Growing a Franchise
Here’s how to create a legally compliant, strategically aligned Franchise Disclosure Document (FDD) that meets all regulations and supports sustainable franchise growth.
Once you’ve validated your business model and prepared to replicate it, one of the most important—and legally required—steps in franchising your business is creating the Franchise Disclosure Document, or FDD. This 23-item document outlines essential details about your franchise offering, including fees, obligations, financial performance representations and more. It’s a cornerstone of legal compliance, transparency and franchisee education.
But more than just a legal checklist, the FDD can—and should—be a strategic tool that supports your brand’s long-term success. In Phase 2 of “The Ultimate Guide to Franchising Your Business,” we break down what goes into a great FDD, why it matters, and how to use it wisely, featuring insights from Sean Fitzgerald, president of TruBlue Home Service Ally.
The Franchise Disclosure Document, referred to as an FDD, is required by the Federal Trade Commission (FTC) and provides prospective franchisees with detailed information about a franchise opportunity. It must be provided to candidates at least 14 days before they sign any binding agreement or make any payments to the franchisor.
Check out our breakdown of all 23 items in the FDD.
For franchisors, the FDD is your first legal impression, and often your first brand impression, too. It's a vital part of the franchise sales process because it:
While the FDD is a legal requirement, the most successful franchisors use it as a strategic asset to align with growth goals, marketing messaging, and system-wide clarity.
A common mistake among new franchisors is trying to use the FDD to outline too much of the day-to-day business model. Fitzgerald cautions against this. “Number one — remember that the FDD is not your operations manual,” he said. “There are things you want to have, controls and things like that, that you don’t want to put into the FDD.”
The FDD should meet legal disclosure requirements, not spell out every operational detail. “Put as little as you need to to enforce your systems, but you don’t have to be overly specific to those terms,” Fitzgerald said. “For example, operational procedures about what time of day you have to open, etc. — those should be part of the operational standards, but you don’t have to put the details in there.”
The FTC mandates certain disclosures in the FDD, but there’s room for strategic thinking — especially in the financial performance representation of Item 19. This is often the first page that prospective franchisees will open to when looking for the bottom line of the business.
“Obviously, you have to follow the standardization of what is required, but there is also a lot of flexibility,” Fitzgerald said. “You want to start with your Item 19, for example — what story do you want to tell?”
Item 19 is the only section where franchisors can legally include financial performance data, and it’s often a deciding factor for franchise candidates.
“A lot of times, people will just tell their AUVs and their average numbers systemwide, for example,” Fitzgerald said. “But businesses grow year-over-year. So, if you are a relatively emerging brand in a business like ours, the numbers may look different depending on how long a location has been open. If you have franchisees that are 15 years old, they will have a much higher AUV organically. But if you are an emerging brand, your AUVs will be lower naturally. So you want to break it down into how long people have been operating, so people can understand where you are at.”
Segmenting data can help provide a more accurate and persuasive picture. “There have been a couple franchise systems I’ve been with where we have refreshed and relaunched the brand, for example,” Fitzgerald said. “So the Item 19 may not look great nationwide, but we segmented the numbers and divided results for the franchisees who did the rebrand and the franchisees who didn’t. The numbers were much better for the ones that refreshed. That was the story we were trying to tell and we used the Item 19 to tell it.”
While Item 19 may draw the most attention, the entire FDD influences your ability to recruit, support, and scale franchisees. Items like initial fees (Item 5), estimated startup costs (Item 7) and territory protections (Item 12) all affect how your opportunity is perceived and whether it meets franchisee expectations.
Franchisors should ask:
Legal counsel is essential, but so is strategic input. Every part of the FDD should serve both compliance and business objectives.
Ultimately, your FDD should help tell the story of your brand’s growth, performance, and opportunity.
“What is the story you want to tell?” Fitzgerald said. “Frame up your data in a way that helps tell that story. If you are saying you are a young franchise with hot growth — show that in the data.”
Growing and selling franchises is difficult. No great franchise did it alone. Want to learn more about how 1851 helps franchisors grow their franchises with confidence? Visit www.1851growthclub.com and see what we can do for you.
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