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.
Vermont Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule The Vermont 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 disclosures franchisors must provide to prospective franchisees in Vermont, in accordance with the Federal Trade Commission's (FTC) Franchise and Business Opportunity Rule. This checklist ensures transparency and allows potential franchisees to make informed decisions before entering into any franchise agreements. The checklist covers various aspects that franchisors should disclose to prospective franchisees, including financial information, legal obligations, obligations of the franchisor and franchisee, termination provisions, and other critical details. These disclosures aim to protect the interests of prospective franchisees and minimize the risk of investing in a franchise that may not meet their expectations. Franchisors must comply with these requirements to maintain compliance with the law. The checklist includes the following key areas that must be disclosed to prospective franchisees: 1. Background Information: Franchisors must provide detailed information about themselves, their executives, and any affiliates involved in the franchise operation. 2. Business Experience: Franchisors must disclose the business experience of their key personnel, including their involvement in any bankruptcy or litigation cases in the past. 3. Litigation History: Any history of litigation involving the franchisor, its affiliates, or key personnel must be disclosed, including any pending lawsuits or settlements related to the franchise operation. 4. Franchise Costs: The total investment required to establish and operate the franchise must be disclosed, including any initial fees, ongoing royalty payments, marketing fees, and other expenses. 5. Initial and Ongoing Payments: Detailed information regarding initial franchise fees, ongoing royalties, and any required payments for advertising or marketing must be disclosed. 6. Financing Options: If the franchisor offers any financing programs or assistance to franchisees, the details, terms, and conditions must be disclosed. 7. Territory Restrictions: Franchisors must clarify the territory restrictions, including exclusivity, protected territories, or any limitations on market expansion. 8. Intellectual Property: Franchisors must disclose information about trademarks, patents, copyrights, and the terms of use for any proprietary systems or technology provided as part of the franchise. 9. Training and Support: The franchisor's obligations regarding initial training, ongoing support, and operational assistance must be clearly outlined. 10. Success and Failure Rates: Historical data on the success and failure rates of franchisees within the system, including closures, transfers, and terminations, must be disclosed. 11. Renewal and Termination: Franchisees should be informed about the conditions for renewing the franchise agreement, as well as the circumstances that can lead to termination or non-renewal. 12. Financial Performance Representations: If the franchisor makes any financial performance claims or representations, they must provide supporting documents and disclose the basis for these claims. Different types of Vermont Checklists Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule may cover specific industries such as food and beverage, retail, services, or lodging. Each type of franchise may have additional requirements or specific disclosures relevant to its unique operations.
