Restrictions on What the Franchisee May Sell Example Franchise Disclosure Document

Sample Item 16: Restrictions on What the Franchisee May Sell

The following is an example franchise disclosure document for Amended Franchise Rule’s Item 16. For more information, see this explanation of the Amended Franchise Rule’s Item 16.

ITEM 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

We require you to offer and sell only those goods and services that we have approved (see Item 9).

You must offer all goods and services that we designate as required for all franchisees. These required services are muffler inspection, repair, and replacement. Parts, supplies, and equipment used in your Belmont Muffler business must be approved by us (see Item 8).

We have the right to add additional authorized services that a franchisee is required to offer. There are no limits on our right to do so except that the investment required of a franchisee for equipment, supplies, and initial inventory will not exceed $5,000 per year.

We also designate some services as optional for qualified franchisees. Current optional services are brake inspection, repair, and replacement; tire rotation, wheel balancing and alignment; and rustproofing. To offer optional goods or services, you must be in substantial compliance with all material obligations under the franchise agreement. In addition, we may require you to comply with other requirements, such as training, marketing, or insurance, before we will allow you to offer certain optional services.

As long as you meet your annual agreed sales quotas (see Item 12), we will not restrict you from soliciting any customers, no matter who they are or where they are located. If you do not meet your annual sales quota, we may deny you the right to receive any further fleet business referrals from us and may either keep the fleet business referrals for ourselves or give them to another franchisee. Failure to meet your annual sales quota is a default under your franchisee agreement and grounds for termination of your franchise. (See Item 17.)

CREDIT: The content of this post has been copied or adopted from the Federal Trade Commission’s Franchise Rule Compliance Guide.