Someone interested in franchising should be knowledgeable about the strengths and weaknesses of companies that offer such arrangements. Perhaps the best source of information on these and many other issues is the franchisor's disclosure document. This important document, which must be given to prospective franchise owners at least ten business days before any contract is signed or any deposits are owed, usually takes the form of the Uniform Franchise Offering Circular (UFOC). The UFOC contains important information on key aspects of the franchisor's business and the nature of its dealings with franchisees. Information contained in the UFOC includes a franchise history; audited financial statements and other financial history documents; franchise fee and royalty structures; background on the franchise's leading executives; terms of franchise agreements; estimated start-up costs for franchisees (including equipment, inventory, operating capital, and insurance); circumstances under which the franchisor can terminate its relationship with a franchisee; franchisor training and assistance programs; franchisee advertising costs (if any); data on the success (or lack thereof) of current and former franchisee operations; and litigation history.
The New York Form of Uniform Franchise Offering Prospectus (UFOs) is a legal document required by the state of New York for companies or individuals looking to offer franchises within the state. This comprehensive document provides potential franchisees with detailed information about the franchisor, the franchise opportunity, and the terms and conditions of the franchise agreement. The New York UFOs consists of various sections that provide valuable insights and protect the interests of potential franchisees. These sections include: 1. Franchisor Information: This section provides detailed information about the franchisor, including its name, business structure, address, and contact details. It also highlights the franchisor's experience, history, and any litigation or bankruptcy information. 2. Franchise Fees and Costs: Here, potential franchisees will find a breakdown of all fees associated with the franchise opportunity. This includes the initial franchise fee, royalty fees, advertising fees, and any other ongoing costs. The UFOs also provides information on any refund policies and conditions for termination or transfer of the franchise. 3. Franchisor's Obligations: This section outlines the franchisor's responsibilities and obligations towards the franchisee. It covers areas such as training and support provided, trademarks and proprietary rights, advertising and marketing support, ongoing assistance, and any restrictions or limitations imposed on the franchisee. 4. Franchisee's Obligations: Similarly, this section details the obligations and responsibilities of the franchisee. It encompasses requirements related to operating the franchise, maintenance of standards, purchasing and inventory requirements, and any ongoing fees or contributions the franchisee needs to fulfill. 5. Territory and Location: The New York UFOs specifies whether the franchisee will be granted exclusive territorial rights or any limitations on the location of the franchise. It also provides details on any competition restrictions and the rights of the franchisor to open additional locations within the franchisee's territory. 6. Financial Information: This section includes the financial statements of the franchisor, audited by an independent certified public accountant. It provides details such as the franchisor's revenue, operating costs, and profitability. This information helps potential franchisees assess the financial viability and success of the franchise opportunity. 7. Litigation History: The UFOs discloses any prior or pending litigation involving the franchisor. This includes lawsuits, arbitration, or other legal actions that affect or may influence the franchise relationship or the franchisor's reputation. 8. Additional Information: The New York UFOs also includes a list of references of current and former franchisees, along with their contact information. This allows potential franchisees to conduct due diligence and gather feedback from individuals who have firsthand experience with the franchisor and the franchise system. It is important to note that the New York Form of Uniform Franchise Offering Prospectus may differ from the Uniform Franchise Offering Circular (UFOs) or Franchise Disclosure Document (ADD) used in other states. However, the purpose of these documents remains the same — to provide potential franchisees with transparent and comprehensive information regarding the franchise opportunity.
