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.
Title: Arizona Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule Introduction: When considering entering into a franchising agreement, it is crucial for both franchisors and prospective franchisees to be aware of the legal obligations and requirements set forth by the Federal Trade Commission (FTC) Franchise and Business Opportunity Rule. In Arizona, potential franchisees must adhere to a detailed checklist of matters that must be disclosed, ensuring transparency and protecting the rights of all parties involved. This article will provide insightful information on the different types of Arizona Checklists that must be disclosed to prospective franchisees in accordance with the FTC Franchise and Business Opportunity Rule. 1. Disclosure Document Checklist: The Disclosure Document Checklist serves as the foundation for transparency between franchisors and franchisees. This comprehensive checklist ensures that all required elements by the FTC Franchise and Business Opportunity Rule are disclosed to prospective franchisees. It includes information on the franchisor's background, litigation history, fees, initial investment, authorized and prohibited uses of the franchise, trademarks, and more. Each item disclosed in the checklist gives potential franchisees a clear understanding of the franchisor's history, financials, and business operations. 2. Financial Performance Representation Checklist: Franchisors are required to disclose their financial performance representations, commonly known as earnings claims or financial projections. The Financial Performance Representation Checklist emphasizes the transparency and accuracy of these claims. It includes information on the basis and assumptions of the representations, supporting documentation, and limitations associated with these claims. By adhering to this checklist, potential franchisees gain a realistic expectation of the profit potential of the franchise. 3. Territory Checklist: Franchisors offering exclusive or protected territories in Arizona must provide a Territory Checklist. This checklist outlines the terms and conditions associated with the franchise's geographical boundaries. Franchisors must disclose whether the territory is exclusive or non-exclusive, along with any restrictions or rights that govern the territory. This checklist ensures that potential franchisees understand the extent of their territorial rights and the potential impact on their business. 4. Renewal and Termination Checklist: The Renewal and Termination Checklist covers the terms and conditions regarding the renewal or termination of the franchise agreement. Franchisors must disclose the duration of the initial franchise term, any renewal options available, conditions for renewal, and the process and fees associated with termination. This checklist acts as a safeguard for prospective franchisees, informing them of their rights and obligations when it comes to renewing or terminating the franchise agreement. Conclusion: The Arizona Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a crucial tool that ensures transparency, protects franchisee rights, and promotes informed decision-making. By adhering to various checklists, potential franchisees can make fully informed choices and evaluate whether a franchise opportunity aligns with their goals and expectations. Understanding these checklists is vital for both franchisors and prospective franchisees to establish a fair and mutually beneficial franchising relationship.
