Part 2: Developing Your Franchise Legal Documents 📝✨
When you decide to franchise your business, one of the most important steps is developing your Franchise Disclosure Document (FDD) and other legal contracts.
These documents form the backbone of your franchise system and protect you — the franchisor — as well as your franchisees.
Let’s break down what you need to know about developing these crucial legal documents. 🚀
What Is the Franchise Disclosure Document (FDD)? 📄
The FDD is a federally required document that gives prospective franchisees detailed information about your franchise system, business history, legal obligations, and much more. It helps ensure transparency so buyers can make informed decisions.
The FDD covers 23 specific topics, such as:
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The background of the franchisor
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Initial and ongoing fees
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Franchisee obligations
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Territory rights
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Litigation history
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Financial performance representations (if any)
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Other contracts the franchisee must sign
🧠 Think of the FDD as your franchise “user manual” that discloses everything a prospective franchisee needs to know to conduct due diligence.
Why You Need a Franchise Agreement (and Other Contracts) 📜
The Franchise Agreement is the primary contract between you and your franchisees. It sets the rules of the relationship — rights, responsibilities, fees, territory protections, and more.H
However, the franchise agreement isn’t the only contract involved. You may also need:
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Vendor or supplier agreements
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Non-disclosure agreements (NDAs)
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Financing contracts (if you offer franchise financing)
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Service contracts (if you are an affiliate offers services to franchisees)
💡 All these contracts should be carefully drafted and tailored to your business to avoid confusion and costly disputes down the road. These contracts are required to be disclosed in Item 22 and are typically included as an attachment or exhibit.
What Does It Cost to Develop These Documents? 💸
Developing an FDD and franchise agreement isn’t cheap — and it shouldn’t be! Quality legal work helps protect your brand and business.
Typical start-up costs range from $12,000 to $35,000, depending on:
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The complexity of your business
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The experience and location of your law firm
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Whether you need help with state registrations
At Waldrop & Colvin, we offer flexible payment options — from flat fees to monthly engagements — so you can franchise on your schedule and budget.
⚠️ Be cautious of non-attorneys or “template” services promising cheap FDDs. Only a qualified franchise attorney can help you navigate the legal maze and protect your interests.
Obtaining cheap support is often very costly in the long run. If you can’t afford the assistance of legal counsel to franchise your business, you should strongly reconsider whether franchising is right for your business.
Legal compliance is an ongoing expense, and an emerging franchisor should plan to spend – at minimum – $20,000 to $30,000 in filing fees and legal expenses during their first year in operation. Fees will increase as the system matures.
Why You Need a Franchise Attorney ⚖️
Franchise law is complex, combining federal and state regulations. A skilled franchise attorney:
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Drafts your FDD and franchise agreement tailored to your business
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Ensures compliance with federal and state laws
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Helps you prepare for state registration filings
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Advises on disclosures, waiting periods, and negotiation rules
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Supports you with ongoing franchise legal needs
Partnering early with legal counsel saves time, money, and headaches. It also helps you build a strong, compliant franchise system from the start. Franchise responsibly!
What’s Next? ⏭️
Once your legal documents are drafted and ready, the next step is filing for state approval, where required. Some states require registration before you can offer or sell franchises there — and each state has its own rules and fees.
👉 To learn more about the state filing process and ongoing compliance, check out Part 3: Filing Your Franchise Disclosure Document and State Registrations.
Ready to Get Started? 🚀
If you’re thinking about franchising your business, don’t leave your legal documents to chance. Reach out to a franchise attorney early to develop your FDD and contracts the right way.
At Waldrop & Colvin, we specialize in franchise legal services tailored to your needs. Contact us today for a free consultation and learn how we can help you launch your franchise system on a solid legal foundation.
📞 Call us at (757) 651-3490
📧 Email: derek@thelawdept.com
🌐 Visit: thelawdept.com
Stay tuned for Part 3 in this series: Filing Your Franchise Disclosure Document and State Registrations!
Book a free video consult with a franchise attorney today!
