Huffington Post: 8 Sections of the Franchise Disclosure Document You Should Never Skim

For anyone looking into buying a franchise, the Franchise Disclosure Document (FDD) is a long but extremely important document to review. Required by the Federal Trade Commission , the FDD must be filed annually and approved by regulators in each state. Without an approved FDD, franchisors are not allowed to sell franchises in that particular state.

During the sales process, franchisors are also not permitted to discuss any information that is not included in the brand’s FDD, which is why every potential franchisee must do their own due diligence by thoroughly reading and understanding it before deciding to invest.

Penn Station President Craig Dunaway outlines the top eight items within an FDD in the Huffington Post and why they are important, and he starts with Item 19. This is where you will find the profit and loss statements and while it may not seem like the most glamorous part of learning about a brand, it will give you a sense of the financial performance of other franchisees within the franchise system. Every prospect should know the potential they have as an owner to make a profit and build a business.