Prepare all your documents...

2. Legal Documents Required of Franchisors
There are two official documents that a franchisor may use to comply with the FTC Rule-- the FTC Disclosure Document (FTC Document) and the Uniform Franchise Offering Circular (UFOC). The FTC document does not meet the requirements of most state disclosure laws, whereas the UFOC is accepted (with minor differences) in all states with franchise disclosure laws. The two documents possess similarities, but the franchisor must pick one or the other. Most franchisors opt for the UFOC, because of its wider acceptance. This is the document we will focus on.

What is the UFOC?
The UFOC is a document that contains information franchisors must provide to you by law, designed to assist you in analyzing the merits of your potential franchisor. In fact, a franchisor must provide a prospective franchisee with a UFOC at their first face-to-face meeting or at least ten business days prior to the signing of the franchise agreement, whichever is earlier.

Keep in mind that neither the FTC nor any of the states has reviewed the offering circular to determine whether the information submitted is accurate or not. They merely require that the franchisor make representations based upon a prescribed format. If the information provided is false, franchisors are subject to civil penalties. However, it is far less costly to avoid making a mistake in the first place with solid research of your own.

How can I get hold of a UFOC?
Most franchisors request the following information from you before sending a copy of their UFOC:

• Assets
• Liabilities
• Net Worth
• Sources of Income
• Educational History
• Previous Employment
• Credit References
• Personal References
• Motivation for Buying a Franchise

Try to obtain a UFOC before franchisor approval so that you can avoid submitting personal information to a franchise that you may not decide to pursue. Please refer to our Resource Center for information on how you can obtain a franchisor's UFOC for viewing.

So what does a UFOC contain?
A UFOC contains the following required information:

1. The Franchisor and Any Predecessors
2. Identity and Business Experience of Persons Affiliated with Franchisor
3. Litigation
4. Bankruptcy
5. Franchisee's Initial Fee/Other Initial Payments
6. Other Fees
7. Franchisee's Initial Investment
8. Obligations of Franchisee to Purchase or Lease from Designated Sources
9. Obligations of Franchisee to Purchase or Lease in Accordance with Specifications or from Approved Suppliers
10. Financing Arrangements
11. Obligations of the Franchisor, Other Supervision, Assistance or Services
12. Exclusive Area of Territory
13. Trademarks, Service Marks, Trade Names, Lototypes and Commercial Symbols
14. Patents and Copyrights
15. Obligations of the Franchisee to Participate in the Actual Operation of the Franchise Business
16. Restrictions on Goods and Services Offered by Franchisee
17. Renewal, Termination, Repurchase, Modification and Assignment of the Franchise Agreement and Related Information
18. Arrangements with Public Figures
19. Actual, Average, Projected or Forecasted Franchise Sales, Profits or Earnings
20. Information Regarding Franchises of the Franchisor
21. Financial Statements
22. Contracts
23. Acknowledgment of Receipt by Respective Franchisee

Next: Is Franchising for You?