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.
Washington Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule is a crucial document designed to protect prospective franchisees by ensuring they receive all necessary information before investing in a franchise. This checklist serves as a guide for franchisors in the state of Washington to comply with the Federal Trade Commission (FTC) Franchise and Business Opportunity Rule. Some specific types of Washington Checklist regarding matters that must be disclosed to prospective franchisees under the FTC Franchise and Business Opportunity Rule include: 1. Financial Performance Representations: Franchisors must disclose any relevant information about the actual or potential income or financial performance of their franchisees. This includes providing historical data or projections to help prospective franchisees make informed decisions. 2. Franchisee Obligations: The checklist requires disclosure of all significant obligations that franchisees will undertake. This includes information about initial and ongoing franchise fees, royalties, advertising or marketing contributions, lease obligations, and any exclusive supplier relationships. 3. Training and Support: Franchisors must disclose detailed information about the training and support programs offered to franchisees. This includes descriptions of initial training, ongoing training opportunities, and any assistance provided by the franchisor to ensure the success of franchisees. 4. Territory Restrictions: Franchisors must specify any territorial restrictions or limitations associated with the franchise. This includes details about the exclusivity or non-exclusivity of the territory, competition within the territory, and any rights to expand or relocate the franchise. 5. Intellectual Property Rights: The checklist requires franchisors to disclose information about the intellectual property rights granted to franchisees. This includes trademarks, trade names, copyrights, or patents, along with any advertising or promotional materials provided by the franchisor. 6. Legal or Litigation History: Franchisors must disclose any relevant litigation history, including bankruptcy filings, previous legal actions involving the franchisor or its key personnel, and any ongoing or pending legal disputes that may affect the franchisee's investment. 7. Financial Statements: Franchisors need to provide audited financial statements for themselves, preferably for the past three years. This allows potential franchisees to assess the franchisor's financial stability and evaluate the long-term viability of the franchise system. 8. Franchise Agreement Review: The checklist advises franchisees to consult with legal and financial professionals before signing any franchise agreement. This highlights the importance of seeking expert advice to fully understand the terms, obligations, and risks associated with the franchise opportunity. 9. Additional Information: Franchisors should include any other information they believe may be relevant to prospective franchisees' investment decision. This may include details about the industry, market conditions, competition, or any ongoing changes or trends that could impact the franchise's success. By following the Washington Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule, franchisors can transparently provide all necessary information to prospective franchisees, enabling them to make informed decisions and minimize the risk of investing in a franchise. Compliance with this checklist ensures fair, ethical, and legal practices within the franchising industry, fostering trust and protecting the interests of both franchisors and franchisees.
