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.
In Missouri, when offering a franchise opportunity, it is vital to comply with the FTC Franchise and Business Opportunity Rule by providing prospective franchisees with a comprehensive checklist of crucial information. This checklist ensures transparency and allows potential franchisees to make informed decisions. The following description outlines the key components of the Missouri Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule. 1. Franchisor Information: The checklist must include the legal name and business address of the franchisor, along with any parent companies or affiliates involved in the franchise offering. 2. Franchise Fee: The disclosure should provide details about the initial franchise fee, including any additional expenses such as royalty fees, marketing contributions, or ongoing charges. 3. Initial Investment Costs: It is essential to outline the estimated initial investment required to set up and operate the franchise, covering expenses like equipment, inventory, leasehold improvements, and working capital. 4. Restrictions and Obligations: Prospective franchisees need to know about any limitations placed on their business operations, including territorial restrictions, non-compete clauses, and exclusive supplier arrangements. 5. Training Programs: Outline the training and ongoing assistance provided by the franchisor, including the duration, location, and costs associated with these programs. 6. Franchisee Obligations: The checklist should itemize the franchisee's responsibilities, such as hiring and training employees, maintaining insurance coverage, marketing expenditures, and adhering to operational standards. 7. Renewal and Termination: Provide information on the terms and conditions of franchise renewal or termination, including any associated fees, obligations, or restraints. 8. Financial Performance Representations: If the franchisor makes claims about potential earnings or financial performance, they must provide supporting documents or clarify the absence of such representations. 9. Legal Issues: Disclose any litigation history involving the franchisor, its directors, or any parent company, including bankruptcy filings or unresolved disputes. 10. Current and Former Franchisees: Provide a list of current and former franchisees, along with their contact details. Prospective franchisees can then reach out to these individuals to gain insight into their experiences and success within the franchise system. Please note that this checklist may vary depending on the specific rules and regulations of the state. It is crucial to consult with a legal professional or the state's regulatory agency to ensure complete compliance. Different types of checklists regarding matters that must be disclosed to prospective franchisees may exist in Missouri, like the "Missouri Franchise Disclosure Document Checklist," "Missouri Franchise Offering Circular Checklist," or "Missouri Franchise Disclosure Agreement Checklist." These checklists may have slight differences in format or specific information required, but they all aim to safeguard the prospective franchisee's interests and ensure transparency in the franchise offering process according to the FTC Franchise and Business Opportunity Rule.
