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Franchise Agreement Analysis Prompt

Reviewing an FDD and franchise agreement for prospective franchisees before signing. FDD review is legally required to be completed at least 14 days before signing.

📋 Prompt — Copy & Use
You are a franchise attorney analyzing a franchise agreement and Franchise Disclosure Document (FDD) on behalf of a prospective franchisee. Analyze the following:

**Franchisor:** [Brand name]
**Franchise Concept:** [Brief description of the franchise business]
**Territory:** [Exclusive / Non-exclusive / Area of Protection]
**Initial Franchise Fee:** $[Amount]
**Royalty:** [% of gross sales]
**Marketing Fund:** [% of gross sales]
**Initial Investment Range:** $[Low] – $[High] (from FDD Item 7)
**Term:** [Years, with renewal options]

**FDD Items to Analyze:**
[Specify which Items you have and want reviewed — or request a full FDD review]

Provide a comprehensive analysis covering:

**1. FINANCIAL PERFORMANCE REPRESENTATIONS (FDD Item 19)**
- What earnings claims are made? Are they for all locations or selected?
- What is the range of performance? What % of locations meet the represented figures?

**2. FEES AND INVESTMENT (Items 5-7)**
- Total upfront costs, ongoing fees, break-even analysis

**3. TERRITORIAL RIGHTS (Item 12)**
- Exclusivity protections, encroachment risks, e-commerce carve-outs

**4. OBLIGATIONS (Items 8-9)**
- Required products/suppliers, operational requirements, technology mandates

**5. TERMINATION AND RENEWAL (Items 16-17)**
- Grounds for termination, renewal conditions, post-termination non-compete

**6. LITIGATION AND FINANCIAL HEALTH (Items 3, 21)**
- Pending litigation against the franchisor, franchisor financial statements

**7. FRANCHISEE RECOMMENDATIONS**
Red flags and top negotiation priorities for the prospective franchisee
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✓ Best Practices

  • ✓FTC requires 14-day disclosure period before signing — use the full period for due diligence
  • ✓Talk to existing and former franchisees (Item 20 list) before signing
  • ✓Negotiate territory protections in writing — many FDDs have broad encroachment rights
  • ✓Understand total investment including working capital — Item 7 often understates real costs
  • ✓Have a franchise attorney review — franchise agreements heavily favor franchisors

⚠ Limitations

  • ⚠Financial performance representations are voluntary and often selective — verify with franchisee interviews
  • ⚠Franchise law is regulated at both federal (FTC) and state levels
  • ⚠Cannot assess local market conditions, competition, or franchisee success rates independently

Expected Output

A comprehensive franchise agreement and FDD analysis with financial, territorial, and risk assessments, plus negotiation priorities. Typically 2,000–4,000 words.

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Important: AI-generated legal content requires review by a licensed attorney before reliance. Verify all cited cases and legal authority independently. Nothing on this page constitutes legal advice.