Item 17 of the franchise disclosure document

Item 17 of the franchise disclosure document summarizes renewal, termination, cure, non-compete and dispute terms. It points to the contract and does not replace it.

Item 17 is the part of the franchise disclosure document (FDD) that summarizes the terms most people look for after a default notice: when the franchisor can end the deal, what counts as a default, and where disputes get decided. The FDD is the document the franchisor had to give you before you signed, under the FTC Franchise Rule.

What the table lists

Under 16 CFR 436.5(q), the title is "Renewal, Termination, Transfer, and Dispute Resolution." The franchisor presents a table headed "The Franchise Relationship" that points to the sections of the franchise agreement. Among its rows are:

  • Termination by the franchisor without cause, and with cause.
  • "Cause" defined, with separate rows for curable defaults and non-curable defaults.
  • The franchisee's obligations on termination or non-renewal.
  • Non-competition covenants after the franchise is terminated or expires.
  • Dispute resolution by arbitration or mediation.
  • Choice of forum and choice of law.

Why it helps and where it stops

The rule has the franchisor describe each contractual provision briefly, and the lead-in to the table tells readers to read the provisions in the attached agreements. So Item 17 is a map. If the table says a default is curable and gives a section number, the section itself holds the wording and any day count. The notice you received and the franchise agreement control your dates, not a summary.

The FTC's consumer guide says Item 17 states whether you can go to court or must use arbitration, and that it covers restrictions after termination. The FTC guide says such restrictions typically stop a former franchisee from running a competing business within a specified distance, and may last as long as three years. That is the FTC's general description, not a statement of what your agreement says or what a court would enforce. See post-termination non-competes.

Related items in the FDD

Item 10, on financing, requires disclosure of whether a person other than the franchisee must personally guarantee franchisor-offered financing, and of the franchisee's potential liabilities upon default, including any accelerated obligation to pay the entire amount due. Item 17 is the main place for termination terms, but Item 10 can matter when money is owed. See personal guaranty and franchise termination.

Item 17 summarizes; it is not the contract. If the summary and the signed agreement ever read differently, the agreement is the document you will be asked about, and the table is a starting point for finding the right section. A lawyer licensed in your state can compare the Item 17 table against the signed agreement and say what any difference means.

Using it after a notice

Pull the FDD you received, ideally the version dated closest to when you signed, and look at rows for with-cause termination, curable and non-curable defaults, arbitration or mediation, forum and law. Then read the matching sections of the agreement. The documents to gather page lists the rest of what to collect. For forum and arbitration, see forum-selection clauses.

Where this came from

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