What is a UFOC?
The UFOC was a response to some unethical conduct inside the 1960's and 1970's. Today franchises are regulated by legislation. The Federal Trade Commission (FTC) requires that sure info be disclosed to potential franchisees earlier than a contract power be signed or any cost made. The info is offered to the possible franchisee inside the type of a doc -- the UFOC.
The FTC requires franchisors in each state to supply a UFOC. In addition, some states require that the providing should first be permitted and registered by the state earlier than it may be promoted to potential franchise patrons. These states embody: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. Certain states, comparable Illinois and Minnesota, have much more rigorous necessities for the franchisor. This in flip affords higher safety for the possible franchisee.
What Does the UFOC Contain?
The UFOC comprises 23 objects of knowledge that have to be present as of the completion of the franchisor's most up-to-date commercial enterprise yr. If there's a materials change to the data inside the doc, the franchisor should make a revision (to be issued quarterly). The revealing doc have to tend to a potential franchisee at whichever happens earlier: the primary private assembly of franchisor and potential franchisee or ten working days previous to the execution of a contract or cash cost to the franchisor.
Standard UFOC Items:
1. The Franchisor, It's Predecessors And Affiliates
2. Business Experience
3. Litigation
4. Bankruptcy
5. Initial Franchise Fee
6. Other Fees
7. Initial Investment
8. Restrictions On Sources Of Products And Services
9. Franchisee's Obligations
10. Financing
11. Franchisor's Obligations
12. Territory
13. TradeSimon Marks
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 Outlets
21. Financial Statements
22. Contracts
23. Receipt
How Do I Use this Franchise Document?
The UFOC is just like a securities prospectus. It can present the data you should consider an organization or to revolve around potential gross revenue shoppers. An commissioned franchise firm, whether or not in public listed or in camera owned, should present this revealing doc.
The UFOC is Most worthy for potential franchisees, potential franchisors, franchisors, traders, medium of exchange corporations and suppliers to franchisees.
Description of Standard UFOC Items:
1. The franchisor and any predecessor. This part comprises historic background materials on the franchisor, additionally to any predecessors. It contains company and commerce name calling, tackle and principal office. An outline of the franchise ought to embody info comparable the character of the franchise and enterprise expertise of the franchisor, together with direct expertise in a franchise.
2. Identity and enterprise expertise of individuals related with the franchisor. All name calling of people having vital duties inside the operation of the enterprise or in assist providers offered to the franchisees have to be disclosed. Information stating the particular somebody;s present place inside the firm and enterprise expertise for the final 5 years can be enclosed. If a advertising and merchandising advisor or franchise dealer is concerned, the identical info is required.
3. Litigation historical past. Detailed info on prison, civil and body judicial proceedings involving any of the officers, house owners, administrators or key executives of the corporate is disclosed on this part if the allegations or proceedingss would concern the potential franchisee.
4. Bankrupcy historical past. The franchisor should disclose whether or not the corporate or any of its administrators or officers has filed for chapter throughout the previous 15 years. Information on every motion have to be enclosed.
5. Franchisee's preliminary franchise defrayment and/ or different preliminary cost. This part states the franchise defrayment and other preliminary finances to be made by the franchisee upon the execution of the franchise settlement. The part discloses the phrases of cost and costs, the usage of such monies, and whether or not the cost and costs are refundable in complete or partially.
6. Other charges. All different charges are detailed, together with royalties, promoting charges, coverage expences, coaching prices, audit and accounting value, consulting, leases, alteration prices and other charges cognate the franchise.
7. Franchisee's estimated preliminary funding. The estimated expenditures cognate the opening of a franchise are recounted with a excessive and low vary given for actual property, development, tools, fixtures, permits, renderings, signage, stock, working capital, and many others. This part ought to embody the identify of the particular somebody or individuals to whom cost is made for the previous, underneath what phrases and whether or not refund phrases apply.
8. Obligations of franchisee to buy or lease from hand-picked sources. Any necessities that the franchisee should buy items, providers, provides, tools or coverage for the opening and/or operation of the franchise from a franchisor-hand-picked supply have to be disclosed. Franchisors should additionally disclose in the event that they obtain earnings from the permitted suppliers on account of purchases by franchisees.
9. Obligations of franchisee to buy or lease in accordance with glasses or from permitted suppliers. An extra elaboration on provide sourcing, this part itemizes any seponsibility of the franchisee to buy or lease both from pre-approved suppliers or in response to franchisor glasses. Specifications for purchases will not be commonly enclosed, notwithstandin pricing, reductions and procedures to have suppliers permitted by the franchisor are often cited.
10. Financing preparations. Any funding applications which power be supplied both by the franchisor or its designates are delineate on this part.
11. Obligations of franchisor: different supervision, help or providers. This part describes the preliminary and on-going providers and assist of the franchisor. Often it's divided into two elements -- service obligations of the franchisor and providers which may be carried out by the franchisor. Some forms of service and assist delineate are coaching, promoting materials, internet site choice, market analysis and pc providers.
12. Territorial rights. If the franchisor grants unique rights, the territory and the rights can be delineate on this part. Any situations that the franchisee should meet to retain these rights, additionally to the correct of the franchisor, are additionally disclosed.
13. TradeSimon Marks, service Simon Marks, commerce name calling, emblem varieties and industrial sumbols. The franchisor should disclose info concerning the registration of logos, service Simon Marks, commerce name calling, emblem varieties and industrial sumbols with the U.S. Patent and Trademark Office. Also enclosed is a listing of states and nations through which the Simon Marks are registered, additionally to any limitations obligatory on the franchisee for the usage of these Simon Marks.
14. Patents and copyrights. This revealing lists any patents and copyrights which may be concerned inside the operation of the franchise and which will cowl commerce secrets and techniques and confidential info.
15. Obligation of the franchisee to participate inside the operation of the franchise enterprise. If the franchisor requires the lively participation of the franchisee inside the operation of the enterprise, it have to be so acknowledged. Terms and situations of the participation ought to be outlined.
16. Restrictions on items and providers supplied by franchisee. Any limits or exclusions on items and providers that may be commerialized by the franchisee are acknowledged on this part.
17. Renewal, termination, repurchase, modification and project of the franchise settlement and associated info. This, the longest and most advanced part, covers the franchisor's necessities and the franchisee's choices when a franchise is to be revived, terminated, repurchased, modified or assigned.
18. Arrangements with public figures. If the franchisor has any compensation or endorsement program with a public determine, it have to be disclosed. If the general public determine is concerned inside the possession or the administration of the franchise, it should even be disclosed.
19. Actual, common, projected or forecasted franchise gross revenue, earnings or earnings. There is an possibility right here. Some franchisors will state that they don't render the precise, common, projected or forecasted gross revenue and earnings to potential franchisees. If a franchisor does make a declare of gross revenue, earnings or earnings, then the franchisor should whole describe the scheme by which the declare is made.
20. Information concerning franchises of the franchisor. The franchisor gives a abstract of franchises bought, the measure really working, the variety of agreements signed notwithstandin not in operation, and the variety of company-owned items. Information on the variety of franchises terminated or not revived with the causes for termination or non-renewal for the previous three years can be required.
21. Financial statements. In this part there's a full set of economic statements, often a stability sheet for the previous commercial enterprise yr, an earnings assertion and modifications inside the medium of exchange place of the franchisor for the latest three commercial enterprise years. Most states require audited statements.
22. Franchise settlement and associated paperwork. A replication of the franchise doc and other doc to be signed by the franchisee have to be enclosed as displays.
23. Acknowledgement of receipt by a potential franchise. Prospective franchisees are required to signal an acknowledgment {that a} revealing doc was obtained from the franchisor.
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