Government Regulation of Franchises
Government Regulation of Franchises
The UFOC / FDD document consists of 23 different categories, which contain information such as basic investment, franchise fees, a financial statement of the franchisor and earnings claims (if the company discloses that information), how long the franchise will be in effect, bankruptcy and litigation history (including civil judgments and felony convictions) and information about the franchisor's executives (such as past experience).
There are fourteen “Registration States” that require franchise companies to file or register their franchise offerings with a state agency. These states are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. These states (and Oregon) additionally have disclosure regulations similar to FTC regulations.
Several other states regulate the offering and sale of “business opportunities” via state business opportunity laws. Arkansas, California, Illinois, Iowa, Minnesota and a few other states regulate the termination of non-renewals of agreements. In California, Illinois, Indiana and Maryland, proposed ads must be pre-approved prior to publication.
As you may very well be aware, the government regulates all businesses, not just franchises. Regardless of what business you're going into, you'll have to find out what licenses and/or permits are required before you open that business. Such licenses/permits include a business license from your city's business license department; a fire department license (if your business uses flammable materials); air and water pollution control permits if you burn any materials, expel anything into sewers or waterways, or use products that emit gas; state licenses for certain occupations like auto mechanics, realtors, barbers and cosmetologists and educations ; a sign permit from your city or county; sales tax licenses from your state department and health department permits.
Government Regulation of Franchises - To learn more about this author, visit Sebastien Page's Website.
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In the United States, all franchisors must abide by the Federal Trade Commission's (FTC) Franchise Rule, which requires franchisors to prepare a disclosure document called the Uniform Franchise Offering Circular (UFOC ) / Franchise Disclosure Document (FDD) and give a copy of that document to prospective franchisees prior to their purchase of a franchise.
The UFOC / FDD document consists of 23 different categories, which contain information such as basic investment, franchise fees, a financial statement of the franchisor and earnings claims (if the company discloses that information), how long the franchise will be in effect, bankruptcy and litigation history (including civil judgments and felony convictions) and information about the franchisor's executives (such as past experience).
There are fourteen “Registration States” that require franchise companies to file or register their franchise offerings with a state agency. These states are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. These states (and Oregon) additionally have disclosure regulations similar to FTC regulations.
Several other states regulate the offering and sale of “business opportunities” via state business opportunity laws. Arkansas, California, Illinois, Iowa, Minnesota and a few other states regulate the termination of non-renewals of agreements. In California, Illinois, Indiana and Maryland, proposed ads must be pre-approved prior to publication.
As you may very well be aware, the government regulates all businesses, not just franchises. Regardless of what business you're going into, you'll have to find out what licenses and/or permits are required before you open that business. Such licenses/permits include a business license from your city's business license department; a fire department license (if your business uses flammable materials); air and water pollution control permits if you burn any materials, expel anything into sewers or waterways, or use products that emit gas; state licenses for certain occupations like auto mechanics, realtors, barbers and cosmetologists and educations ; a sign permit from your city or county; sales tax licenses from your state department and health department permits.
Government Regulation of Franchises - To learn more about this author, visit Sebastien Page's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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