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.
Virginia 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 that franchisors are required to disclose to prospective franchisees in the state of Virginia. This checklist ensures transparency and helps prospective franchisees make informed decisions about entering into a franchise agreement. The following are some key aspects covered by this checklist: 1. Franchise Fee: The checklist requires franchisors to disclose the initial franchise fee, along with any ongoing or recurring fees such as royalty payments, advertising fees, or technology fees. It ensures that prospective franchisees understand the financial obligations associated with the franchise. 2. Estimated Initial Investment: Franchisors must provide an estimate of the total investment required to start and operate the franchise. This includes the cost of equipment, supplies, leasehold improvements, and other expenses necessary to establish the business. 3. Franchisee's Obligations: The checklist outlines the obligations of the franchisee, including any personal involvement in the operations of the franchise, training requirements, and restrictions imposed by the franchisor. 4. Territory Restrictions: Franchisors must disclose any exclusive or non-exclusive territorial rights granted to the franchisee. This information helps prospective franchisees understand the market potential and possible competition. 5. Trademarks and Intellectual Property: The checklist requires the disclosure of information regarding any trademarks, copyrights, or patents associated with the franchised business. This ensures that the prospective franchisee understands the level of protection and limitations associated with the intellectual property. 6. Renewal and Termination: Franchisors must provide details on the conditions and process for renewing or terminating the franchise agreement. This includes any fees or penalties associated with termination and any rights or obligations after termination. 7. Financial Performance Representations: If the franchisor discloses information about the actual or potential financial performance of the franchise, it must be done in accordance with the FTC guidelines. The checklist ensures that any earnings claims made by the franchisor are supported by facts and are not misleading. Besides the general Virginia Checklist, specific types of franchise businesses may have additional requirements or disclosures. For example, franchisors in the food service industry may have to disclose details about the performance of existing franchise locations or provide a sample franchise agreement. Additionally, certain industries may require specific licenses or permits, which must be disclosed and obtained before commencing operations. In summary, the Virginia Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a vital tool that ensures transparency and protects the interests of prospective franchisees. By following this checklist, franchisors can provide the necessary information to help prospective franchisees make informed decisions and mitigate the risks associated with entering into a franchise agreement.
