Franchise Disclosure Document Review

Not under the FTC Franchise Rule. The franchisor must give you the FDD a set number of days before you sign a binding agreement or pay the franchisor or an affiliate anything. If the franchisor makes unilateral, material changes to its standard agreement, you must have the final version for a separate waiting period before signing, but changes you negotiate don't restart the clock.

Item 19 is optional. A franchisor that gives sales or earnings figures must have a reasonable basis and written substantiation for them, and one that doesn't must state that it makes no financial performance representations. Either way, build your own projections with your CPA, using what franchisees tell you about sales and costs.

Most franchisors require each owner of the franchisee company to sign, and some ask spouses to sign too. The guaranty usually covers everything owed under the franchise agreement, including future royalties and damages, and it can outlast your ownership of the business. A cap, a time limit or a release when an approved buyer takes over is sometimes negotiable.

Ask what opening really cost compared with Item 7, how long it took to break even, how good the support is and whether fees or requirements changed after they signed. Former franchisees can explain why they left, though Item 20 discloses whether franchisees signed confidentiality clauses that may limit what they can say.