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: Idaho Franchise Disclosure Checklist: Compliance with FTC Franchise and Business Opportunity Rule Introduction: Idaho, like other states in the United States, enforces the Federal Trade Commission (FTC) Franchise and Business Opportunity Rule, which requires franchisors to provide comprehensive disclosure documents to prospective franchisees. The following is a detailed description of the Idaho Checklist regarding the matters that must be disclosed to prospective franchisees in accordance with the FTC Franchise and Business Opportunity Rule, ensuring compliance and transparency. 1. Overview of the Idaho Franchise Disclosure Checklist: The Idaho Franchise Disclosure Checklist acts as a guideline for franchisors to ensure compliance with the FTC Franchise and Business Opportunity Rule. It outlines the essential information that needs to be disclosed to prospective franchisees in a clear and concise manner. 2. Identification of the Franchisor: The checklist mandates the disclosure of the franchisor's legal name, principal business address, and contact information. This aims to ensure that prospective franchisees are fully aware of the identity and contact details of the franchisor they are considering entering into a business relationship with. 3. Franchise Fee Details: The checklist requires the disclosure of all franchise fees, including initial fees, royalty fees, and any ongoing fees. This information allows prospective franchisees to understand the financial obligations associated with the franchise opportunity. 4. Financing Options and Obligations: Franchisors must provide a comprehensive overview of any financing arrangements they offer, including available loans, terms, interest rates, and repayment conditions. This ensures transparency in understanding the financial implications of the franchise arrangement. 5. Initial Investment: The Idaho checklist mandates the franchisor to disclose all costs involved in starting the franchise, including the initial investment range, costs of equipment, inventory, leasehold improvements, and any additional fees. This information helps prospective franchisees evaluate the total required investment accurately. 6. Ongoing Costs and Expenses: Prospective franchisees must be aware of the ongoing costs and expenses associated with running the franchise. Franchisors are obligated to disclose details of any ongoing royalties, advertising fees, marketing expenses, and other recurring costs. 7. Intellectual Property Details: Franchisors must provide complete information regarding the trademarks, patents, copyrights, and any other intellectual property used in the franchise system. This ensures prospective franchisees fully understand the scope and limitations of using the franchisor's intellectual property. 8. Territory Restrictions and Exclusivity: The checklist requires franchisors to disclose any territorial restrictions, non-compete clauses, and exclusivity rights. This helps prospective franchisees assess the geographic limitations and competition in their chosen territory. 9. Training and Support: Franchisors must provide an overview of the training programs, operational manuals, and ongoing support they offer to franchisees. Prospective franchisees need to understand the level of training and ongoing assistance they can expect in order to operate their franchise successfully. 10. Franchisee's Obligations and Restrictions: This section requires franchisors to disclose the obligations and restrictions imposed upon franchisees, including maintenance requirements, quality standards, operational guidelines, and any non-negotiable clauses that franchisees must adhere to. Conclusion: The Idaho Franchise Disclosure Checklist acts as a key tool to ensure that franchisors comply with the FTC Franchise and Business Opportunity Rule and provide complete and transparent information to prospective franchisees. By carefully adhering to this checklist, franchisors can establish trust, honesty, and mutually beneficial relationships with potential franchisees.
