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 North Carolina Checklist Regarding Matters that must be Disclosed to Prospective Franchisee is an essential tool for both franchisors and prospective franchisees operating in North Carolina. This checklist ensures compliance with the FTC Franchise and Business Opportunity Rule, safeguarding the rights and interests of both parties involved in the franchise relationship. The checklist covers various matters that must be disclosed to prospective franchisees, providing them with crucial information needed to make informed decisions. These disclosures aim to ensure transparency and promote fair business practices. Here are some key areas that the North Carolina Checklist focuses on: 1. Franchisor Background: The checklist requires the franchisor to disclose its history, experience, and any previous litigation or bankruptcies. This allows prospective franchisees to assess the credibility and stability of the franchisor. 2. Franchise Fees and Costs: All fees, initial investment requirements, ongoing royalties, and operational costs must be fully disclosed. This ensures that prospective franchisees have a clear understanding of the financial commitment associated with the franchise. 3. Franchise Territory: The checklist requires the franchisor to clarify the defined territory where the franchisee will operate. This helps the franchisee assess market potential and competition within the specified area. 4. Training and Support: The franchisor must disclose the availability and nature of training programs, ongoing support, and assistance provided to franchisees. This information helps prospective franchisees evaluate the level of guidance they can expect during their journey as a franchisee. 5. Intellectual Property Rights: The checklist mandates disclosure of any trademarks, patents, copyrights, or proprietary rights associated with the franchise. This allows prospective franchisees to understand the extent of protection for their business and brand identity. 6. Franchisee Obligations: The checklist outlines the franchisee's responsibilities, such as purchasing products exclusively from the franchisor, maintaining quality standards, and adhering to operational guidelines. This helps prospective franchisees understand the expectations and obligations they must fulfill. 7. Financial Performance Representations: If the franchisor makes any claims regarding the actual or potential financial performance of the franchise, these claims must be substantiated and disclosed. This empowers prospective franchisees to evaluate the potential profitability of the business accurately. 8. Renewal, Transfer, and Termination: The checklist requires disclosure of the conditions and terms governing franchise agreement renewal, transfer, and termination. This allows prospective franchisees to understand their rights and options should they decide to make changes or exit the franchise. Different types of North Carolina Checklists Regarding Matters that must be Disclosed to Prospective Franchisees may include specific industry-related requirements or additional state-specific regulations.
