A Uniform Franchise Offering Circular (UFOC), now called a Franchise Disclosure Document (FDD) is a disclosure document that the Federal Trade Commission (FTC) requires franchisors to give potential franchisees before granting a franchise.
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 for the past 2 fiscal years.
- 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. A business 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.