The purpose of the Franchise Disclosure Document is to provide prospective franchisees with information about the franchisor, the franchise system, and the agreements they will need to sign so that they can make an informed decision. The Franchise Association of Southern Africa (FASA) recognises that this enables prospective franchisees to make an informed decision. DTC can assist with Franchise Disclosure Document Development South Africa!
Contents of a Franchise Disclosure Document include:
The franchisor and any parents, predecessors and affiliate-
This section provides a description of the company and its history.
This section provides biographical and professional information about the franchisors and its officers, directors, and executives.
This section provides relevant current and past criminal and civil litigation for the franchisor and its management.
This section provides information about the franchisor and any management who have gone through a bankruptcy.
This section provides information about the initial fees and the range and factors that determine the fees amount.
This item provides a description of all other recurring fees or payments that needs to be made.
Includes all the expenditures required by the franchisee to make to establish the franchise.
Restriction on sources of products and services-
This section includes the restrictions that franchisor has established in regards to the source of products or services.
This item provides a reference table that indicates where in the franchise agreement franchisees can find the obligations they have agreed to.
This section describes the terms and conditions of any financing arrangements offered by the franchisor.
Franchisor’s Assistance, Advertising-
(Computer Systems and Training) This section describes the services that the franchisor will provide to the franchisee.
This section provides the description of any exclusive territory and whether the territories will be modified.
This section provides information about the franchisor’s trademarks, service and trade names.
Patents, copyrights and proprietary information-
This section provides information on how the patents and copyrights can be used by the franchisee.
Obligation to participate in the actual operation of the franchise business-
This section describes the obligation of the franchisee to participate in the actual operation of the business.
Restrictions on what the franchisee may sell-
This section deals with any restrictions on the goods and services that the franchisee may offer its customers.
Renewal, termination, transfer, and dispute resolution-
This section articulates when and whether your franchise can be renewed or terminated and what your rights and restrictions are when you have disagreements with your franchisor.
If the franchisor uses public figures (celebrities or public persons), the amount the person is paid is revealed in this section.
Financial Performance Representations-
Here the franchisor is allowed, but not required, to provide information on unit financial performance.
Outlets and Franchisee Information-
This section provides locations and contact information of existing franchises.
Audited financial statements for the past three years are included in this section. This includes balance sheets, statements of operations, owner’s equity, and cash flows.
This item provides of all the agreements that the franchisee will be required to sign. This is where the franchisor outlines the franchise agreement.
Prospective franchisees are required to sign a receipt that they received the FDD.
In terms of the FASA Code of Ethics and Business Practices, which is binding on FASA members, this information must be updated at least annually, more often should material changes take place within the franchisor company. Moreover, the franchise agreement should refer to the disclosure document, and acknowledge that the franchise joined the network based on the information it contains.
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