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.
Connecticut Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule: 1. Franchise Fee: The prospective franchisee must be provided with detailed information about any initial franchise fee and ongoing fees or royalties to be paid. 2. Estimated Initial Investment: A breakdown of the estimated initial investment required to establish and operate the franchise, including costs such as equipment, inventory, and signage. 3. Restrictions on Products and Services: Any limitations or restrictions on the products or services that the franchisee can offer, as well as any required purchases from the franchisor or approved suppliers. 4. Franchisee Obligations: A comprehensive list of the franchisee's responsibilities and obligations, including advertising requirements, operational standards, and quality control measures. 5. Training and Support: Details regarding the initial and ongoing training programs provided by the franchisor, as well as the level of ongoing support and assistance offered to franchisees. 6. Territory and Exclusivity: Any territorial restrictions or exclusivity provisions, including whether the franchisee will receive a protected territory and the extent of any exclusive rights. 7. Franchisee's Rights: Information regarding the franchisee's rights to renew the franchise agreement, transfer ownership, and terminate the agreement. 8. Financial Performance Representations: If the franchisor makes any claims or representations about the potential financial performance of the franchise, these must be disclosed, including any supporting documentation. 9. Litigation History: Full disclosure of any past or pending litigation involving the franchisor, its key personnel, or other franchisees, including details of the outcome. 10. Additional Fees and Expenses: Any additional fees or expenses that may be incurred during the operation of the franchise, such as marketing fees, technology fees, or required upgrades. Different types of Connecticut Checklists Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule may include: 1. Initial Franchise Disclosure Document (ADD) Checklist: Outlining all the required disclosures as per the FTC Franchise Rule, ensuring compliance with federal regulations. 2. Connecticut-Specific Franchise Disclosure Checklist: Highlighting any additional state-specific requirements or regulations that franchisors need to disclose in Connecticut. 3. Franchise Agreement Checklist: Detailing the key elements to include in a franchise agreement, ensuring that the prospective franchisee is aware of the terms and conditions they will be bound by. 4. Financial Performance Representation Checklist: Providing guidance on accurate and transparent disclosure of financial performance representations, if made. 5. Training and Support Checklist: Ensuring that all the necessary training and support elements are adequately disclosed to the prospective franchisee. 6. Expansion and Territory Rights Checklist: Outlining any expansion opportunities or territorial rights available to the franchisee and the corresponding disclosure requirements. 7. Renewal and Termination Checklists: Detailing the terms and conditions for franchise agreement renewal, transfer of ownership, and termination rights that must be disclosed to the prospective franchisee. 8. Litigation History Disclosure Checklist: Assisting franchisors in documenting any litigation history that needs to be disclosed to potential franchisees. 9. Additional Fees and Expenses Checklist: Identifying all potential additional fees and expenses that may arise during the operation of the franchise, ensuring they are disclosed to prospective franchisees. It is important that franchisors consult with legal professionals familiar with Connecticut state laws to ensure accurate and complete disclosure in accordance with the FTC Franchise and Business Opportunity Rule.
