How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
The disclosure is one of the most important documents you will receive prior to committing to a Canadian franchise. It's only natural to feel overwhelmed when you're presented with a huge document as a prospective franchisee, and many people simply flip through it, looking at some charts and highlights without reading the document in detail. This, however, is a huge mistake. Like the franchise agreement, you need to fully understand the disclosure before you decide to invest in a franchise. Keep reading to learn why that disclosure document you just received rivals "War and Peace" in length.
With age comes wisdom
Given the length of some disclosure documents, it's only fair for franchisees to wonder if everything include is really necessary. Some franchisors do use short-form versions of this document because they have a shorter-form franchise agreement. However, a more established franchise is likely to have a longer disclosure because their agreement has been modified to add provisions that cover issues they've encountered over time.
The devil's in the details
Other agreements and documents franchisees have to sign may be attached to the disclosure, increasing its length. Franchisors also have to list all their locations and franchisee contact information, and this list naturally gets longer as the brand expands. Some franchisors attach their financial statements to the disclosure, and these may be pages and pages long.
This is where size matters
When you do a complete read of the disclosure, you will have insight into the franchisor's rules and what they are trying to protect or cover. A longer document isn't necessarily harder to interpret than a short-form one. In fact, a shorter document can be tougher to parse because they tend to have general, broad statements that can make it trickier for you to determine the franchisor's real intention. Should you end up in a dispute with your franchisor one day, a court or arbitrator will have a tougher time interpreting broader statements, too.
Keep in mind that while style may vary in disclosure documents, the content is what matters. Regardless of the length, you will need to invest sufficient time in reading through the entire document. If you are unclear about anything in that document, seek clarification from the franchisor and your attorney. The more informed you are before you make a decision about an investment, the better off you'll be.
