Digital Earnings Claims Statements & Financial Performance Representations


Purchase FDDs/UFOCs

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What is an FDD/UFOC?

The Franchise Disclosure Document (FDD), which was previously known as a Uniform Franchise Offering Circular (UFOC), is a document containing detailed information about a franchise. Its contents are regulated by the Federal Trade Commission and are designed to assist the prospective franchisee in analyzing the merits of a potential franchise. By law, a franchisor must provide the franchisee with an FDD (previously UFOC) before a contract can be signed or any payment is made. An FDD (previously UFOC) is made up of at least three parts, plus various additional exhibits:

  1. Twenty-three items describing various aspects of the franchise offering,
  2. Up to three years of the franchisor's audited financial statements, and
  3. The Franchise Agreement that the franchisee must sign if he/she intends to buy the franchise.

Keep in mind that neither the FTC nor any of the states has reviewed the offering circular to determine whether the information submitted is true or not. They merely require that the franchisor make representations based upon a prescribed format. If the information provided is false, franchisors are subject to civil penalties. However, it is far less costly to avoid making a mistake in the first place with solid research of your own.

Every FDD/UFOC document contains the following 23 items:

  • Item 1: The Franchisor, Its Predecessors And Affiliates
  • Item 2: Business Experience
  • Item 3: Litigation
  • Item 4: Bankruptcy
  • Item 5: Initial Franchise Fee
  • Item 6: Other Fees
  • Item 7: Initial Investment
  • Item 8: Restrictions On Sources Of Products And Services
  • Item 9: Franchisee's Obligations
  • Item 10: Financing
  • Item 11: Franchisor's Obligations
  • Item 12: Territory
  • Item 13: Trademarks
  • Item 14: Patents, Copyrights and Proprietary Information
  • Item 15: Obligation To Participate In The Actual Operation Of The Franchise Business
  • Item 16: Restrictions On What The Franchisee May Sell
  • Item 17: Renewal, Termination, Transfer And Dispute Resolution
  • Item 18: Public Figures
  • Item 19: Financial Performance Representations
  • Item 20: List Of Outlets
  • Item 21: Financial Statements
  • Item 22: Contracts
  • Item 23: Receipt