The FTC requires franchisors to give prospective franchisees the Franchise Disclosure Document fourteen days before selling a franchise or receiving any fees. Regulated by federal and Florida state laws, every Franchise Disclosure Document contains twenty-three disclosure items that include information on an assortment of topics related to the franchise and its operation. For more information, please read on, then contact one of our experienced franchise acquisition attorneys. The items included in a Florida Franchise Disclosure Document should include:
The franchisor and any parents, predecessors and affiliates
This provides franchisees with information regarding the structure of the franchisor and its affiliated companies.
Within this item, franchisors must provide franchise buyers with information about the franchisor’s management team, franchise sales and franchisee support team members, including each team member’s five-year employment history.
This gives franchisees knowledge of any instances of litigation the franchisor or its affiliates have been involved in over the years.
In the FDD, the franchisor must disclose whether or not, it, its affiliates, its predecessors and/or its individual management team members have ever filed for bankruptcy.
This lets the franchisee know what fees and their price before they purchase the franchise in question.
Franchisors must disclose additional fees that may crop up throughout the life of a franchise, including:
- Build-out costs
- Reserve capital for the first three months of operation
- Equipping the franchised business
In table format, the franchisor discloses what it expects the franchisee to do, including:
- Site selection
- Opening to default provisions
- Franchisee’s obligations upon termination of the franchise agreement
Assistance, advertising, computer systems and training
This section details the type of aid the franchisor will provide to the franchisee, what advertising requirements it imposes on the franchisee and the computer and software systems the franchisee will need.
Item 12 discloses whether the franchisee will receive a protected territory, the means for protecting said territory and instances in which the franchisor observes the right to operate within the franchisee’s territory.
Trademarks, Patents, Copyrights and Proprietary Information
Items 13 and 14 reveal information about the franchise system’s intellectual properties, their registration status and whether the franchisor has notice of a dispute.
Obligation to participate in the operation of the franchise
This section discloses what obligations, if any, the franchisees must have in the day-to-day operation of the franchised business, including whether they work there on a full-time basis.
Terms regarding what a franchisee may sell
Franchisors must disclose what control they have over what a franchisee may or may not sell.
Renewal, termination, transfer and dispute resolution
Here, franchisors must disclose and summarize the legal rights and obligations related to the renewal, termination and transfer of the franchised business, including a summary of how the parties must resolve disputes.
Financial performance representations
Franchisors must specify whether they’ll make any written or oral statements/communications about the franchised business’s actual or potential financial performance.
In this section, franchisors must disclose and include copies of their financial statements.
At this point, franchisors must list and attach as an exhibit all contracts that franchisees must sign, including:
- A sample of the franchisor’s standard franchise agreement
- Development agreement
- Site selection agreement
- Release Agreement
Franchisors must include two copies of their receipt pages, which franchisees must sign to confirm the FDD’s proper disclosure.
If this sounds at all overwhelming, speak with one of our skilled franchise law attorneys.
Contact Our Experienced Franchise Lawyer Today
If you have any franchising issues, contact Fortman Spann, LLC online today to schedule your initial consultation.