Franchising: Understanding the Uniform Franchise Offering Circular (UFOC)

The Uniform Franchise Offering Circular (UFOC) is an important document for you to look at when you are considering getting involved with a franchise. The Federal Trade Commission requires that this document be provided to prospective franchisees. This document outlines a great deal of information that is associated with the franchise business. Here are a few things to consider about the Uniform Franchise Offering Circular and what information it contains.

FTC Requirements

The Federal Trade Commission requires all franchisors to provide this document to potential franchisees at least 10 days before signing a contract. If you have a face-to-face meeting with a franchisor before the 10-day window, they are required to provide you with this document then. The FTC requires this so that you will have all of the information that you need in order to make an educated decision about the franchise. 

Franchise Information

The UFOC will provide you with all of the basic information about the franchise. In this, the franchisor will tell you what the basic idea behind the franchise is and what product or service they sell. They will tell you where the franchise does business and any other important basic information that you need to know.

Experience

The UFOC will also provide you with information about the past experience of the individuals that are selling the franchise to you. This will include information about past employers and franchises for all of the executives and officers of the company. Sometimes, it can be helpful to see how long a business owner has been doing this particular business.

Litigation

Another important aspect of the Uniform Franchise Offering Circular is the litigation section. This section tells you what types of litigation the company is currently involved in or has been involved in in the past. This section can be very important because it can tell you if other franchisees are having any legal disputes with the franchisor. If there are several legal actions between franchisees and the parent company, you should be very skeptical.

Fees

This document will also cover all of the fees that will be involved with purchasing a franchise. It will tell you what the initial purchase price of the franchise is as well as what the ongoing costs will be. This section is critically important because it should give you an idea of how much money you will have to come up with out of pocket in order to make it work.

Financing

You will also be able to find out if there is any type of financing available through the company. Sometimes, the franchisor will offer financing directly, or they will have a partnership with a lender that they prefer to work with. This can be very helpful because it tells you exactly where to go to get access to the money that you need to buy the franchise. Many times, they will have some type of incentive for using their financing solution.

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