Unlock the Power of eSignature Legality in Franchise Contracts

How to eSign a document: eSignature lawfulness for Franchise Contract

the fdd and the franchise agreement are two of the most important documents in the franchise world so what's the difference between them [Music] whether you're buying a franchise franchising your business selling franchises you know that two of the most important documents you're going to be dealing with is the fdd and the franchise agreement the difference the fdd is a pre-sales disclosure document it's designed to inform prospective franchise buyers about the franchise opportunity they may be investing in while the franchise agreement that's the legal agreement that creates the relationship between franchisor and franchisee so the fdd the franchise disclosure document it's required by federal law franchisors need to disclose their franchise disclosure document to prospective franchise buyers before they sign a franchise agreement or before they pay any fees within the franchise disclosure document should be a copy of the franchise agreement and within the franchise disclosure document should be a summary of certain legal rights and relationships within the franchise agreement so the fdd it's designed to educate inform franchise buyers about the franchise opportunity and about the legal relationship between them as a franchisor and franchisee where's the franchise agreement itself that's the legal agreement that's what creates rights for franchisees obligations franchisor franchisee relationship so we'll dive into this a little more fdd under the rules by the federal trade commission and the franchise laws 14 days before a franchisee signs a franchise agreement or pays a franchise fee the franchisor should have and is required to disclose its franchise disclosure document the purpose of the fdd is to educate and inform prospective franchise buyers it's like a prospectus before someone buys a stock or security it's designed to inform franchise buyers and it contains detailed information about the franchise opportunity so what's some examples of the information contained in the fdd well the fdd itself has 23 sections they're called items and it's broken down between who the franchisor is experience of the franchisors management team whether or not there's litigation or bankruptcy history what's the initial phase that a franchise buyer has to pay that initial franchise fee what are the ongoing legal fees and other information about the franchisor including financial statements what the fdd also does well it attaches a copy of the franchisor's standard form franchise agreement and even in items 9 of the fdd and item 17 of the fdd includes a legal summary a breakdown summary of the franchisor's obligations to the franchise buyer what are the things the franchisor is going to do before franchisee opens during opening what type of support and obligations are they going to provide their franchisees after the franchise business is open and in item 17 of the fdd franchisors provide a detailed disclosure in a grid format of legal obligations and relationship between franchisor and franchisee for example how long the term of a franchise agreement is whether or not the franchisee is a right to renew circumstances where a franchisor can terminate so the fdd and the franchise agreement they go hand in hand the fdd provides information about the franchise agreement and the franchise agreement itself that's your legal agreement within a franchise agreement it's going to be signed between the franchisee and the franchisor it creates the obligation between the parties so within the franchise agreement a franchisor is awarding a franchise providing typically a franchisee with a designated territory where they're going to operate and ongoing obligations like a franchisee's obligation to pay royalties to spend minimum amounts on marketing to follow the franchisor's standards and also obligations by the franchisor itself in terms of the ongoing support they're going to provide so fdd it's a disclosure it's not a legal agreement it's required by federal and state franchise laws it's designed to inform franchisees about what's in their franchise agreement and other information that's relevant to a franchise buyer about a franchise investment there's other legal agreements they'll be attached to an fdd again they're just exhibits to disclose to you as a franchise buyer the types of agreements you may need to sign so now in the franchising process a franchisor will disclose typically electronically the fdd to a franchise buyer someone who's interested in buying a franchise it's disclosed not less than 14 days before they sign a franchise agreement the franchisee franchise buyer should be reviewing the fdd everything legal obligations estimated start-up expenses whether or not the franchisor makes financial performance representations and a bunch of other items they should be reviewing that with their franchise lawyer when it comes time to entering into or buying a franchise well that means you're signing the franchise agreement yourselves franchisor franchisee you're paying the initial fee and you're building a franchise relationship so the difference between a franchise agreement and an fdd the fdd is a legal disclosure document the franchise agreement is your legal agreement or the legal agreement between franchisor and franchisee when people negotiate the terms of a franchise relationship they're negotiating the terms of the franchise agreement you