{"id":1591,"date":"2022-01-11T00:27:21","date_gmt":"2022-01-11T00:27:21","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1591"},"modified":"2024-05-22T07:04:42","modified_gmt":"2024-05-22T06:04:42","slug":"how-should-i-use-franchise-disclosure-document","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/franchising\/how-should-i-use-franchise-disclosure-document\/","title":{"rendered":"How Should I Use the Franchise Disclosure Document in the UK?"},"content":{"rendered":"\n

If you are buying a franchise<\/a>, the franchise disclosure document <\/span>is very important in obtaining information about your potential new business. Indeed, the franchise disclosure document should answer many of your questions.<\/span> It will also give you an insight into how profitable the franchise you are buying might be. This article will outline what a franchise disclosure document is, what it will likely contain and how you should use that information in making legal and commercial decisions.<\/span><\/p>\n\n\n\n

What is the Franchise Disclosure Document?<\/span><\/h2>\n\n\n\n

A franchise disclosure document (sometimes known as an ‘FDD’) is a legal document requir<\/span>ing the franchisor to disclose crucial information<\/a> about the franchise business. As a prospective franchisee, once you receive your franchise disclosure document, you will have a set amount of time to review the document before deciding whether to enter into a franchise agreement.\u00a0<\/span><\/p>\n\n\n\n

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Most franchise disclosure documents are structured in a similar, prescribed format. Additionally, all franchise disclosure documents must address 23 key points.<\/span><\/p>\n<\/div>\n\n\n\n

What Will be in the Franchise Disclosure Document?<\/span><\/h2>\n\n\n\n

The 23 key points form the basis of a franchise disclosure document. Further, the table below outlines what some of those points cover.<\/span><\/p>\n\n\n\n

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Point<\/b><\/h6>\n<\/td>
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Explanation<\/b><\/h6>\n<\/td><\/tr>
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The business experience of the franchisor<\/span><\/h6>\n<\/td>
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This will give you a detailed account of the professional experience of the franchisor. Part of the reason why you would enter into a franchise agreement is because of the information you can receive from the franchisor on running a business effectively. As a result, the business experience of the franchisor should be a consideration when you decide whether the franchise agreement can provide value to your business. <\/span><\/p>\n<\/td><\/tr>

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Any disputes that the franchise is involved in<\/span><\/h6>\n<\/td>
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This is important because legal action against the franchisor can complicate their ability to do business. In some cases, it can even jeopardise the running of the business as a whole. As a result, you should make sure that any disputes that the franchise is involved in will not affect your business as a franchisee. <\/span><\/p>\n<\/td><\/tr>

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Franchise fees<\/span><\/h6>\n<\/td>
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Entering into a franchise agreement requires you to pay franchise fees. This can include a range of costs, such as initial fees, the cost of renting a premise, and ongoing royalties. Royalties are frequent payments, which work a bit like a subscription. Therefore, the franchise disclosure document should give you a comprehensive idea of the fees you can expect to pay.<\/span><\/p>\n<\/td><\/tr>

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Details on existing franchisees<\/span><\/h6>\n<\/td>
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The franchisor should also be able to provide you with the contact details of existing franchisees. This is valuable because it gives you the opportunity to contact existing franchisees to ask how they are managing their commercial and legal obligations with the franchisor. <\/span><\/p>\n

For example, they can let you know if the franchise agreement is bringing in valuable business and whether that is offsetting the franchise fees and royalties they are obliged to pay. <\/span><\/p>\n<\/td><\/tr>

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Whether the franchisor will participate in the actual operation of your business<\/span><\/h6>\n<\/td>
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Some franchisors will want to be involved with the actual operation of your business on a day to day basis. Therefore, the franchise disclosure document should include a section that outlines whether the franchisor intends to do this or not. <\/span><\/p>\n<\/td><\/tr>

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Financial statements<\/span><\/h6>\n<\/td>
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In this section, you should be able to find legal documents relating to the franchisor\u2019s financial situation. This should include assets, liabilities, and audited financial statements. Reviewing the financials can help you decide whether the franchisor has been successful in the past and also whether the franchise fees reflect the financial health of the franchisor and franchise business.<\/span><\/p>\n<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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