The FDD is required to be written in “plain English”. What exactly does plain English mean? Section 436.1 of the FTC’s Franchise Rule (16 C.F.R. §436.1(o)) states that “Plain English means the organization of information and language usage understandable by a person unfamiliar with the franchise business. It incorporates short sentences; definite, concrete, everyday language; active voice; and tabular presentation of information, where possible. It avoids legal jargon, highly technical business terms, and multiple negatives.” As you can see, plain English is the opposite of legalese.
With that said, I am shocked how often we encounter FDDs written by attorneys using anything but “plain English”. Long run-on sentences with many convoluted technical terms, passive tense and multiple negatives, are not unusual in certain FDDs. My advice to my clients who are prospective franchisees is to read through the FDD, it is “supposed” to be written in plain English. Unfortunately, often this is completely impossible for the average person to do without legal knowledge. The client must then rely on counsel to not only interpret the franchise agreement (which can be written in legalese), but on the 23 disclosure items as well. That is not the intent of the FTC in promulgating the Franchise Rule requiring plain English.
The purpose of the FDD is to provide the prospective franchisee with knowledge/disclosure about the franchise he or she is buying. As the FTC rule states, the language should be understandable by a person unfamiliar with the franchise business. I would add that the language should be understandable by a person who is unfamiliar with legalese and other technical language. As stated in the Franchise Rule, it should use everyday language. Unfortunately certain attorneys and certain franchise systems have failed to understand the requirements of the Rule regarding plain English so that reading the 23 items of the FDD becomes next to impossible for the average person.