FDD Item 3
Litigation
FDD Item 3 discloses pending and concluded litigation involving the franchisor, its predecessors, and certain executives over a defined lookback window. It covers civil, criminal, and material administrative actions.
Why It Matters
Item 3 is the systematic record of legal disputes involving the franchisor. Reading Item 3 carefully is the single highest-yield section for understanding how the franchisor behaves under stress, how franchisees experience the relationship, and what kinds of disputes recur.
What Item 3 Must Disclose
- Pending administrative, criminal, and material civil actions against the franchisor
- Actions involving alleged violation of franchise, antitrust, or securities law
- Concluded material civil actions in the past 10 fiscal years
- Currently effective injunctive or restrictive orders
- Litigation against listed Item 2 executives, when material
What to Look For
- Multiple franchisee-vs-franchisor cases on similar issues — patterns matter more than one-off disputes
- Recent regulatory actions by FTC or state franchise regulators
- Trademark-defense litigation that's not patterned franchisee litigation is generally fine
Go Deeper
FDD Item 3 Decoded: How to Pull and Weight Franchisor Litigation in 2026
Item 3 of the FDD discloses franchisor litigation history — but the disclosure is incomplete and often misleading without independent research. Here's how to pull the full litigation picture using PACER, state court databases, and Item 3 cross-referencing techniques.