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.
California Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is an essential document that provides vital information to prospective franchisees in California. This checklist ensures compliance with the Federal Trade Commission (FTC) Franchise and Business Opportunity Rule, which aims to protect individuals interested in investing in a franchise. The California Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule includes several key items that franchisors are obligated to disclose. These items encompass various aspects of the franchise opportunity and help potential franchisees make informed decisions. Some relevant keywords associated with this checklist include: 1. Franchise Disclosure Document (ADD): The ADD is a comprehensive legal document that contains all the necessary information about the franchise. It covers areas such as the franchise system, fees, royalties, intellectual property, advertising, litigation history, franchisor background, and key executives. 2. Financial Performance Representation (FPR): This refers to any representation made by the franchisor about the actual or potential financial performance of the franchise. If an FPR is provided, it must be supported by reliable data and included in the ADD. 3. Initial franchise fee: The upfront fee charged by the franchisor to grant the right to operate a franchise. 4. Ongoing fees: These include royalties, advertising contributions, and other recurring payments that franchisees must make to the franchisor. 5. Territory: The exclusive or non-exclusive geographic area where the franchisee can operate the business. 6. Renewal and termination: Information regarding the conditions and terms for franchise renewal or termination. 7. Training and support: Details regarding the initial and ongoing training and support provided by the franchisor. 8. Intellectual property: The use and protection of trademarks, patents, copyrights, and other intellectual property associated with the franchise. 9. Litigation history: Any past or ongoing litigation involving the franchisor, including lawsuits, bankruptcy filings, or regulatory actions. 10. Existing and former franchisees: A list of current and past franchisees along with their contact information, enabling prospective franchisees to validate the information provided by the franchisor. These are just a few key elements of the California Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule. It is crucial to review and understand this checklist thoroughly before engaging in any franchise opportunity in order to protect your investment and make an informed decision.
