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.
Oklahoma Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule When considering investing in a franchise opportunity, it is crucial for prospective franchisees to have access to comprehensive information about the business they are considering. The Federal Trade Commission (FTC) has established the Franchise and Business Opportunity Rule to ensure transparency and protect franchisees. In Oklahoma, the checklist below outlines the matters that franchisors must disclose to prospective franchisees in accordance with this rule: 1. Basic Information: Franchisors should provide their legal name, business address, contact information (phone, email), and any other relevant identification details. 2. Franchise History: This section requires franchisors to disclose detailed information about their franchise's history. This includes the number of years the franchise has been in operation, any changes in ownership or control, and whether the franchisor operates any other similar franchises. 3. Litigation and Bankruptcy: Any lawsuits, arbitration, or unresolved claims involving the franchisor, its officers, or related entities must be disclosed. Additionally, if the franchisor or any of its executives have filed for bankruptcy within the past ten years, this information should be disclosed. 4. Initial Investment: Detailed information about the costs associated with starting the franchise must be provided. This should include the initial franchise fee, costs for equipment, inventory, and real estate (if applicable), as well as estimates for other start-up expenses such as marketing and training. 5. Continuing Fees: Franchisors must disclose any ongoing fees and payments that franchisees will be required to make. This includes royalties, advertising contributions, and any other ongoing financial obligations. Additionally, any restrictions or limitations on the franchisee's ability to generate income from non-franchise sources should be clearly outlined. 6. Training and Assistance: The franchisor should provide a detailed description of the training and assistance that will be provided to franchisees. This includes information about the length and location of training programs, as well as ongoing support services such as marketing and operations guidance. 7. Territory and Competition: Franchisors must disclose any territorial restrictions on the franchisee's operations. This includes any limitations on the exclusive territories granted to franchisees and whether the franchisor operates or plans to operate competing businesses within the franchisee's territory. 8. Intellectual Property: The franchisor's ownership and control over trademarks, patents, copyrights, and proprietary systems should be disclosed. Franchisees need to understand the extent of their rights to use these assets and any limitations or restrictions that may apply. 9. Franchisee Obligations: Franchisors must detail the obligations and responsibilities that franchisees will be expected to fulfill. This includes the nature of the business operations, minimum staffing requirements, and any requirements for the franchisee's personal involvement in day-to-day activities. 10. Financial Performance: While not mandatory, franchisors may include information about the financial performance of their existing franchises. If provided, this information should be based on actual data and include any material assumptions made in the calculations. It is important to note that this checklist provides a general overview of the matters that must be disclosed under the FTC Franchise and Business Opportunity Rule in Oklahoma. Additional state-specific requirements may apply, so it is recommended for prospective franchisees to consult with legal professionals familiar with franchise laws in Oklahoma.
