Know Here The Difference between Franchise Agreement and FDD

A few people other than the Franchisee Attorney are aware of the fact that the Franchise Agreement and Franchise Disclosure Document (FDD). However, it is a very important thing that they have to understand before signing the dotted line. Once you have signed you are bound to do follow all the guidelines. So, always have a clear idea of where the things are heading to.  

The Franchise Agreement is a long and complex document written in legal language that only the Franchisee Attorney will understand and the FDD is also the long and complex document that the franchisees think that they understand.

To solve the problem, here we will have an elaborate discussion about this in the following section.

  • The main purpose of the Franchise Disclosure or FDD is to describe the franchisor and franchisee relationship. There will be information for the franchisees by which they will understand the franchisor so that they can conduct accordingly.

  • In the Franchise Agreement, there is the contract of the franchisor and the franchisee regarding the franchise to legally govern the relationship between two business bodies.

What is the difference between the FDD and Franchise Agreement?

The agreement will be signed by both parties whereas the FDD will be presented from the Franchisor side on which the Franchisee has to agree. The FDD holds the information that will be presented to the potential franchisee so that they can review and make their final decision about it. It is quite obvious that the FDD will be presented prior to the agreement as knowing the franchisor must be the first step before signing.

The FDD holds the history and background of the company including any case of bankruptcies or lawsuits. Along with them, the financial data and the information of the distribution channel will also be there. Any confidential factor can be disclosed that the franchisee may or may not discuss with others.

Factors of the Franchise Agreement:

  • Contract Explanation: It will describe the relation of the franchisee with the business.

  • Operations Manual: In this part, it is depicted how the franchisee will run the business. There may be amendments in the future so that they can cope up perfectly.

  • Proprietary Statements: It will describe the idea of how the brand name of the franchise will be used along with marketing and advertising procedure.

  • Ongoing Site Maintenance: The maintenance of location is also mentioned in the agreement. The time frame of up-gradation or any change will be there that the franchisee has to follow.