1851

Pursuing business ownership as an entrepreneur isn&rsquo;t an easy feat, even when backed by the support that&rsquo;s inherent through franchising. Before a franchise agreement is ever signed, there&rsquo;s a lot of hard work that goes into <a href="https://1851franchise.com/3-tips-on-picking-the-right-franchise-for-you-2708033#mainTrending" target="_blank">determining what franchise opportunity is best suited for each individual entrepreneur</a>, and there&rsquo;s no shortage of qualifications that prospective franchisees need to meet in order to be considered franchise candidates. 

One of the most important pieces of this discovery puzzle is reading through and comparing FDDs, or Franchise Disclosure Documents. For first-time franchisees, these documents can be overwhelming &mdash; FDDs run hundreds of pages long and are filled with both legal and franchising jargon that can be confusing. That&rsquo;s why 1851 Franchise reached out to <a href="https://www.franchiselawsolutions.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=fdds-for-beginners-leading-franchise-attorney-gives-top-tips-for-franchisees-comparing-their-first-franchise-disclosure-documents-2709429" target="_blank" rel="nofollow" style="text-decoration-line:none" target="_blank">Charles Internicola, the franchise attorney behind The Internicola Law Firm</a>, to cut through the noise and break down what franchisees need to know before tackling their first FDD.

When it comes to his top piece of advice for first-time franchise candidates looking at an FDD for the first time, Internicola keeps it simple, saying, &ldquo;Understand that the FDD is a legal disclosure document that has been prepared by the franchisor. For the most part, the information contained in the FDD is not verified and while the information and disclosures contained in the FDD are critical to the franchise review process, it&#39;s only one of many information tools that franchisee candidates should be evaluating.&rdquo;

While going through that evaluation process, Internicola stresses that while every part of an FDD is important &mdash; including potential omissions that an experienced franchise attorney may notice &mdash; there are three items in FDDs that shouldn&rsquo;t be overlooked. The first of these is Item 3, which covers litigation.

&ldquo;If the franchisor discloses significant litigation with its franchisees, you&#39;ll need to evaluate the litigation carefully,&rdquo; Internicola said. &ldquo;As franchise systems grow, litigation, many times, becomes inevitable. But if Item 3 discloses a troubling pattern of franchisee litigation, you need to take notice.&rdquo;

Internicola&rsquo;s next can&rsquo;t-miss Item is Item 6, which walks through other fees that may incur. He notes, &ldquo;Item 6 includes a table summarizing the ongoing fees that you will be paying the franchisor. These fees are important to evaluate as they will impact the economics and profitability of your franchised business.&rdquo;

Along those same lines, the third Item that Internicola stresses is Item 19. <a href="https://1851franchise.com/don-t-skip-these-items-when-reviewing-franchise-disclosure-documents-2709311" target="_blank">This Item is often cited as one of the most important in FDDs because it includes a brand&rsquo;s financial performance representations</a>. 

&ldquo;Franchisors cannot disclose financial information or financial performance history unless it&rsquo;s disclosed in Item 19,&rdquo; said Internicola. &ldquo;If a franchisor does not disclose information in Item 19, you need to ask them, &lsquo;why not?&rsquo; If they do, then you need to carefully review that information.&rdquo;

In addition to these key FDD Items, Internicola recommends that aspiring franchisees also pay close attention to anything that may confuse them or raise questions. And when it comes to the Item in an FDD that most often confuses candidates or is the cause of the most questions, there&rsquo;s one that Internicola immediately points to: Item 12. 

&ldquo;There are significant regulations and requirements that franchisors must abide by when describing the nature and type of territory protection that the franchisee will be granted. Franchisees benefit from territory protection, i.e., where the franchisor agrees to provide an exclusive or protected territory to each franchisee, and within Item 12, franchisors are required to disclose the type of territory protection granted to its franchisees,&rdquo; Internicola explained. &ldquo;Since there are many exceptions and carve-outs to territory protections typically granted, many times franchisee candidates experience confusion when reviewing Item 12.&rdquo;

As franchise candidates become more comfortable with FDDs and work with experts in the field to understand their ins and outs, it&rsquo;s important for them to compare what&rsquo;s listed across brands&rsquo; FDDs in order to ensure that they move forward with the right business ownership opportunity for them.

&ldquo;At the most basic level, you should compare the unit economics, i.e., compare the fees between each franchisor and their Item 19,&rdquo; Internicola said. &ldquo;At a deeper level, your franchise lawyer should be able to assess the quality of the FDD and whether or not one brand has omitted information that should have been disclosed to you.

FDD, franchise disclosure document, FDD tips from franchise attorneys, Charles Internicola

FDDs for Beginners: Leading Franchise Attorney Gives Top Tips for Franchisees Comparing Their First Franchise Disclosure Documents

1851 Franchise

Charles Internicola of the Internicola Law Firm shares what FDD Items can’t be overlooked and provides insight into the best ways to avoid confusion when reading these lengthy documents.

fdds-for-beginners-leading-franchise-attorney-gives-top-tips-for-franchisees-comparing-their-first-franchise-disclosure-documents

Dillas Quesadillas

Design with photo of Michael Mabry and Dillas Primo Quesadillas logo

Franchise Times: New Franchise Exec Says Dillas Is Bringing ‘Excitement’ Back to QSR Category

michael-mabry-franchise-growth

Lawn Squad

Greener, Faster, Smarter: Why Entrepreneurs Are Choosing Lawn Squad 

Greener, Faster, Smarter: Why Entrepreneurs Are Choosing Lawn Squad as a Treatment-Only Lawn Care Franchise

lawn-squad-franchise-opportunity

Jollibee

How Jollibee’s Veteran Leadership Team Is Rewriting the Playbook for U.S. Expansion

franchise-leadership-growth

Woodhouse Spas

Photo of guest checking in at Woodhouse Spas reception desk

franchise-questions-answered

Mellow Mushroom

How Mellow Mushroom’s Model Made it the Perfect Addition to Brad Harper’s Restaurant Portfolio

How Mellow Mushroom’s Flexible Model Made it the Perfect Addition to Brad Harper’s Growing Restaurant Portfolio

mellow-mushroom-brad-harper-restaurant-growth

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Development Website Builder

Franchise Resources

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

Buying a fitness franchise, people exercising

Boutique vs. Big Box Gym Franchises: Which Offers Best ROI in the $7 Billion Fitness Market?

buy-fitness-franchise-boutique-big-box-comparison

Pieology Pizza Enters Chapter 11 Following Costly Bid To Save Struggling Stores

pieology-pizza-files-chapter-11-bankruptcy

CNBC: McDonald’s Will Assess if Franchisees Are Offering Value for Customers Under New Standards

mcdonalds-franchise-standards-value-metric

How AI Is Transforming Restaurant Operations and Franchises

ai-impact-restaurants-franchises-human-centric-technology

Round Table Pizza Franchisees Take FAT Brands to Court Over Marketing Fund Mismanagement

round-table-pizza-franchisees-take-fat-brands-to-court-over-marketing-fund-mismanagement

AI-related job cuts, October U.S. job cuts, American job cut record

AI-Fueled Layoffs Reshape the U.S. Job Market — And Highlight Franchising’s Resilience

ai-job-cuts-franchising-path-forward

Paris Baguette Welcomes Zac Sulma as New Chief Operating Officer

new-coo-zac-sulma

Callaway Sells Majority Stake in Topgolf to Private Equity for $770 Million

callaway-sells-majority-stake-in-topgolf-to-private-equity-for-770-million

Photo of group of dogs standing together in day care facility

Top Pet Boarding and Day Care Franchise Opportunities for 2025

top-pet-boarding-daycare-franchises

A Practical Playbook: Who To Call First When Franchising Your Business

franchising-your-business-who-to-call-first

image of jerome hanway from right at home Las Cruces, New Mexico 1851 franchise franchisee spotlight

Jerome Hanway Is Building His Right at Home Franchise Around His Mission To Serve

right-at-home-franchise-las-cruces-jerome-hanway

1851 Franchisee Spotlight graphic with photo of Eli Cohen, Layne's Chicken Fingers logo

C5 Restaurants Grows its Texas Footprint with 40 Layne’s Chicken Fingers Locations Planned Statewide

eli-cohen-laynes-chicken-fingers-texas

FDDs for Beginners: Leading Franchise Attorney Gives Top Tips for Franchisees Comparing Their First Franchise Disclosure Documents

MORE STORIES LIKE THIS