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.
A Nevada Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a comprehensive document that outlines the necessary information to be disclosed by franchisors to prospective franchisees in Nevada. This checklist ensures compliance with the provisions set forth by the FTC Franchise and Business Opportunity Rule, which aims to protect prospective franchisees from fraudulent or misleading practices. The Nevada Checklist may include the following matters that must be disclosed: 1. Franchisor Information: The checklist would require the franchisor to provide their legal name, business address, contact details, and any previous bankruptcy or litigation history. 2. Financial Performance Representation: If the franchisor makes any claims regarding the financial performance of their business or other franchisees, it must be fully disclosed in the checklist. This includes providing details on the time frame, location, and basis for these claims. 3. Initial Fees and Other Costs: Prospective franchisees need to be made aware of the initial franchise fee, any recurring fees, and any other costs they may incur during the setup and operation of the franchise. This would include costs for training, inventory, equipment, marketing, and any ongoing royalties or advertising fees. 4. Territory: The checklist should outline whether the franchisee will be granted an exclusive or non-exclusive territory, and if there are any existing restrictions on territorial rights. 5. Intellectual Property: If the franchisor provides the use of trademarks, patents, copyrights, or other proprietary rights, the checklist would require disclosing any limitations or conditions regarding their use. 6. Training and Support: The checklist should include details about the initial and ongoing training programs offered by the franchisor, as well as the level of support provided to franchisees in terms of advertising, marketing, and operational assistance. 7. Renovation and Modification: If the franchisor requires franchisees to renovate or modify their premises, the checklist should specify the extent of these obligations and any associated costs. 8. Termination and Renewal: The checklist would require the franchisor to provide information on the circumstances that could lead to termination of the franchise agreement and the conditions for renewal or transfer of the franchise. Other types of Nevada Checklists Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule may be specific to certain industries or niche markets. For example, there may be a separate checklist for food service franchises, retail franchises, or home-based franchises, each addressing industry-specific details and requirements. It's crucial for franchisors to adhere to these checklists and provide complete and accurate information to potential franchisees. Failure to comply with disclosure requirements can lead to legal consequences and tarnish the reputation of the franchisor.
