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.
Florida is a state in the United States that follows the Federal Trade Commission (FTC) Franchise and Business Opportunity Rule, which mandates the disclosure of certain matters to prospective franchisees. These matters are crucial for transparency and provide potential franchisees with important information to make informed decisions. The Florida Checklist Regarding Matters that Must be Disclosed to Prospective Franchisee includes various key aspects that franchise sellers must disclose. Here is a detailed description of some crucial elements covered by this checklist: 1. Initial Franchise Fee: The Florida checklist requires franchise sellers to disclose the initial franchise fee. This fee represents the amount a potential franchisee is required to pay to obtain the rights to the franchise's trademark, business model, and support. 2. Total Investment Cost: Franchise sellers must provide an estimated total investment cost in the disclosure. This includes expenses required to establish and operate the franchise, such as equipment, inventory, rent, marketing, and working capital. 3. Franchisee's Obligations: This section details the franchisee's obligations, including any requirements to personally operate the franchise, participate in training programs, or hire employees. It may also outline ongoing fees, royalties, and marketing contributions. 4. Initial and Ongoing Training Programs: The checklist requires franchise sellers to disclose information about the initial and ongoing training programs provided to franchisees. This may include the duration, content, location, and cost of these programs. 5. Territory Restrictions: Franchise sellers must disclose any restrictions on the franchisee's territory or exclusivity. This ensures that prospective franchisees have a clear understanding of their market reach and any potential competition from other franchisees. 6. Intellectual Property Rights: The disclosure must provide information regarding the franchisee's right to use trademarks, logos, and other proprietary materials. It should also specify any restrictions on the use or modification of these assets. 7. Franchisee's Financial Performance: Potential franchisees must be provided with information on the financial performance of existing franchisees. This may include historical revenue, expenses, and profitability data, presented in the form of an earnings claim or a disclosure document. 8. Renewal, Termination, and Transfer of Franchise: The checklist requires franchise sellers to disclose the terms and conditions of franchise renewal, termination, and transfer. This includes any fees associated with these actions and any restrictions or conditions involved. 9. Litigation and Bankruptcy History: Franchise sellers must disclose any past or ongoing litigation involving the franchise or its key personnel, as well as any bankruptcies or insolvency proceedings related to the franchise. 10. Contact Information for Existing Franchisees: The disclosure must include a list of existing franchisees along with their contact information. This allows potential franchisees to reach out and gather additional insights regarding their experiences with the franchise. These are some crucial elements covered by the Florida Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule. Adhering to this checklist ensures that potential franchisees receive essential information for evaluating the franchise opportunity and making an informed investment decision.
