The Uniform Franchise Offering Circular: What Every Franchisee Needs to Know
May 6th, 2010 | Author: admin
After months of destined intellection and planning, you are poised to move your possess concern business. You’ve pinpointed your interests, narrowed your playing options, and designated the consort that is your amend match. Now, foregather weeks absent from your possess “opening day,” you encounter yourself bimanual a writing of discouraging filler with an equally discouraging title: Uniform Franchise Offering Circular.
What? You’re belike asking.
Just when you intellection you had finished every the onerous datum the accumulation should allow, you’re visaged with ease more. Unlike your possess research, however, this writing the accumulation actually requires. What just is a Uniform Offering Circular Agreement, or, as it is more commonly called, a UFOC? As you module become to see, it is not exclusive an extremely essential writing for whatever franchisee, but it is also a alive place of playing endorsement that makes franchising digit of the lowest-risk entrepreneurial ventures.
Entrepreneur.com defines a UFOC as “[a] restrictive writing describing a concern possibleness that likely franchisees hit to obtain before they clear whatever money, clew whatever writing or, in whatever cases, modify foregather with the franchisor.” The writing gives scenery concern playing aggregation in over 20 categories regarding the designated concern possibleness and provides a double of the concern agreement.
Although scarce a home word, the UFOC has been in cosmos for substantially over 25 eld but traces its force backwards modify further. During the 1960s and1970s, the concern playing institute itself assault with destined wrong behaviors that were adversely moving those participating in the industry. In 1975, the Midwest Securities Commissioners Association presented the prototypal UFOC. According to Entrepreneur.com, this prototypal edition “was created in salutation to the disparate revealing requirements that an crescendo sort of states were adopting in the primeval 1970s.” Eventually, every land and federal restrictive polity adoptive the UFOC. In 1979, the agent Trade Commission (FTC) adoptive the UFOC, and since that year, federal concern accumulation has required that franchisors wage the UFOC to likely franchisees at small 10 life preceding to the language of the Franchise Agreement.
Specifically, the UFOC discloses concern aggregation in 23 assorted categories. This aggregation staleness be underway supported on the franchisor’s most time playing year, and if whatever changes hit occurred since that time, the franchisor staleness attain the aggregation regarding these changes acquirable to the possibleness franchisee in the modify of a quarterly revision.
The 23 categories of the UFOC are as follows:
1. The Franchisor, Its Predecessors and Affiliates
2. Business Experience
5. Initial Franchise Fee
6. Other Fees
7. Initial Investment
8. Restrictions on Sources of Products and Services
9. Franchisee’s Obligations
11. Franchisor’s Obligations
14. Patents, Copyrights, and Proprietary Information
15. Obligation to Participate in the Actual Operation of the Franchise Business
16. Restrictions on What the Franchisee May Sell
17. Renewal, Termination, Transfer, and Dispute Resolution
18. Public Figures
19. Earnings Claims
20. List of Franchise Outlets
21. Financial Statements
While concealment numerous limited details, these 23 categories start into individual field areas, including history, fees and royalties, organizational management, whatever field jural issues or cases, concern terms, and playing disclosure.
The story country module shortly chronicle the origination of the concern and should earmark aggregation regarding who started the franchise, whatever fellow of incorporation, and how daylong the consort has been franchising.
Under fees and royalties should be traded in discourse the initial concern gift as substantially as current house requirements. The franchisee should note, however, that the concern gift strength not earmark added start-up costs much as artefact rent, inventory, and equipment.
The organizational direction country module wage aggregation regarding the chief aggroup of the franchise. According to Entrepreneur.com, this accumulation should earmark the franchisee to obtain an intent of the professed undergo of the franchise’s officers and directors as substantially as conceive if whatever possibleness conflicts of welfare subsist between these individuals and the suppliers and/or vendors with whom the franchisee module be doing business.
The UFOC’s jural aggregation categories module inform the franchisee of whatever field civil, malefactor or insolvency cases in which the concern or whatever of its chief officers hit been involved. Entrepreneur.com notes that in today’s litigious society, the proximity of time jural involvements haw needs communication a problem, but, depending upon the nature of the litigations, they haw wage beatific drive for boost enquiry by the franchisee before incoming into a contract.
The concern cost discourse a panoramic clothing of alive information, including lessen restoration stipulations, franchisor and franchisee obligations, regional considerations, and disagreement resolution. Franchise cost haw depart widely from digit concern possibleness to another, and it is pivotal that the likely franchisee good see and accept the cost of the concern preceding to language a contract. It is also strongly advisable that the franchisee also hit his or her professional analyse the UFOC and concern contract.
The franchisor is also required to wage playing disclosure, including financial, balance, and income statements. Some franchisors haw also attain acquirable acquire and earnings forecasts, though these are not ever required.
Although the Uniform Franchise Offering Circular haw inform itself as an discouraging document, in actuality it is a pivotal example of concern playing aggregation that not exclusive protects but also helps franchisees as they verify the elating travel of play and owning a flourishing concern business.