Why Doesn’t Everything Have An FDD?

Have you ever heard of a Franchise Disclosure Document? I hadn’t either until I became involved in matching people up with franchise opportunities. You can read about what the FDD entails here but in a nutshell, it’s meant to be a document that provides enough information to someone thinking about investing in a franchise so that that person can make an educated decision about the investment. It’s sort of like a prospectus you would receive before you invested in a mutual fund or a stock.

If you’re someone who is looking at franchises, putting the FDD’s of a couple of brands in which you’re interested side by side can be enlightening. You will see the differences in the ongoing fees you’re going to be paying as well as the estimated start-up costs you’ll incur. You can look at how many franchisees have joined the system over the years and where they’re located. You can see if any have left the system as well as if there are any bankruptcies or legal actions. You’ll see any differences in how they define the territory to which you’re getting exclusive rights (and if the rights you’re getting are, in fact, exclusive). In short, you’re being given a document that provides the bulk of the information you would probably have to spend weeks researching on your own if you could even find it.  In fact, the FDD even gives you a list of current franchisee so you can “validate” the franchise by calling them and asking them to tell you even more information.

My first thought when I read my first FDD was “wouldn’t it be nice if EVERYTHING had an FDD?” I mean, who wouldn’t want to be handed this kind of information by law? Not only that, once you get the FDD there is a mandatory waiting period before the franchisor can take your money, even if you’re ready to sign up on the spot. Wouldn’t THAT be nice when you’re being pressured into making a quick decision about a big purchase such as a car or a house?

Come to think of it, if you’ve ever bought a car or a house, have you remotely thought that you had complete information? Maybe you got a mechanic or a building inspector to look at them but wouldn’t it be great to have an FDD?

That’s something any business should keep in mind. While we might not want to make up a 250+ page document, we should strive to disclose as much important information as we can throughout the decision-making process to potential customers and partners. Not only does it make them feel more secure in their decision to sign up with you but it also prevents a lot of surprises down the road. Just because we’re not legally obligated to provide something that’s the equivalent of an FDD doesn’t mean we shouldn’t, don’t you think?

And if you’re ready to change your life and look at a new opportunity, click here and I’ll help you make that happen. With an FDD too!

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Filed under Consulting, Franchises, Thinking Aloud

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