Most people don’t lose money in franchising because they chose the wrong brand.
They lose money because they didn’t understand what they were signing. They trusted the sales conversation instead of the paperwork.
If you’re looking at franchise opportunities right now, there’s one document that can protect you from a very expensive mistake: the Franchise Disclosure Document (FDD). I review and update ours every year because it forces the franchisor to lay everything on the table.
This article is based on a recent Courtside Conversation episode by Little Boomers Basketball founder, Emile Koorey.
Watch the Full Breakdown
The Franchise Disclosure Document Is the One That Tells the Truth
People get excited when they’re close to buying a franchise.
They start imagining the launch. The freedom. The new chapter.
That’s exactly when mistakes happen.
The FDD is the document that brings you back to reality. It’s designed to help you make an informed decision before you sign anything.
It’s also not short. Ours is around 150 pages.
So instead of telling you to “read every word” and leaving you there, I’m going to walk you through the seven sections you must review. These are the parts that matter most when you’re trying to protect yourself.
Section 1: The Opening Pages Are a Warning Label
Right at the start, the disclosure document sets the tone.
It’s basically telling you:
This is serious
A franchise is still a business
A franchise can fail
You should read this with professional advice
That first section isn’t there for fluff.
It’s there so you don’t treat a franchise agreement like a gym membership. This is a business commitment.
If a person skips this mindset piece, they usually rush the rest.
Section 2: The Fees Table Shows What You’ll Really Pay
This is one of the most important pages in the entire document.
There’s usually a table that lists:
The initial fees
The ongoing fees
When they’re charged
What they’re for
What can change over time
In our case, the table includes things like:
The initial franchise fee
The cost of an initial advertising campaign
Checks and compliance items like working with children checks
Court hire costs
Royalty fee structure
Annual admin fee
Training and onboarding costs
Here’s the key point:
If you don’t understand a fee, ask about it before you sign.
Not after you sign.
Most franchise disputes start with, “I didn’t know that fee existed.”
The fees were usually disclosed. The franchisee just didn’t read them properly.
If you want a clearer understanding of royalty fees and how they work across franchise models, read Royalty Fees Explained: What Franchise Owners Really Pay.
Section 3: Territory Rules Can Make or Break Your Business
In most franchises, you’re buying the right to operate in a territory.
So you need to know:
Is your territory exclusive?
Can another franchisee sell in your area?
Can head office sell directly in your area?
Are you limited to one site, or can you expand?
For Little Boomers, our territories are exclusive. One franchisee per area.
But don’t assume that’s how every franchise works.
Some brands use “non-exclusive” territories, which means multiple operators can overlap.
If you don’t check this section, you could unknowingly buy into competition.
Section 4: Can the Franchisor Change the Agreement Later?
This part matters more than most people realise.
Your franchise agreement is a living system.
Over time, the franchisor may improve programs, add new products, update branding, or change operational standards.
The disclosure document should explain:
Whether changes can be made
When changes can be made
What the franchisor is allowed to update
Whether the changes must improve the system
This is often referred to as “unilateral variation.”
In simple terms:
It answers the question, “Can they change the rules after I sign?”
It’s not always a bad thing if it’s used properly. Franchises need to evolve.
But you should know what the rules are before you commit.
Section 5: What Happens If You Need to Exit Early?
Nobody buys a franchise planning to exit.
But smart buyers still check the exit clauses.
This section typically outlines:
What can end the agreement early
Serious breaches that can terminate the agreement
What happens if the franchisee becomes insolvent
Compliance issues that trigger termination
It’s not there to scare you.
It’s there so you understand the worst-case scenarios.
A mature franchise buyer doesn’t just ask, “How do I win?”
They also ask, “What happens if things go wrong?”
Section 6: Financial Details and Earnings Claims
This one catches people off guard.
Many franchise buyers ask:
“Can you send me financials?”
“How much do franchisees make?”
“Can I see profit and loss statements?”
In the disclosure document, there’s usually a section that explains whether the franchisor discloses earnings information.
In our case, we don’t publish individual franchisee earnings or private P&Ls. That’s franchisee-owned information.
What we can do is provide a snapshot-style breakdown using realistic business inputs, so you can understand:
Typical expenses
Typical margins
The relationship between enrolments, costs, and profit
But the bigger point is this:
If a franchisor makes big financial promises verbally, but the disclosure document says they don’t provide earnings information, that’s a red flag.
Trust what’s written.
Not what was said in a sales call.
Section 7: The Cooling-Off Period
This is your “cold feet” window.
After you sign the franchise agreement, you usually have a short period where you can change your mind.
Commonly, that’s 14 days.
During that time:
You may be able to terminate the agreement
You may receive your money back
The franchisor may deduct reasonable costs already incurred (like legal preparation)
This is not a loophole to sign casually.
It’s a safeguard in case something serious happens.
Still, you need to know it exists.
Common Mistakes People Make
If you’re comparing franchise opportunities, here are the mistakes that cost people the most:
Skipping the FDD because it’s “too long”
Assuming the sales conversation is the full truth
Not checking the fees table and ongoing charges
Not understanding territory rules until it’s too late
Ignoring exit clauses because “that won’t happen to me”
Believing earnings talk without written backing
Signing first, asking questions later
The FDD doesn’t stop you from buying a franchise.
It stops you from buying the wrong franchise for you.
Key Takeaways
The Franchise Disclosure Document is the most important document you’ll read before buying a franchise.
It forces the franchisor to disclose the “full picture,” not just the highlights.
The fees table is where surprises usually hide.
Territory rules can protect you or expose you to competition.
You must understand how the agreement can change over time.
Always check exit conditions and cooling-off rights.
If it’s not written, don’t treat it as real.
FAQ: Common Questions People Ask
What is a Franchise Disclosure Document (FDD) in simple terms?
It’s the document that tells you what the franchise really is, including fees, rules, risks, and the structure of the network. It exists to help you make an informed decision before signing.
Do I need a lawyer to review the FDD?
Yes, you should. A good franchise lawyer can help you understand what’s normal, what’s risky, and what questions you should ask before you commit.
Why don’t franchisors just explain this on a call?
They can explain parts of it, but the written document is what matters legally. Conversations are easy to forget or misinterpret. The FDD is the official record.
What section should I look at first?
Start with the fees table and territory rules. Those two sections usually reveal the biggest long-term costs and limitations.
If a franchisor promises something verbally, should I trust it?
Only if it’s supported in writing. If it’s not in the documents, treat it as non-binding and ask for clarity before you sign.
Keen to learn more?
If you want a clearer picture of what it actually looks like to run a Little Boomers Basketball franchise, you can use our Franchise Profit Calculator to understand the moving parts of the business model in a simple way.
It’s built to help serious buyers think through numbers calmly, without hype.
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