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.
The Michigan Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a comprehensive document designed to ensure transparency and protect the interests of potential franchisees. This checklist outlines the information that franchisors must disclose to prospective franchisees as mandated by the Federal Trade Commission's Franchise and Business Opportunity Rule. Here are some key areas covered in the Michigan Checklist: 1. General Information: — Franchisor's legal name, address, and contact information. — Franchisor's business experience, including any bankruptcy or litigation history. — Description of the type of business and services offered by the franchise. — Any trademark or copyright information related to the franchise. 2. Franchise Fees and Other Payments: — Detailed breakdown of all initial franchise fees and ongoing royalty or advertising fees. — Any other fees, such as training fees, technology fees, or renewal fees. — Explanation of how fees are calculated and the payment schedule. 3. Franchisee Obligations: — Description of the franchisor's training and assistance provided to franchisees. — Franchisee's responsibilities regarding advertising, marketing, and record-keeping. — Any restrictions or limitations on the franchisee's right to operate the business. 4. Territory: — Definition and scope of the franchise territory. — Any exclusivity rights granted to the franchisee within the territory. — Conditions under which the franchisor may modify or expand the territory. 5. Trademarks and Intellectual Property: — Disclosure of any trademarks, logos, slogans, or other intellectual property associated with the franchise. — Terms and conditions for the use of such intellectual property. — Any limitations or restrictions on the franchisee's use of the franchisor's intellectual property. 6. Financial Performance Representations: — Whether the franchisor makes any claims or representations regarding the actual or potential financial performance of the franchise. — If such claims are made, a detailed explanation of the basis for those claims and supporting data. 7. Renewal, Transfer, and Termination: — Procedures and requirements for renewing the franchise agreement. — Conditions under which the franchisee may transfer or sell the franchise. — Grounds and procedures for termination or non-renewal of the franchise agreement. It's important to note that the Michigan Checklist is specific to the state's requirements while also adhering to the guidelines set forth by the FTC's Franchise and Business Opportunity Rule. By providing potential franchisees with this detailed information, the intention is to enable them to make informed decisions and protect their investment in a franchised business.
