Many individuals choose to buy into a successful company through the purchase of a franchise. The relationship created through a franchise is a legal one that allows an individual to use a service, trademark or advertising symbol in their business. Fast food chains are commonly franchised and are typically proven successful.
Simply wanting to own your own McDonald's does not make a franchise. There are several steps that an individual must take before taking ownership of a franchise. State law requires that certain information be provided to the interested party before a contract is signed. When an individual wants to purchase a franchise, the franchisor must provide them with what is known as a franchise disclosure document or FDD.
A franchise disclosure document gives the interested party the information necessary to make a secure decision whether to franchise or not. These documents typically include the business information required by state law as well as an outline of the initial investment needed to purchase the franchise. Other information provided in the FDD may include the business's history, its expectations of the franchisee and any dispute resolution obligations the new owner may have.
The franchise disclosure document is a necessary element in the purchase of a franchise. It outlines important business information and offers protection to the franchisor and the franchisee. As helpful as this document may be, the FDD may be written in a way that makes it difficult to understand. As with most business startups, purchasing a franchise typically represents a significant investment. To better protect this investment, individuals should consider having a business law attorney look over the franchise disclosure document. With their help, the information provided within the FDD may be more easily understood, and any information lacking in the document may be addressed before the purchase.