Which of the following statements is/are TRUE about a Franchise Disclosure Document (FDD)? Group of answer...

Which of the following statements is/are TRUE about a Franchise Disclosure Document (FDD)?

Group of answer choices

Federal law requires the franchisor to give a potential franchisee an FDD.

The purpose of the FDD is to guarantee that the franchisor’s business model is sound.

A franchisee can bring suit under federal law against a franchisor who has failed to provide an FDD prior to purchase of the franchise.

A and B only

A, B and C

Solutions

Expert Solution

Federal law requires the franchisor to give a potential franchisee an FDD: TRUE

A Franchise Disclosure Document (FDD) is basically a legal disclosure document. The document must be provided to a potential franchisee who is about to make a significant investment in a U.S. franchise.

FDD is not a guarantee, it is rather a pre sale disclosure document which is necessary to make an informed decision prior to entering into a franchise relationship. It provides them with information essential to make an assessment of potential benefits and risks, to make meaningful comparisons, etc. As per the Franchise Rule, 23 areas of disclosure are specified which include items like Business Experience; Litigation; Bankruptcy;Financing; etc.

In case of failure to provide an FDD and other violations, the FTC ( Federal Trade Commission) Rule does not provide franchisees with a private cause of action. Instead, the FTC is charged with prosecuting violations of the FTC Rule.

keosha answered 3 hours ago

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