Guide to Buying a Franchise: The Franchise Disclosure Document

For a franchisee, the buying process can be difficult if not educated on the exact steps of getting from inquiry to purchase. Many franchisors include proposed steps to ownership, but rarely do they include in depth guidance.

As a part of 1851’s Guide to Buying a Franchise issue, we interviewed Steve Beagelman, CEO of SMB Franchise Advisors, on what the franchisee and the franchisor should know about the franchise disclosure document.

A franchise disclosure document (FDD) is a legal document which is presented to prospective buyers of franchises in the pre-sale disclosure process in the United States.

Both would-be buyers and franchisors need to know that some states require different regulations for the FDD.

Charles Internicola, a national franchise attorney from Internicola Law Firm, wrote in this article that: While Federal Law provides an overriding framework regulating the offer and sale of franchises throughout the entire country, fifteen states have enacted their own franchise laws that, supplement and add additional regulations to be followed by franchisors. In thirteen of the states, registration of the franchisors Franchise Disclosure Document (FDD) is required.

The states that include registration are as follows:

States that have Enacted Supplemental Franchise Laws and Require Registration of a Franchise Disclosure Document:

• California

• Hawaii

• Indiana

• Maryland

• Michigan

• Minnesota

• New York

• North Dakota

• Rhode Island

• Virginia

• Washington

• Wisconsin

States that have Enacted Supplemental Franchise Laws but do not Require Registration of a Franchise Disclosure Document:

• Michigan (only notice)

• Oregon (no filing)

• South Dakota (filing only)