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What's in the disclosure statement (or circular offering)
The circular offering (UFOC) requires data and information from the franchiser in over 20 categories. Cover pages of the offering circular must spell out any risk factors in bold type, such as what happens in the event of disputes (lawsuits or arbitration, and where the dispute may be resolved); costs; the effective date of the offering; and the state law controlling the agreement. They must be updated at least annually, or when there is a material change to the information contained in the document, quarterly.
The key items of the disclosure statement include:
Background information on the franchiser and any predecessor;
The identity and business background of key personnel affiliated with the franchiser or franchise brokers;
Any prior litigation actions;
Any bankruptcy history;
Franchisee's initial franchise fee or other initial payment to begin the operation;
Other fees, such as service fees, training fees, advertising fees, royalties;
Any commitment of a franchisee to purchase or lease from designated sources;
Franchisee's principal obligations;
Obligations of the franchiser; supervision; assistance; services;
Exclusive area or territory;
Trademarks, service marks, trade names, logos, and commercial symbols;
Patents and copyrights;
Any commitment of the franchisee to personally participate in the actual operation of the franchise business;
Renewal, termination, transfer and dispute resolution;
Statistical information and listing of other existing franchisees; and
Audited financial statements. |
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