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.
When considering a franchise opportunity in West Virginia, it is crucial for both franchisors and prospective franchisees to be aware of the checklist regarding matters that must be disclosed in accordance with the FTC Franchise and Business Opportunity Rule. This comprehensive checklist ensures transparency and protection for all parties involved in the franchise relationship. The West Virginia Checklist Regarding Matters that must be Disclosed to Prospective Franchisees includes: 1. General Information: This section covers details about the franchisor's business, its legal structure, and any parent or affiliate companies involved in the franchise offering. It also includes information about the franchisor's litigation history, bankruptcy filings, and previous franchise terminations. 2. Franchise Costs: In this section, the franchisor must disclose all the initial fees, ongoing royalties, advertising fees, and other financial obligations required from the franchisee. It should also include estimates of additional investment necessary to start and operate the franchise. 3. Initial and Ongoing Support: Franchisors must disclose the assistance and training they provide to franchisees during the setup process and ongoing operations. This includes training programs, operational manuals, marketing support, and any other resources available to franchisees. 4. Territory and Competition: This section details the territorial rights granted to franchisees, including any restrictions or limitations. It should also include information about existing franchisees in nearby territories and any potential competition. 5. Intellectual Property: Franchisors are obligated to disclose details about their trademarks, copyrights, patents, and other intellectual property rights. This may include any restrictions or limitations on the use of these assets by franchisees. 6. Obligations and Restrictions: Franchisees must be made aware of all their contractual obligations and any restrictions imposed by the franchisor. This includes requirements related to the purchase of goods and services, operational standards, and any exclusive supplier agreements. 7. Financial Performance Representations: If the franchisor provides information about the potential financial performance of the franchise, it must be disclosed in this section. This may include historical financial data, average sales figures, and any other relevant information regarding the franchise's financial performance. 8. Franchise Agreement: Franchisors must provide a copy of the franchise agreement, including all attachments and exhibits, that the franchisee will be required to sign. Prospective franchisees are encouraged to review the agreement thoroughly and consult with legal counsel before committing to the franchise. It is important to note that while the checklist mentioned above covers the general requirements for franchisors in West Virginia, there may be additional state-specific disclosures or regulations that need to be considered. It is advisable for both franchisors and prospective franchisees to seek legal counsel familiar with West Virginia franchise laws to ensure compliance and protect their respective interests.
