Owning a franchise is a powerful step towards financial stability for both new and seasoned entrepreneurs. If the benefits of owning a business and operating in a tried-and-tested model are not enough to convince you, we recommend taking a good look at your Franchise Disclosure Document (FDD).
The Franchise Disclosure Document contains a wealth of background information about the franchise and the franchisor. This piece of document is about 100 to 200 pages long, divided into 23 important sections that enrich your knowledge of the franchise. We recommend enlisting the help of a franchise lawyer to fully understand the legal and financial information enclosed in the document.
Franchisors must hand over the FDD to their potential franchise partners 14 calendar days prior to signing any contracts or going into any transactions. The FDD may also be provided upon the franchisee’s request.
Past and Present Franchisees
If you are unsure of the franchise, the best way to get to know the business is through the people working with the franchise. The FDD contains the names and contact details of the current franchisees. Use this information to ask about their experience as a franchise partner. Their insights will paint a clearer picture of what to expect in terms of expenses and profitability.
Another section of the FDD presents the Financial Performance Representations of a franchise. Simply put, this section shows what a potential franchise partner can earn. To a franchisee, this information is crucial to understanding the business better. Industry stats suggest that the data displayed in this section offer a glimpse of the franchise’s growth per location.
Training Programmes and Financing
A number of provisions in the FDD disclose the type of support and sponsoring the franchise can provide to help you operate the franchise. The FDD can determine if the franchisor sponsors financing for new franchisees, identify the services they will provide before and after the branch opens and provide a detailed description of the training programmes.
The Necessary Initial Step
The information above is just a few quick pointers about the kinds of essential information you will find in the FDD. It’s a vital aspect of the research process to help guide your decision and determine if the franchise is suitable for your financial goals.
The role of a professional franchise lawyer is crucial to understanding the FDD. He or she will decipher provisions of the FDD concerning both the franchisor and the prospective franchisee. Proper and adequate grasp of the FDD can protect you from future problems encountered by franchisees who don’t read the document.
If you need any more information about the FDD, or if you are interested in joining the Signarama team, feel free to download our free E-book. It contains helpful information about joining the Signarama franchise even without prior franchise or entrepreneurial experience. It shows the different ways our team prepares franchisees to own their own business with confidence.
For any other enquiries, feel free to contact our team at 1300 616 785.