Franchisee Attorney - FDD and Franchise Agreement Review
Buying a franchise is a major investment. Knowing what you're signing before you commit is critical.
Schedule a Consultation➔What You Don't Know About That FDD Can Cost You
The Franchise Disclosure Document is the most important document in the franchise buying process. It runs hundreds of pages, covers 23 required disclosure items, and includes the full form of franchise agreement and other agreements you'll be bound to for a long period of time. Franchisors are required by federal law to give it to you at least 14 days before you sign anything. Most prospective franchisees spend those 14 days reading the parts they understand and glossing over the parts they don't.
EntrePartner provides flat-fee FDD review for prospective franchisees, giving you a clear, honest assessment of what you're being asked to sign before you commit. We are also able to provide you with a list of diligence questions to discuss with the franchisor and other franchisees at discovery day or prior to signing.
What's Actually in an FDD
The FDD has 23 Items, each covering a different aspect of the franchise relationship. Some are straightforward. Others require a trained eye to evaluate properly. Here are the items that matter the most.
Litigation and Bankruptcy History
A franchisor's legal history tells you a lot about how they operate. We look for patterns in franchisee disputes, regulatory actions, and any financial instability that could affect the system you're buying into.
Fees
Initial franchise fees, royalties, marketing fund contributions, technology fees, renewal fees, and transfer fees. The total potential cost of ownership is often buried across multiple line items. We add them up, note which fees can change, and make sure you understand the full financial picture.
Estimated Initial Investment
The initial franchise fee is only one piece of the investment. We review the estimated startup costs, working capital assumptions, buildout expenses, equipment, inventory, professional fees, and other required expenditures so you understand what has been disclosed and what could potentially change. This allows you to identify the capital you may actually need to open and operate.
Territory
Territory rights are one of the most negotiated and most misunderstood provisions in franchise agreements. We assess whether your territory is exclusive, protected, or essentially meaningless, and what the carveouts actually mean for your business.
Renewal, Termination, Non-Compete, and Exit Rights
Item 17 summarizes some of the most important terms in the franchise relationship, including renewal rights, termination rights, transfer restrictions, non-compete requirements, dispute resolution, and what happens when the relationship ends. We help you understand how easy or difficult it may be to renew, sell, transfer, or exit the business, and what other business ventures may be an issue for the franchise relationship.
Financial Performance Representations
If the franchisor makes a representation about how much you might earn from the franchised business, they have to disclose it in Item 19. We evaluate what they're showing you, what assumptions or limitations apply, what may be missing, and how to interpret the numbers in the context of your market and investment.
Outlets and Franchisee Information
How many franchisees have opened, transferred, or left the system? Are franchisees renewing? Are units changing hands? High turnover or unusual patterns in a franchise system is a warning sign. We interpret the table and tell you what the trends actually indicate.
Financial Statements
The franchisor's audited financials can provide insight into the financial condition of the company behind the brand. We review them for issues that may raise questions about long-term support, growth, and system viability.
Beyond the Disclosure: The Franchise Agreement
The FDD contains the franchisor's form of franchise agreement and other required agreements as an exhibit, and they are the documents you'll actually be bound to. Reviewing the FDD Items without reviewing the agreement is only half the job.
At EntrePartner Law, we review all together and identify provisions that deserve attention before you sign, including territory carveouts, renewal conditions, termination rights, transfer fees and approval requirements, non-compete clauses, and personal guarantee scope.
In many cases, there may be room to negotiate targeted and well thought out requests. We frequently push for revisions to territory terms, development schedules, personal guarantee limitations, and other provisions where franchisors may have flexibility they don't advertise.
FDD Review Services
How the FDD Review Process Works
Receive and Review
Once you receive your FDD, send it to EntrePartner as soon as you receive it. Federal law generally requires franchisors to provide the FDD at least 14 calendar days before you sign a binding agreement or pay money, but that period is not a deadline to rush toward. The earlier we start, the more time you have to understand the documents, ask questions, and negotiate before you commit.
Get a Clear Summary
We prepare a written summary of the key findings, flag items that warrant concern, and explain what the provisions mean for your specific situation in plain language.
Talk Through the Results
You'll have a one-on-one consultation with an attorney to discuss the summary, answer your questions, and receive a practical assessment of the opportunity, the risks, and the terms you may want to address before signing.
Negotiate What's Negotiable
If we identify terms worth pushing back on, we will tell you which targeted issues are realistic to raise and help negotiate with the franchisor if you decide to proceed.
Frequently Asked Questions
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Don't Sign Before You Understand The Deal
A franchise investment is one of the largest financial commitments many people make. The FDD, Franchise Agreement, and related exhibits explain what you are buying, what you will owe, what restrictions apply, and what rights you will and will not have after you sign. EntrePartner helps you understand the documents before you commit. Call us to get an attorney who's read thousands of them in your corner before you sign.
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