Franchise Agreement vs. FDD: What's the Difference?
Two essential documents that play very different roles. Understanding both is non-negotiable.
Many buyers confuse the FDD and the franchise agreement. They are different documents with different purposes — and you'll sign one but should study both.
The FDD: A Disclosure Document
The Franchise Disclosure Document is a federally required disclosure that the franchisor must give you at least 14 days before you sign or pay. It describes the company, the system, the fees, the obligations, and the system's history. You do not sign the FDD.
The Franchise Agreement: A Contract
The franchise agreement is the binding legal contract. It contains the actual obligations you take on — royalties, territory, term, termination, renewal, non-compete, dispute resolution. The agreement is typically attached as an exhibit to the FDD.
Why Both Matter
The FDD describes what the franchisor says they'll do. The agreement is what's actually enforceable. The two should align — when they don't, the agreement controls.
What to Do With Each
Read the FDD to evaluate the brand. Have an attorney read the agreement word-for-word before you sign. The FDD is for diligence. The agreement is for commitment.
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