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.
Riverside California Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule: 1. Franchise Disclosure Document (ADD): The ADD is a legal document that franchise companies are required to provide to prospective franchisees. It contains detailed information about the franchise system, business model, financial statements, training, fees, and any restrictions or obligations. 2. Franchisor Background Information: Prospective franchisees should receive information about the franchisor's history, including litigation history, bankruptcy filings, and any regulatory actions taken against the franchisor. 3. Initial Investment Required: The franchisor must disclose the total estimated initial investment required to start and operate the franchise, including any fees, equipment costs, inventory, and working capital requirements. 4. Ongoing Fees and Costs: Franchisees should be informed about ongoing royalty fees, advertising fees, and any other recurring costs associated with operating the franchise. 5. Training and Support: The franchisor must disclose the type and extent of training and support available to franchisees, including initial training, ongoing assistance, and access to a franchise support team. 6. Territory: Franchisees should know if they will be granted an exclusive or protected territory and whether other franchisees or company-owned outlets may operate within the same area. 7. Intellectual Property: Details regarding any trademarks, copyrights, or patents that franchisees will have the rights to use should be disclosed. 8. Renewal and Termination: Franchisees should learn about the renewal terms, conditions, and any fees associated with renewing the franchise agreement. The conditions under which the franchisor may terminate the agreement should also be disclosed. 9. Financial Performance Representation: If the franchisor chooses to provide information about the actual or potential financial performance of the franchise, it must be disclosed in a specific format outlined by the FTC. However, this section is voluntary and not all franchisors include it. 10. Current and Former Franchisee Information: Franchisors may provide a list of current and former franchisees to prospective franchisees. This allows them to contact and gather insights from other franchisees who have operated within the system. By adhering to the FTC Franchise and Business Opportunity Rule, franchisors in Riverside, California can ensure that prospective franchisees have access to vital information necessary to make informed decisions about investing in their franchised businesses.Riverside California Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule: 1. Franchise Disclosure Document (ADD): The ADD is a legal document that franchise companies are required to provide to prospective franchisees. It contains detailed information about the franchise system, business model, financial statements, training, fees, and any restrictions or obligations. 2. Franchisor Background Information: Prospective franchisees should receive information about the franchisor's history, including litigation history, bankruptcy filings, and any regulatory actions taken against the franchisor. 3. Initial Investment Required: The franchisor must disclose the total estimated initial investment required to start and operate the franchise, including any fees, equipment costs, inventory, and working capital requirements. 4. Ongoing Fees and Costs: Franchisees should be informed about ongoing royalty fees, advertising fees, and any other recurring costs associated with operating the franchise. 5. Training and Support: The franchisor must disclose the type and extent of training and support available to franchisees, including initial training, ongoing assistance, and access to a franchise support team. 6. Territory: Franchisees should know if they will be granted an exclusive or protected territory and whether other franchisees or company-owned outlets may operate within the same area. 7. Intellectual Property: Details regarding any trademarks, copyrights, or patents that franchisees will have the rights to use should be disclosed. 8. Renewal and Termination: Franchisees should learn about the renewal terms, conditions, and any fees associated with renewing the franchise agreement. The conditions under which the franchisor may terminate the agreement should also be disclosed. 9. Financial Performance Representation: If the franchisor chooses to provide information about the actual or potential financial performance of the franchise, it must be disclosed in a specific format outlined by the FTC. However, this section is voluntary and not all franchisors include it. 10. Current and Former Franchisee Information: Franchisors may provide a list of current and former franchisees to prospective franchisees. This allows them to contact and gather insights from other franchisees who have operated within the system. By adhering to the FTC Franchise and Business Opportunity Rule, franchisors in Riverside, California can ensure that prospective franchisees have access to vital information necessary to make informed decisions about investing in their franchised businesses.
