A franchise or business opportunity seller must give the prospective buyer a detailed disclosure document at least ten (10) business days before the buyer pays any money or legally commit himself to a purchase. The disclosure document includes:
" Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to the buyer;
" A fully audited financial statement of the seller;
" Background and experience of the business's key executives;
" Cost of starting and maintaining the business; and
" The responsibilities buyer and the seller will have to each other once the buyer has invested in the opportunity.
Franchise sellers also must tell a prospective buyer in writing the number and percentage of owners who have failed.
Nebraska Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule The Nebraska Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a comprehensive document designed to ensure that franchisors provide potential franchisees with all necessary information. This checklist includes various matters that must be disclosed to potential franchisees in compliance with the Federal Trade Commission's (FTC) Franchise and Business Opportunity Rule. This rule aims to protect prospective franchisees from fraudulent or misleading practices. Here are some key elements and aspects covered by the Nebraska Checklist: 1. Franchisor Information: The checklist emphasizes the importance of disclosing details about the franchisor's history, executives, litigation history, bankruptcy filings, and any criminal records that might be relevant. 2. Franchise Fee and Other Initial Payments: Franchise fees, deposits, and any other financial obligations required by the franchisor must be clearly outlined in the disclosure document. Any ongoing fees or royalties, along with the payment schedule, should also be stated. 3. Estimated Initial Investment: Franchisors are required to disclose a range of potential costs involved in starting a franchise, including equipment, inventory, real estate, licenses, permits, and any other necessary expenses. 4. Financing Options and Arrangements: If the franchisor offers financing or assistance in securing financing, the details including interest rates, loans, terms, and conditions must be disclosed. 5. Intellectual Property Rights: The checklist highlights the necessity of providing information regarding trademarks, copyrights, patents, and other intellectual property rights associated with the franchise. 6. Obligations and Restrictions: Franchisees must be informed about their obligations, such as purchasing goods and services solely from the franchisor or approved suppliers. Any restrictions on the use of trademarks, trade secrets, or other proprietary assets should also be disclosed. 7. Territory Restrictions and Exclusivity: If there are any territorial restrictions or exclusive rights granted to the franchisee, they must be clarified in the disclosure document. 8. Training and Support: Franchisors are obligated to provide details about the initial and ongoing training programs, as well as the support systems available to the franchisee. 9. Renewal, Termination, and Transfer: The checklist requires disclosure of the terms and conditions for franchise renewal, termination, and transfer. This includes any associated fees or restrictions and the process for handling disputes or disagreements. 10. Financial Performance Representations: If the franchisor provides any information or data on the actual or potential financial performance of the franchise, it must be clearly stated, along with any assumptions or qualifications. 11. Current and Former Franchisees: Franchisors should provide a list of current and former franchisees, including their contact information, to allow prospective franchisees to gather additional insights and perspectives. By diligently following the Nebraska Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule, franchisors can ensure transparency, build trust with potential franchisees, and comply with legal requirements.
