How To Read A Franchise Disclosure Document

TheStreet.com:

Reading a franchise disclosure document can almost be about as fun as reading an encyclopedia, but new franchisees — whether they’re buying into Hampton Hotel for $13.2 million or Vanguard Cleaning Systems for $8,200 — would do themselves a great service by paying attention to the details.

Steven Feirman, partner at Nixon Peabody, talked with TheStreet about the importance of getting and carefully reading the legally required franchise disclosure document.

What is the purpose of a franchise disclosure document?
Feirman
: A franchise disclosure document is a federally required, pre-sale prospectus that everyone who purchases a franchise in the U.S. and in many other countries must receive before paying any money or signing any agreements. This disclosure document or prospectus contains specified items — 23 separate items of disclosure — that must be provided to a prospective franchisee. It’s a federal requirement under the Federal Trade Commission franchise rule. Read more.

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