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.
Montana Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule The Montana Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with the FTC Franchise and Business Opportunity Rule is a comprehensive guide designed to outline the information that franchisors are required to disclose to prospective franchisees in the state of Montana. The key purpose of the Montana Checklist is to ensure transparency and protect the interests of potential franchisees, enabling them to make informed decisions when considering a franchise opportunity. Franchisors must adhere to this checklist in order to comply with state regulations and avoid legal consequences. The Montana Checklist includes various essential matters that need to be addressed and disclosed. These may include, but are not limited to, the following: 1. Franchisor Information: Franchisors must provide accurate and complete details about their business, including their legal name, address, and contact information. They must also disclose any predecessors and affiliates associated with the franchise. 2. Litigation History: Franchisors must disclose any past or present litigation they have been involved in, including lawsuits, arbitration, or any legal proceedings relating to the franchise or the franchisor. 3. Franchise Fees and Terms: All fees, initial and ongoing, must be disclosed clearly. This includes the initial franchise fee, royalties, advertising fees, and any other financial obligations. The terms and conditions of these fees, such as their duration and potential increases, should be clearly communicated. 4. Territory and Exclusivity: Franchisees have the right to know any limitations or restrictions on their territory, including potential exclusivity agreements or non-compete clauses that may affect their operations. 5. Training and Support: Franchisors must provide information regarding any training programs, mentoring, or ongoing support they offer to franchisees. This includes details about the extent, duration, and location of the training, as well as any associated costs. 6. Advertising and Marketing: Franchisees should be informed about the franchisor's advertising and marketing strategy. Any required contributions or obligations regarding advertising campaigns or materials must be explicitly disclosed. 7. Intellectual Property: Franchisors need to disclose any trademarks, copyrights, patents, or trade secrets associated with the franchise. This includes whether franchisees have the right to use such intellectual property and whether any fees or royalties are involved. 8. Termination and Renewal: Franchisees must be aware of the conditions under which the franchise agreement can be terminated and the rules regarding renewal or transfer of the franchise. While the above key points are typical, it's important to note that the exact checklist may vary from state to state. Therefore, it is essential for both franchisors and prospective franchisees to refer to the specific Montana Checklist for complete and accurate information on what must be disclosed in accordance with the FTC Franchise and Business Opportunity Rule. By diligently reviewing and adhering to the Montana Checklist, franchisors can ensure compliance, promote transparency, and build trust with prospective franchisees. On the other hand, prospective franchisees can utilize the checklist to evaluate franchise opportunities, compare different options, and make well-informed decisions based on complete information.
