Buying a US franchise: start with the FDD

For a US franchise, start by asking for the current Franchise Disclosure Document, or FDD. This gives you information about the company and the offer before you buy. It has 23 numbered sections and attached agreements. Read it alongside the contract and arrange independent advice. The FTC rule applies to covered transactions, with exemptions; state requirements can also matter.

Confirm the package before reading the numbers

Check the franchisor’s legal name, the issue date, the proposed location and the offer being described. Collect the attachments. For a covered US sale, the current FDD must be furnished at least 14 calendar days before a binding agreement with, or payment to, the franchisor or an affiliate in connection with the sale. That minimum review period does not require you to decide when it ends.

Keep dated copies of what you receive. If the final agreements differ, compare them. The FTC rule generally requires revised agreements at least seven calendar days before signing when the franchisor makes unilateral, material changes to the supplied agreements; changes arising from negotiations initiated by the buyer are treated differently. Ask your lawyer to check the actual facts and state rules.

Read related items together

• Costs: Items 5–7 help connect initial fees, other charges and the investment estimate. Read the dates, formulas and footnotes.
• Buying supplies: Item 8 addresses required sources and specifications. Ask how those requirements affect your business plan.
• Financing: Item 10 addresses financing offered through the arrangements covered by that disclosure requirement.
• Support and territory: Items 11–12 address support and territorial rights. Check restrictions and exceptions, not just the names of services.
• Continuing or leaving: Item 17 points to renewal, termination, transfer and dispute-resolution clauses. Follow the cross-references into the contracts.
• Financial claims: Item 19 addresses financial performance representations, meaning claims about sales, income or other financial results. These are not mandatory in every FDD. Where given, examine the basis, sample, dates and limitations.
• Outlets and financial condition: Items 20–21 address outlet information and the franchisor’s financial statements. They answer different questions from your own future profitability.
• Agreements: Item 22 contains proposed contracts. Read every agreement you would sign.

Investigate numbers without converting them into promises

A financial claim may describe a subset of established outlets rather than new businesses like yours. Find out which locations were included, which period was measured, how many provided data and how many achieved the result. Ask for the written substantiation for a representation. An average, or high sales, cannot by itself tell you what you would take home.

Treat legal history precisely

Items 3 and 4 cover specified litigation and bankruptcy information. They are not an unlimited search of every possible dispute. For a material issue, identify the correct parties and original record. Keep an allegation, a court finding and a settlement distinct. Check later developments before using an old case to characterise a present offer.

Before committing, write down unanswered questions, collect the promised documents and arrange independent legal and financial review. A complete-looking FDD is a starting point for that investigation.

Read the original sources

1. 16 CFR Part 436, official 2026 annual editionAccessed 17 October 2026 · External source
2. FTC: Taking a deep dive into the Franchise Disclosure DocumentAccessed 17 October 2026 · External source