Tips on Reading a Franchise Disclosure Document: Item 2
On an earlier blog post, we examined Item 1 of the Franchise Disclosure Document (FDD) and explained its meaning. As the series “Tips on Reading a Franchise Disclosure Document” continues, it is only natural to go in order and examine Item 2.
Remember, opening a franchise is a big decision and one that should not be taken lightly. An important step in the franchise selection process is conducting due diligence and carefully reading the FDD. While this may look like a cumbersome document, we are making it easy to understand by explaining each of the 23 items in this series of blog posts. What is Item 2? Item 2 is headlined “Business experience of franchise executives.” This section lists the Franchise’s leadership team and their employment history over the past five years.
The leadership team includes:
- Chief Executive Officer;
- Chief Operating Officer;
- Chief Financial Officer;
- Officers responsible for franchise marketing;
- Officers responsible for franchisee training; and
- Officers responsible for franchise operations.
What does this mean to you? Joining a franchise is like joining a family. It is important for a franchisee to feel comfortable working with the franchisor’s leadership team. Interview these executives when researching different franchise opportunities. Are they accessible? What is their track record in the franchise and relevant industry, such as travel, restaurant or fitness. Can you trust their expertise?
Remember, these are the folks who will be providing you with the tools for success. See, the FDD is not so scary a document when you break it down Item by Item. Before purchasing a franchise, don’t forget to read the FDD carefully and don’t be afraid to ask questions.