive officers should be disclosed in the FDD. The FDD should also contain information on whether the Franchisor has taken legal action against entities infringing on its trademarks or against franchisees not in compliance with quality standards. It is always a good idea to be cautious especially in cases were there are multiple lawsuits filed by franchisees alleging fraud or misrepresentation on the part of the franchisor.
3. Trademarks, copyrights, patents and the right to use other intellectual property.
You are currently viewing this page under the free view. An upgrade is required to view more.