Do I Really Have to Sign the Franchise Disclosure Document Item 23?

02.11.23 09:33 PM By Stacey Riska

We are so excited because we finally reached the review of the final item of the Franchise Disclosure Document (FDD). If you've been hanging in there with us, we know this is a lot of information, but it's worth understanding the FDD and what you are agreeing to. If you've reviewed this information and looked this over in-depth and learned about the different items of the FDD, then you are going to most likely make a much better decision about your perfect choice of a franchise

Item 23 - The Receipt

What this item is about, in general, is receipt of the Franchise Disclosure Document, and this particular item requires your signature. Now, we want to explain this to you first. The signature does not bind you in any way at this point in time for acquiring this franchise. All it is is a signature that says you've received the FDD. What's important about this is that it's signed and dated. 

Once it's signed and dated, the franchisor has to wait 14 days for you to make a decision. Regardless if you read it, signed it, and decided you wanted to go forward tomorrow, they still have to give you a 14-day period, and this is calendar days, for you to read the document before they can reach back out to you to sign any further agreements or move forward. What's important about this is that if you do read this agreement and you find any false statements or misleading statements or anything like that, there's going to be a disclosure in there that says you should contact the Federal Trade Commission (FTC). Now, with that, that's an overview of the receipt Item 23. 

What is So Important About Item 23?

The main point is that many people who see this Item sometimes don't want to sign anything at this point. Is this binding? I just got a 600-page document. I haven't even read it yet. However, the franchise must have a signed receipt that you received the Franchise Disclosure Document. That's why it's called a receipt showing that you the franchise that you have received it. That's all you're signing for, that you received it. 

Here's a simple way to think of Item 23. When you invest in different types of investments many times they will give you a disclosure. They have to disclose pertinent investment information about the background of whatever you're investing in. Generally, they don't make you sign per se that you've received it. 

So it’s the same thing with a franchise except they must have a receipt that you received the FDD that is signed and dated so that starts the clock that gives you 14 calendar days at a minimum to review it. During this period the franchise can then not contact you, even if two days later you're just gung-ho, ready to go, here's my check, I'm ready. The franchise cannot accept it.

The franchise is legally bound to wait a minimum of 14 days which is generally referred to as the “quiet period”.  This gives you time to really review the FDD without any contact from the franchisor. Then you can move on, do your final due diligence and become a franchise owner in the business of your dreams.

We know that the Franchise Disclosure Document (FDD) is NOT the most exciting topic in the world, but very important to the process of acquiring a franchise. This one is the final Item of the FDD and it's the most important one. Again, we stress, It's not a legally binding document that you have to acquire the franchise.  If you're uncomfortable in any way signing Item 23, the receipt, you should contact a legal professional to get additional advice on this and anything else about this document that you might be unsure about. 

The Franchise Disclosure Document (FDD) can seem big and overwhelming, but think about it, in no other business model do we know that you get such robust in-depth factual information to help you make an informed decision. Please know that we are here as your expert franchise matchmakers to help you along the franchise roadmap so that you can make an informed decision and hopefully find the business that is a really great fit for you. Please feel to reach out anytime.

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 Author Bio

I’m Stacey Riska aka “Small Business Stacey”, your franchise placement specialist. I help aspiring business owners find the PERFECT franchise so they can get to the next level in life and business.
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