FDD Item 16
Restrictions on What the Franchisee May Sell
FDD Item 16 discloses restrictions on the goods and services the franchisee may offer, including any required offerings, prohibited products, customer restrictions, and obligations to offer only approved items.
Why It Matters
Item 16 defines the franchisee's product and service line. It prevents franchisees from drifting from the brand's positioning and ensures system-wide consistency. The restrictions also limit the franchisee's ability to respond to local market opportunities outside the approved scope.
What Item 16 Must Disclose
- Required goods and services the franchisee must offer
- Prohibited goods and services the franchisee may not offer
- Restrictions on the customers the franchisee may serve
- Process for adding or modifying approved offerings
What to Look For
- Very narrow approved-product lists that limit operational flexibility
- Customer restrictions that prevent serving high-value segments (B2B, government, online)
- Unilateral franchisor right to add or remove required products