A franchise or business opportunity seller must give the prospective buyer a detailed disclosure document at least ten (10) business days before the buyer pays any money or legally commit himself to a purchase. The disclosure document includes:
" Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to the buyer; " A fully audited financial statement of the seller; " Background and experience of the business's key executives; " Cost of starting and maintaining the business; and " The responsibilities buyer and the seller will have to each other once the buyer has invested in the opportunity.
Franchise sellers also must tell a prospective buyer in writing the number and percentage of owners who have failed.
Title: Hawaii Franchise Disclosure Checklist as per FTC Franchise and Business Opportunity Rule Introduction: Franchising offers lucrative business opportunities, but due diligence is essential before investing. The Federal Trade Commission (FTC) has established the Franchise and Business Opportunity Rule, which outlines crucial information that franchisors must disclose to prospective franchisees. In Hawaii, as in other states, there are specific checklist requirements that franchisors must adhere to when presenting their franchise opportunities. This comprehensive guide will outline the key elements included in the Hawaii Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with the FTC Franchise and Business Opportunity Rule. 1. Disclosure Document: Franchisors in Hawaii must provide a comprehensive Franchise Disclosure Document (ADD) to prospective franchisees. The ADD includes critical information about the franchise system, its financials, legal agreements, and more. This document must be provided at least 14 calendar days before the signing of any agreement or payment of any consideration. 2. Background and Experience of Key Individuals: The franchisor must disclose details about the key individuals involved in the franchising company, including their educational background, professional experience, and any other relevant qualifications. 3. Litigation History: Any litigation history involving the franchisor, its affiliates, or key individuals must be disclosed. This includes any pending or settled lawsuits, arbitration, or government actions related to the franchise business. 4. Initial Investment Cost: The franchisee should be provided with a detailed breakdown of the initial investment required, including franchise fees, equipment costs, inventory requirements, and other related expenses. This disclosure allows the prospective franchisee to assess the financial viability of the opportunity. 5. Ongoing Fees and Royalties: The franchisor must disclose any ongoing fees, royalties, or other recurring expenses that the franchisee will be responsible for. These may include advertising fees, royalty payments, technology fees, or any additional charges imposed by the franchisor. 6. Territories and Site Selection: Details about the franchise territory, any exclusive rights, or any restrictions imposed on the franchisee's ability to operate in certain areas should be disclosed. The criteria for site selection and assistance provided by the franchisor in finding suitable locations should also be outlined. 7. Training and Support: Information regarding the initial and ongoing training programs provided by the franchisor should be disclosed. This includes details about the duration, content, and location of training sessions, as well as the ongoing support that will be offered. 8. Intellectual Property and Trademarks: Franchisors must disclose details about any registered trademarks, patents, copyrights, or proprietary materials used in the franchise system. Any restrictions on the use of these intellectual properties should also be made clear. 9. Termination and Renewal: The terms and conditions for terminating the franchise agreement, as well as any rights to renewal, should be disclosed. This ensures that prospective franchisees are aware of the contractual commitments and obligations. 10. Financial Performance Representations: If the franchisor makes any claims about the financial performance or potential profitability of the franchise opportunity, they must provide supporting data and disclose any assumptions made in these representations. Conclusion: When considering a franchise opportunity in Hawaii, prospective franchisees should be aware of the checklist requirements mandated by the FTC Franchise and Business Opportunity Rule. This detailed checklist ensures that all essential information related to the opportunity is transparently disclosed. By carefully reviewing and analyzing this information, individuals can make informed decisions about investing in a franchise business.Title: Hawaii Franchise Disclosure Checklist as per FTC Franchise and Business Opportunity Rule Introduction: Franchising offers lucrative business opportunities, but due diligence is essential before investing. The Federal Trade Commission (FTC) has established the Franchise and Business Opportunity Rule, which outlines crucial information that franchisors must disclose to prospective franchisees. In Hawaii, as in other states, there are specific checklist requirements that franchisors must adhere to when presenting their franchise opportunities. This comprehensive guide will outline the key elements included in the Hawaii Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with the FTC Franchise and Business Opportunity Rule. 1. Disclosure Document: Franchisors in Hawaii must provide a comprehensive Franchise Disclosure Document (ADD) to prospective franchisees. The ADD includes critical information about the franchise system, its financials, legal agreements, and more. This document must be provided at least 14 calendar days before the signing of any agreement or payment of any consideration. 2. Background and Experience of Key Individuals: The franchisor must disclose details about the key individuals involved in the franchising company, including their educational background, professional experience, and any other relevant qualifications. 3. Litigation History: Any litigation history involving the franchisor, its affiliates, or key individuals must be disclosed. This includes any pending or settled lawsuits, arbitration, or government actions related to the franchise business. 4. Initial Investment Cost: The franchisee should be provided with a detailed breakdown of the initial investment required, including franchise fees, equipment costs, inventory requirements, and other related expenses. This disclosure allows the prospective franchisee to assess the financial viability of the opportunity. 5. Ongoing Fees and Royalties: The franchisor must disclose any ongoing fees, royalties, or other recurring expenses that the franchisee will be responsible for. These may include advertising fees, royalty payments, technology fees, or any additional charges imposed by the franchisor. 6. Territories and Site Selection: Details about the franchise territory, any exclusive rights, or any restrictions imposed on the franchisee's ability to operate in certain areas should be disclosed. The criteria for site selection and assistance provided by the franchisor in finding suitable locations should also be outlined. 7. Training and Support: Information regarding the initial and ongoing training programs provided by the franchisor should be disclosed. This includes details about the duration, content, and location of training sessions, as well as the ongoing support that will be offered. 8. Intellectual Property and Trademarks: Franchisors must disclose details about any registered trademarks, patents, copyrights, or proprietary materials used in the franchise system. Any restrictions on the use of these intellectual properties should also be made clear. 9. Termination and Renewal: The terms and conditions for terminating the franchise agreement, as well as any rights to renewal, should be disclosed. This ensures that prospective franchisees are aware of the contractual commitments and obligations. 10. Financial Performance Representations: If the franchisor makes any claims about the financial performance or potential profitability of the franchise opportunity, they must provide supporting data and disclose any assumptions made in these representations. Conclusion: When considering a franchise opportunity in Hawaii, prospective franchisees should be aware of the checklist requirements mandated by the FTC Franchise and Business Opportunity Rule. This detailed checklist ensures that all essential information related to the opportunity is transparently disclosed. By carefully reviewing and analyzing this information, individuals can make informed decisions about investing in a franchise business.
