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.
Tennessee Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is an essential document that outlines the necessary information franchisors must disclose to potential franchisees in Tennessee, in accordance with the FTC's franchise and business opportunity rules. This checklist helps ensure transparency and protection for individuals interested in pursuing a franchise opportunity. The checklist can vary based on specific requirements and regulations in Tennessee, but generally, it covers the following key areas and topics: 1. Identification of the franchisor: The checklist includes details about the franchisor's legal name, address, contact information, and any associated parent companies or affiliates. 2. Franchisor's business experience: Franchisors are required to disclose their business background, including any litigation history, bankruptcy filings, or past franchise ownership experience. 3. Franchise fees and additional costs: The checklist includes a comprehensive breakdown of all fees and expenses associated with the franchise, such as initial franchise fees, royalties, marketing contributions, and any other ongoing or one-time payments. 4. Estimated initial investment: Franchisors must provide a range or estimated investment required to establish and operate the franchise successfully. This encompasses costs like equipment, inventory, leasehold improvements, and working capital. 5. Financial statements: Franchisors should disclose their audited financial statements, including balance sheets, income statements, and cash flow statements. These documents give potential franchisees insights into the financial health and stability of the franchisor. 6. Obligations of the franchisor: This section clarifies the franchisor's responsibilities and obligations, such as providing training and ongoing support, advertising and marketing assistance, and operational guidelines. 7. Franchisee's initial and ongoing obligations: The checklist outlines the responsibilities and commitments expected from the franchisee, including initial training, compliance with operational standards, purchasing requirements, and possibly attending regular meetings or conferences. 8. Territory restrictions: Franchisors should specify any territorial limitations or constraints associated with the franchise agreement, including exclusivity, protected areas, or any competition restrictions. 9. Intellectual property: The checklist includes details about the franchisor's intellectual property, such as trademarks, copyrights, or patents, and the franchisee's rights to use these assets. 10. Renewal and termination: Franchisees must be made aware of the terms and conditions regarding franchise agreement renewal and potential reasons for termination, as well as any associated fees or penalties. 11. Resale or transfer of the franchise: This section outlines the process and requirements for selling or transferring the franchise to a new owner, including approval from the franchisor and potential transfer fees. 12. Contact information of existing and former franchisees: Franchisors may list the names and contact details of current and former franchisees to allow prospective franchisees to gather additional insights and make informed decisions. Remember, this checklist may vary based on specific state regulations and additional requirements imposed by Tennessee law.
