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.
Virgin Islands Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule. The Virgin Islands Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a comprehensive document designed to ensure that prospective franchisees receive all the necessary information before making a decision to invest in a franchise. This checklist is specifically tailored to the laws and regulations of the Virgin Islands and includes the following matters that must be disclosed: 1. Franchise Fee: The checklist requires the franchisor to disclose the initial franchise fee and any ongoing fees that the franchisee will be required to pay. This helps the prospective franchisee understand the financial commitment involved in the franchising opportunity. 2. Financing Arrangements: If the franchisor offers any financing options, they must be fully disclosed. This includes any interest rates, repayment terms, and collateral required. Understanding the financing arrangements is crucial for prospective franchisees who may need assistance in funding their investment. 3. Franchisee's Obligations: The checklist outlines the obligations and responsibilities that a franchisee will have. This includes the scope of the franchisee's rights to use the franchisor's trademarks, trade secrets, or other intellectual property. It also includes any required training or ongoing support the franchisor will provide. 4. Territory and Competition: Prospective franchisees need to know the territorial rights and restrictions they will have under the franchise agreement. The checklist requires the disclosure of any existing or potential competition within the specified territory. 5. Legal or Administrative Actions: Franchisors are obligated to disclose any past or pending litigation, bankruptcy filings, or regulatory actions against them, their key personnel, or the franchise system as a whole. This information helps the prospective franchisee assess the franchisor's credibility and potential risks. 6. Financial Performance Representations: If the franchisor makes any claims about the potential financial performance of the franchise, they must disclose supporting data and the basis for such claims. This ensures that the prospective franchisee can make an informed decision based on realistic expectations. 7. Current and Former Franchisees: The checklist requires the franchisor to provide a list of current franchisees along with their contact information. Additionally, information about any franchisee terminations, non-renewals, or transfers within the past year should be disclosed. Prospective franchisees can then contact these individuals to gather insights and evaluate the franchise opportunity. It's important to note that while this checklist is tailored to the Virgin Islands, the FTC Franchise and Business Opportunity Rule applies to all U.S. states and territories. Therefore, the disclosure requirements and checklist items should be similar across other states and territories. In summary, the Virgin Islands Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a vital tool for prospective franchisees to ensure they receive all the necessary information about a franchise opportunity. By following this checklist, both franchisors and prospective franchisees can have a transparent and mutually beneficial relationship.
