At What Point in The Sales Process Must a Franchisor Furnish The Disclosure Document? The amended Rule provides that franchisors must furnish prospective franchisees with a disclosure document at least 14 calendar days before the prospective franchisee signs a binding agreement with, or makes any payment to, the franchisor or an affiliate in connection with…
Large Franchise Investment Exemption The amended Rule exempts franchise offers and sales where the initial investment is atleast $1 million, excluding the cost of unimproved land and any franchisor (or affiliate)financing. In addition, the prospective franchisee must sign an acknowledgment that thefranchise sale is exempt from the Franchise Rule because the prospective franchisee will bemaking…
Definition of Franchising Franchising is a method of marketing and distributing goods and services. Franchises are offered and sold for many types of businesses, including services, retail trade, finance, real estate, transportation, and communications. A franchise is broadly defined as a contract or agreement between two or more persons by which the franchisor (the seller),…
ITEM 17: THE FRANCHISE RELATIONSHIP This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document. Provision Section in franchise or other agreement Summary a. Length of the franchise term Section 1 (also Section 1 of Lease) Term is equal to…
Introduction Here is a sample cover page of a franchise disclosure document. Franchise Disclosure Document Belmont Mufflers, Inc. A Minnesota Corporation 111 First Street Jackson, Minnesota 55000 (111) 222-3333 franchiseofficer@belmont_mufflers4u.com www.belmont_mufflers4u.com Belmont Mufflers, Inc., repairs and installs motor vehicle exhaust systems. The total investment necessary to begin operation of a Belmont Mufflers franchise is $100,000….
Sample Item 19-1: Financial Performance Representation (Based on Actual Historical Performance Results) ITEM 19: FINANCIAL PERFORMANCE REPRESENTATION The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included…
Sample Item 21-1: Financial Statements ITEM 21: FINANCIAL STATEMENTS Attached to this disclosure document as Exhibit J are our audited, fiscal year end financials for 2005, 2006, and 2007. Attached to this disclosure document as Exhibit K are the audited, fiscal year end financials for 2005, 2006, and 2007 of subfranchisor Richard McDonald. Sample Item…
ITEM 13: TRADEMARKS We grant you the right to operate a shop under the name “Belmont Muffler Shop.” You may also use our other current or future trademarks to operate your shop. By “trademark,” we mean trade names, trademarks, service marks, and logos used to identify your shop. W e registered the trademark on the…
ITEM 3: LITIGATION Pending Actions Blank v. Belmont Mufflers, Inc., No. 06-111 (M.D. Fla. filed August 1, 2007). Five franchisees filed suit against us for breach of contract, alleging that we failed to furnish equipment in the time period stated in our franchise agreement. These franchisees seek damages of $350,000. A trial is scheduled for…
Table No. 1 – Systemwide Outlet Summary Table No. 1 of Item 20 presents the total number of all outlets nationwide – both company owned and franchised – operating at the beginning and at the end of each of the franchisor’s last three fiscal years. This chart should include all outlets that are substantially similar…
The “Significant Control or Assistance” Element The amended Rule covers business arrangements where the franchisor “will exert or has the authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation.” When Is Control or Assistance Significant? The more franchisees reasonably rely…
Sample Item 23: Receipts ITEM 23: RECEIPTS Receipt This disclosure document summarizes certain provisions of the franchise agreement and other information in plain English. Read this disclosure document and all agreements carefully. If Belmont offers you a franchise, it must provide this disclosure document to you 14 calendar days before you sign a binding agreement…