The FDD Franchise Questions:
It’s important to master the fundamentals of Franchising in analyzing the requirements needed to write an FDD. The material provided in this Module provides you with information that would be used to write an FDD. The Case Study is designed to establish specific lessons and scenarios to draw information needed on the FDD. The questions below are provided to determine whether you are able to identify the required information needed to construct a FDD.
It’s important to remember that the FDD exists for two reasons: to protect you as a candidate and to protect the franchisor against allegations of misleading claims.
There are typically 23 distinct sections, or “items,” in an FDD, each of which serves to answer a specific question. Provide answers base on all available information to develop your answer to the below questions. If there is no direct information you are permitted to make inferences based on support from the material provided.
What’s the history of the franchisor?
1 – Outline the history of the franchisor, including any parent companies, predecessors, or affiliated entities.
2 – Provide information about the experience of the founder and management team, as well as the operational history of the business itself.
3 – Cover any and all litigation, both current and past, going back ten years.
4 – Disclose any bankruptcies, either on the part of the franchisor or its founder.
5 – Detail all existing outlets and franchise information.
How much does this franchise cost?
6 – Detail using the finance Tables the initial fees associated with becoming a franchisee, including the franchise fee itself, multi-unit fees, and necessary supplies/materials.
7 – Outline other ongoing fees, such as the royalty, training fees (if applicable), technology fees, marketing fees, renewal fees, and any other fee required by the franchisor.
8 – Cover the total initial investment required, combining the initial fees disclosed in Item 5 with estimates of construction/leasehold improvement costs, furniture, fixtures, equipment, signage, computer systems, rent deposits, insurance deposits, professional fees, grand opening expenses…you name it. It’s meant to give you a solid estimate of the total cost of opening a franchise location.
What kind of support do I get as a franchisee?
9 – Discusses supply sources and ongoing operational items. This is particularly important if you’re in a food-based concept.
10 – Detail the training, operations, and ongoing assistance that you receive as a franchisee of the system.
11 – Outline how the franchisor defines territory and the protections provided to franchisees.
12 – Provide details regarding copyrights and intellectual property of the business.
13 – List the issues of renewing franchise fees, grounds for termination, transfer options, and dispute resolution.
What are the franchisee obligations?
14 –List any sourcing restrictions for products and materials.
15 – Discuss franchisees specific obligations.
16 – Detail the expectations set forth regarding franchisees ongoing participation in the business, specifically outlining where the franchisee needs to be personally involved.
What are the economic expectations for the business?
17 – Detail the Financial information you are able to identify from the entire information from the course Case Study and any other information you are able to forecast from all information available and that could be associated with the one and only source for financial information about the performance of the franchise system.
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