What Is a UFOC?A UFOC is a disclosure document that the Federal Trade Commission requires franchisors to give potential franchisees before granting a franchise. The more common of the two UFOC formats is the one adopted by North American Securities Administrators Association (NASAA).
What Must Be Disclosed in the UFOC?Some basic disclosures that must be made in the UFOC are:- A description of the business, as well as any management and partners who would have management responsibilities over the franchisees.
- Any litigation or bankruptcy hearings that have taken place in the last 10 years concerning the franchisor or affiliates.
- Any and all payments the franchisee must make to open and continue running the franchise branch.
- An estimation of the initial investment the franchisee will have to make, along with any purchases that must be made according to the franchisor's estimations.
- The duties and obligations of the franchisee under the agreement.
- The duties and obligations of the franchisor under the agreement, including any funding the franchisor will provide to the franchisee.
- The location of the franchise, as well as a description of the territory.
- Restrictions on the franchisee, including what may be sold and who it may be sold to.
- The length of time of the franchise license, as well as the renewal process, if any.
- Contact information as well as fiscal performance records and expectations for at least 100 other franchisees.
- Financial records (balance sheets) for the past 2 fiscal years of the franchisor.
- Samples of all contracts the franchisee must sign.
Should I Acquire the Services of an Attorney When Going through a UFOC in Preparation for Becoming a Franchisee? Setting up a franchise branch can be an incredibly complex process that has many legal consequences. An attorney who has experience dealing with franchise contracts and UFOCs can be invaluable to help a potential franchisee negotiate fair terms that are in the best interest of the franchisee. |
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