If you're considering buying a franchise, the single most important document you'll encounter is the Franchise Disclosure Document, or FDD. Required by the Federal Trade Commission since 1979, the FDD is a legal document that franchisors must provide to prospective franchisees at least 14 days before any money changes hands or any binding agreement is signed.
What Does the FDD Contain?
The FDD is organized into 23 specific items, each covering a different aspect of the franchise opportunity. Some of the most critical sections include:
- Item 5 — Initial Fees: The upfront franchise fee and any other payments due before opening.
- Item 6 — Ongoing Fees: Royalties, advertising fund contributions, technology fees, and other recurring costs.
- Item 7 — Estimated Initial Investment: A detailed breakdown of every cost required to open and operate the franchise through its first few months.
- Item 19 — Financial Performance Representations: Revenue, profit, or other financial data the franchisor chooses to disclose. Not all franchisors include this item.
- Item 20 — Outlets and Franchisee Information: A three-year history of unit openings, closings, and transfers — essentially the franchise system's growth and churn data.
Why Does the FDD Matter?
The FDD turns franchise evaluation from guesswork into analysis. Instead of relying on a sales pitch, you can examine actual fee structures, see how many units have closed, and — when Item 19 is disclosed — compare revenue figures across locations. Franchises that look attractive on the surface sometimes tell a different story in the data.
At Franchise Breakdown, we extract and structure data from hundreds of FDDs so you can compare franchise opportunities across investment cost, royalty rates, unit growth, revenue, and more — all in one place. For example, see the full cost breakdown for McDonald's or browse franchises you can start for under $100K.
How to Get an FDD
Franchisors are required to provide the FDD upon request during the sales process. Many state regulators also maintain public registries where FDDs are filed. Once you have a copy, tools like Franchise Breakdown can help you make sense of the numbers quickly.