FDD Item 15
Obligation to Participate in the Actual Operation of the Franchise
FDD Item 15 discloses whether the franchisee (or, if a corporation, a designated owner) is required to personally participate in the operation of the franchise. If participation is required, the item specifies the nature and extent.
Why It Matters
Item 15 determines whether the franchise is an owner-operator model or whether semi-absentee/passive ownership is permitted. The distinction has major implications for the buyer's lifestyle, hiring needs, and unit economics.
What Item 15 Must Disclose
- Whether personal on-site supervision by the franchisee is required
- If a corporate franchisee, whether a designated principal must operate the business
- The nature and extent of required participation (full-time, part-time, supervisory)
- Whether the operator's role can be delegated to a manager
What to Look For
- Full-time owner-operator requirements — limits absentee ownership and multi-unit scaling
- 'Designated principal' language that restricts who in a corporate buyer can act as operator
- Penalties or termination triggers for failure to maintain required operator presence