This section is pretty straightforward and one of the key factors that makes your business a franchise. Our guidance is that you’re always going to dictate what your franchisees can and can’t sell. Even if they want to sell something atypical, we are going to insist they get your permission first and that you have the right at any time to revoke that permission. Only by controlling what the franchise can and can’t sell can you maintain brand standards over the long term.
Sample Item 16
ITEM 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
We require you to offer and sell only those goods and services that we have approved (see Item 9).
You must offer all goods and services that we designate as required for all franchisees. These required services are muffler inspection, repair, and replacement. Parts, supplies, and equipment used in your Belmont Muffler business must be approved by us (see Item 8).
We have the right to add additional authorized services that a franchisee is required to offer.
There are no limits on our right to do so except that the investment required of a franchisee for equipment, supplies, and initial inventory will not exceed $5,000 per year.
We also designate some services as optional for qualified franchisees. Current optional services are brake inspection, repair, and replacement; tire rotation, wheel balancing and alignment; and rustproofing. To offer optional goods or services, you must be in substantial compliance with all material obligations under the franchise agreement. In addition, we may require you to comply with other requirements, such as training, marketing, or insurance, before we will allow you to offer certain optional services.
This is a sample section from a fictional FDD for Belmont Muffler Shops that was prepared by the Federal Trade Commission as a compliance guide for franchisors preparing their FDD. These are used to provide an idea of what these items may look like in an FDD, but keep in mind, your FDD will most likely vary significantly from these examples.
