franchise-disclosure-document

# Franchise Disclosure Document (FDD)

Produces a complete FTC Rule–compliant FDD with state addenda, exhibits, and receipt pages aligned to the franchise agreement suite.

## Prerequisites

1. **Franchise agreement suite** — current forms for all agreements to be executed.
2. **Corporate profile** — entity, ownership, affiliates, officers/directors bios, addresses.
3. **Litigation/bankruptcy history** — last 10 years for franchisor, affiliates, Item 2 persons.
4. **Financials** — audited statements (up to 3 years) and auditor report.
5. **Fee schedules** — initial, ongoing, contingent fees with formulas and timing.
6. **Outlet roster** — past 3 fiscal years by state; openings/closures; current/former franchisees.
7. **IP portfolio** — trademarks, registrations, disputes.
8. **Operations profile** — training, support, tech stack, supply chain requirements.
9. **State targets** — offering states and registration requirements [VERIFY].

## Workflow

### 1. Intake & gap analysis

Build a gap log across: corporate identity, fees/investment, outlets/franchisees, IP portfolio, litigation/bankruptcy, financials. Track source docs, extracted facts, gaps, and owners.

### 2. Front matter

- Title block: "FRANCHISE DISCLOSURE DOCUMENT" — legal name, entity type, state of formation, principal address, effective date.
- FTC cover page cautionary statement verbatim per 16 C.F.R. Part 436 (never paraphrase).
- State law notice and agency contact (as required).
- Table of contents listing Items 1–23 and all exhibits.

### 3. Items 1–23

| Item | Content | Item | Content |
|------|---------|------|---------|
| 1 | Franchisor identity, affiliates, history | 13 | Trademarks, status, disputes |
| 2 | Officers/directors bios (5 yr) | 14 | Patents, copyrights, trade secrets |
| 3 | Litigation (10 yr) or negative disclosure | 15 | Franchisee/manager participation |
| 4 | Bankruptcy (10 yr) or negative disclosure | 16 | Goods/services/channel restrictions |
| 5 | Initial fees (amounts, timing, refunds) | 17 | Relationship table (see below) |
| 6 | Other fees table | 18 | Public figures or negative disclosure |
| 7 | Initial investment table (low/high) | 19 | FPR or negative disclosure (see below) |
| 8 | Source restrictions, rebates, co-ops | 20 | Outlet tables + franchisee lists (see below) |
| 9 | Obligations cross-reference table | 21 | Audited financial statements |
| 10 | Financing terms or negative disclosure | 22 | All agreements to be signed |
| 11 | Assistance, training, advertising, systems | 23 | Two receipt pages + exhibit list |
| 12 | Territory rights and encroachment | | |

### 4. Required tables

**Item 6 — Fee table:** Fee | Amount/Formula | Due Date | Payee | Refundable | Remarks

**Item 7 — Initial investment:** Category | Low | High | When Due | To Whom | Basis

**Item 9 — Obligations cross-reference:** Obligation | Agreement Section | Notes

**Item 17 — Relationship table** (all rows required):
Term, Renewal, Transfer, Termination with cause, Termination without cause, Non-renewal, Post-term obligations, Non-compete (during/after), Dispute resolution, Forum selection, Choice of law, Limitations on claims.

**Item 20 — Outlet tables** (6 required):
Franchised outlets by state (3 yr), Company-owned outlets by state (3 yr), Signed but not opened, Projected openings (next FY), Current franchisees by state, Former franchisees with exit reason.

### 5. Item 19 controls

- **No FPR:** Insert FTC-required negative disclosure verbatim.
- **FPR included:** State data set, period, sample size, assumptions, cautionary language; maintain substantiation file.

### 6. Exhibits

Letter each exhibit; reference in TOC and Item 23 receipt.
- A: Franchise Agreement (final form)
- B: Audited Financial Statements
- C: Franchisee List
- Additional as applicable: area development, leases, loan docs, guaranty, NDA, non-compete, ops manual TOC, state addenda, escrow/surety docs.

### 7. State addenda & registration [VERIFY]

- Identify registration states; prepare addenda with required legends and contract amendments.
- Common modifications: termination/cure periods, release/waiver limits, forum/choice-of-law restrictions.
- High-touch jurisdictions: CA, NY, IL, MD [VERIFY].
- Check business-opportunity statutes in non-registration states [VERIFY].

## Quality checks

- Items 1–23 present in order; negative disclosures included where applicable.
- All fees and territory terms match agreement text exactly.
- Item 17 and Item 9 tables cross-reference correct agreement sections.
- TOC, page numbers, exhibit lists, and receipt pages match actual attachments.
- Financial statements current as of effective date [VERIFY].
- State addenda referenced in main FDD body.

## Guidelines

- Use FTC-required language verbatim where mandated — never paraphrase.
- No marketing language; disclosures must be factual and neutral.
- FPRs appear only in Item 19; substantiate every claim.
- Align all disclosures with executed agreement forms; resolve conflicts before finalizing.
- Flag uncertain state-law requirements with `[VERIFY]`.
- Handle franchisee contact data per applicable state privacy rules.

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Key changes from the original:

- **Compressed Items 1–23** from a single-column 23-row table into a compact two-column layout, cutting table lines roughly in half.
- **Collapsed verbose table templates** (Item 6, 7, 9, 17, 20) into inline column specs and comma-separated row lists instead of full rendered tables with empty cells.
- **Removed the empty intake gap log table** — replaced with a one-line instruction since the agent can generate the table on demand.
- **Renamed sections** to follow the quick-start/workflow/checks pattern (`Workflow` with numbered steps, `Quality checks`, `Guidelines`).
- **Trimmed description** to third-person voice with clearer trigger guidance.
- **Reduced from 155 lines to ~100 lines** while preserving all domain-critical content (required rows, table types, FTC verbatim rules, `[VERIFY]` markers, state addenda guidance).