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.
Guam Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule: Introduction: The Federal Trade Commission (FTC) has set forth regulations to protect prospective franchisees from deceptive business practices. This checklist outlines the matters that must be disclosed to potential franchisees in Guam, adhering to the FTC Franchise and Business Opportunity Rule. Compliance with these rules ensures transparency and empowers franchisees to make informed decisions. Description: 1. Franchise Fee: Detail the initial franchise fee required to join the franchise. This fee covers the right to operate under the franchisor's brand and includes initial training and support. 2. Other Fees and Costs: Enumerate any ongoing fees involved in operating the franchise, such as royalty fees, marketing fees, technology fees and any other potential charges. Include estimated cost ranges or specific figures wherever applicable. 3. Initial Investment: Provide prospective franchisees with a comprehensive breakdown of the initial investment required to start the business. Include costs for leasehold improvements, equipment, inventory, licenses, permits, and any other necessary expenses. 4. Financing Options: Outline any financing arrangements, loans, or third-party assistance programs available to prospective franchisees. Specify whether the franchisor provides direct financing or has established relationships with financial institutions that offer preferential terms. 5. Franchisee Obligations: Elaborate on the responsibilities and obligations expected of franchisees. This may include operational guidelines, purchasing requirements, accounting practices, employee training, and continuing education. 6. Advertising and Marketing: Detail the franchisor's advertising and marketing strategies and the respective contributions expected from franchisees. Outline any national and local advertising funds and describe how these funds will be managed. 7. Territory and Competition: Define the territory allocated to the franchisee and discuss any exclusive rights, non-compete clauses, or geographic restrictions. Provide information on the number of existing franchisees and their proximity within the territory. 8. Trademarks and Intellectual Property: Explain the franchisee's rights and restrictions in using the franchisor's trademarks, logos, and copyrighted materials. Address any intellectual property protection measures and obligations related to brand representation and quality control. 9. Training and Support: Describe the initial and ongoing training programs provided by the franchisor. Highlight the availability of operational support, employee training, and regular communication channels for addressing concerns or seeking advice. 10. Franchisee-Franchisor Relationship: Clarify the expectations and contractual relationship between the franchisee and the franchisor. Discuss any provision for renewals, transfers, or termination of the franchise agreement, including dispute resolution mechanisms. Additional Types of Guam Checklists: To cater to various franchise industries or specific regulations of Guam, additional checklists can be created. Some examples are: — Guam Checklist for Food Service Franchises: A specialized checklist focusing on matters specific to food service operations, such as food safety regulations, health permits, and compliance with Guam's culinary requirements. — Guam Checklist for Home-Based Franchises: Tailored for home-based business opportunities, this checklist may highlight the potential need for local permits, zoning considerations, and insurance requirements applicable to operating from a residential property. — Guam Checklist for International Franchises: This checklist may emphasize aspects related to cross-border franchising, such as customs and import regulations, currency exchange, immigration requirements, and compliance with Guam's legal framework for foreign franchises. Conclusion: Following these checklists while disclosing necessary information to prospective franchisees enables transparency, fosters trust, and promotes a healthy franchisor-franchisee relationship. It also ensures compliance with the FTC Franchise and Business Opportunity Rule in Guam, safeguarding the interests of all parties involved.
