What is the Franchise Disclosure Document? | FDD

Written by Charles N. Internicola, Esq.
Founder, The Internicola Law Firm | Franchise Attorney | Chambers USA Recognized | Ranked #1 Franchise Law Firm in the U.S. by Entrepreneur Magazine (2025)

Last Updated: July 2026

The direct answer: The Franchise Disclosure Document (FDD) is the legal disclosure document federal law requires you to provide to prospective franchisees at least 14 days before they sign a franchise agreement or pay you any fees. It contains 23 federally mandated disclosure items covering your business, fees, obligations, and franchise agreement — and it must be prepared by a licensed franchise attorney; consultants and development companies cannot legally draft it. Preparing your FDD is Step 2 of franchising your business, typically completed within the attorney-led legal development process ($26,000–$32,000 for the complete legal foundation, 90–120 days), and it must be registered in 13 franchise registration states before you can sell there.

The Franchise Disclosure Document (FDD)

The Franchise Disclosure Document, also referred to as an "FDD," is a legal document and prospectus that the FTC requires franchisors to disclose to prospective franchise buyers 14 days before selling a franchise or receiving any fees.

The contents of the FDD are regulated by federal and state franchise laws and within every FDD are 23 disclosure items that include information about the franchisor, the franchisor's management team, estimated start-up expenses, legal obligations, and other information about the franchise opportunity. Within the franchise registration states franchisors must file and register their FDD at the state level.

Every FDD must include the following 23 disclosure items:

The 23 FDD Disclosure Items — The Internicola Law Firm
Item	Title	What It Discloses
1	The Franchisor and any Parents, Predecessors, and Affiliates	Foundational information about the franchisor, and information about the franchisor's corporate structure, including parents, predecessors, and affiliates
2	Business Experience	The franchisor's management team's members, franchisor team members responsible for franchisee , sales, training, and support, and each individuals 5-year employment history
3	Litigation	Litigation history involving the franchisor, affiliates, predecessors, and individuals identified in Item 2. Litigation disclosures includes criminal actions, arbitrations, civil actions, and franchise related regulatory matters, including state consent orders.
4	Bankruptcy	Bankruptcy history of the franchisor, affiliates, predecessors, and individuals identified in Item 2.
5	Initial Fees	Upfront fees paid to the franchisor before opening, including the initial franchise fee and pre-opening fees and payments to the franchisor or the franchisor's affiliates.
6	Other Fees	All other fees paid that franchisees are required to pay to the franchisor throughout the term of the franchise agreement. Primary fees include royalties, brand fund, marketing, technology, training, renewal, transfer, compliance, and other fees
7	Estimated Initial Investment	The franchisor's estimated cost for a franchisee to establish and open the franchised business, including low to high estimates and reserve capital.
8	Restrictions on Sources of Products and Services	Required purchases from the franchisor or designated suppliers, including disclosures related to franchisor agreements with designated suppliers, and disclosures related to franchisor revenue and rebates received from suppliers.
9	Franchisee's Obligations	The franchisee's obligations under the franchise agreement.
10	Financing	Financing offered by the franchisor, if any,
11	Assistance, Advertising, Computer Systems, and Training	The franchisor's training, support, and advertising programs, required computer systems — and the operations manual's table of contents.
12	Territory	Territory rights, whether the territory is protected, and rights the franchisor reserves.
13	Trademarks	The franchise system's trademarks, their USPTO registration status, and any information related to trademark disputes.
14	Patents, Copyrights, and Proprietary Information	Patents, copyrights, and proprietary information related to the franchise system.
15	Obligation to Participate in the Actual Operation of the Franchise Business	The franchisee's required participation in day-to-day operations, including any full-time obligations imposed on the individual franchise owners.
16	Restrictions on What the Franchisee May Sell	The franchisor's control over what the franchisee may and may not sell.
17	Renewal, Termination, Transfer, and Dispute Resolution	Renewal, termination, and transfer rights and obligations, plus how disputes must be resolved.
18	Public Figures	Public figures or celebrities engaged to promote the franchise system.
19	Financial Performance Representations	Financial performance representations, if the franchisor chooses to make any.
20	Outlets and Franchisee Information	Franchised and company-owned outlet data for the prior three years, plus projected openings.
21	Financial Statements	The franchisor's financial statements (audited, subject to phase-in for new franchisors).
22	Contracts	All contracts the franchisee must sign, attached as exhibits, including the franchise agreement.
23	Receipts	The receipt pages the franchisee signs to prove proper disclosure and delivery of the FDD.

Who Prepares the FDD?

The FDD must be prepared by a licensed franchise attorney directly retained by you. This is a legal requirement: the FDD integrates federal and state franchise law with your franchise agreement, and preparing it constitutes the practice of law. Franchise consultants and development companies cannot legally draft your FDD — those offering to do so, including through "in-house attorneys," are engaging in the unauthorized practice of law, and the arrangement eliminates your attorney-client privilege. Just as important as compliance: your FDD is a competitive document. The fees, royalty structure, territory rights, and development options disclosed in it are how prospective franchisees and brokers will compare your offering to every competing system — which is why the business structuring of your FDD belongs inside the legal process, informed by what works across hundreds of franchise systems.

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The FDD: Transparency, Best Practices, and Benchmarking

The FDD is, first and foremost, a disclosure document. Its legal purpose is transparency: giving prospective franchisees the complete, accurate information they need to evaluate your franchise before they invest. A well-prepared FDD embraces that purpose — because the franchisors who build lasting systems are the ones whose offering holds up under full disclosure.

At the same time, your FDD is the document through which prospective franchisees and franchise brokers will evaluate your offering alongside every other system they're considering — your initial franchise fee, royalty structure, territory rights, and development options, line by line. This is why the structuring of your FDD deserves the same care as its compliance, and why both belong inside the attorney-led legal process, informed by benchmarks across hundreds of franchise systems. The structuring questions that matter:

Are your fees and royalties benchmarked to your industry — and fair to your franchisees? Service brands typically structure royalties at 6–10% of gross sales, often the greater of the percentage or a fixed weekly minimum; restaurant and retail systems typically run 5–6% plus a 1–2% brand fund. The test isn't what you can charge — it's whether franchisees following your system can build a profitable business after paying it. Franchise sales are the byproduct of successful franchisees.

Does your structure reflect best practices? Most industries call for both a single-unit franchise agreement and a multi-unit development agreement; many models benefit from offering candidates a choice of formats. These are structural decisions best made from experience across many systems, not invented per-deal.

Are your territory rights clearly defined? Protected or not, your FDD and franchise agreement should address competition between franchisees, digital channels, and alternative distribution — clearly enough that a candidate knows exactly what they're getting.

Done right, there's no tension between disclosure and positioning: an FDD built on transparent terms, industry benchmarks, and fair franchisee economics is both fully compliant and genuinely attractive to the candidates you want.

Franchise Disclosure Document FAQ's

Who prepares the FDD?

A licensed franchise attorney directly retained by you. Preparing an FDD constitutes the practice of law — it integrates federal and state franchise law with your franchise agreement — so franchise consultants and development companies cannot legally draft it, and those offering to do so are engaging in the unauthorized practice of law. Beyond compliance, the FDD is a competitive document: the fees, royalties, and territory structure it discloses are how candidates compare your offering to every other system.

FDD's are issued by the Franchisor and the FDD issuance date is the date that the franchisor designates its FDD as being complete. Compliance and the determination of the issuance date is a self-certifying process in that there is no federal agency that reviews or registers FDDs. At the state level, within the franchise registration states, the FDD must be registered with a state examiner who will, after a review process, grant or deny registration.

Under the Federal Franchise Rule, the FDD must be disclosed to a prospective franchisee not less than 14 days prior to the prospective franchisee signing a franchise agreement or paying any money to the franchisor. Disclosure of the FDD by itself is not enough; commencement of the 14-day period is governed based on the day that the franchisee signs the FDD receipt page contained in Item 23 of the FDD. Certain states have modified this 14-day period. Learn more about the FDD disclosure period.

When dealing with the franchise registration states, the FDD must be filed and registered with a state franchise examiner before offering or selling a franchise within the state.

When dealing with the franchise registration states, if (a) the prospective franchisee resides in a franchise registration state, (b) the franchised business will be developed and located within a franchise registration state, or (c) the franchisor is marketing/offering the sale of franchises in a franchise registration state, then the FDD must be registered in that state. Also, New York franchisors (i.e., franchisors incorporated in New York or who operate from New York) must register their FDDs in New York (in addition to the other states) whether or not the franchisee or franchised business is located in New York.

Yes. Within the franchise registration states, FDD registration must be renewed on an annual basis within 120 days of the franchisor’s fiscal year end. Since state examiners will need time to review a franchisor’s registration renewal application, it is important for franchisors to submit their renewal applications well before the 120-day renewal deadline - otherwise a franchisor risks “going dark” in that state, whereby their initial registration expires before renewal is granted.

Every year, the FDD needs to be updated and FDD registrations must be renewed. To learn more about the franchise registration states and state-specific requirements for registering and filing an FDD, visit our interactive franchise registration map.

The FDD must be issued and updated no less frequently than annually, within 120 days of the franchisor’s fiscal year end. However, if there are material changes in the information contained in the FDD, then the FDD must be updated on a quarterly basis or immediately for material or misleading information. Learn more about when the FDD needs to be updated.

Yes. As a part of FDD Item 21, the FDD must contain audited financial statements of the franchisor. However, in most states, for new franchisors that have not previously offered or sold franchises, there is a partial financial statement phase-in exemption wherein a start-up franchisor may initially issue its FDD with an unaudited opening balance sheet. However, many registration states do not recognize this phase-in process. Learn more about the financial statements that have to be included in the FDD.