Big Changes Coming in Franchise UFOC Meet the FDD

Guest post by: Michael Hemenway
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Factoring Offers Hope for Companies Struggling with Cash Flow - By Michael Hemenway

The franchise industry is going through a period of makeover. The federal agency FTC is laying down new rules regarding the franchisor-franchisee relationship. The changes are going to be placed in the UFOC, the first document that the franchisors give to the prospective franchisees who come in response to their franchise business for sale offers. The document will make the person seeking to buy a franchise aware of everything about the company. There will be information about the company-background, the management system and other existing franchisees. Besides, the UFOC will also tell the would-be franchisees about the cost of starting that franchise business and the support system of the franchisor. According to the new ruling, the new format of the franchise disclosure is supposed to be implemented from July of this year onwards.

Now let’s see some of thechanges in the new document:

• The first important change is the name itself. From UFOC it is becoming FDD (Franchise Disclosure Document).
• The condition that the franchisor and franchisee have to meet face to face before handling the latter the UFOC has been scrapped.
• The UFOC was supposed to be given 10 business days prior to any signing of deal and exchange of money. The new one makes it 14 calendar days.
• A very important change is the mode of delivery of the new FDD. It can be given out through electronic media.
• Similarly, the receipt a would-be franchisee sends back can also be electronically signed.
• The company history will also include information of the main parent company that is anyhow related to the franchise system.
• There won’t be any list of franchise-brokers the franchisor is associated with.
• The financial and other history of the people, whether they are management staffs or not, associated with the selling or dealing of the franchise have to be disclosed.
• Litigation history between the franchisor and the franchisees need to be stated.
• Mentioning the supplier’s name in whose company an employee of the franchisor is involved in one way or another is mandatory.
• If the franchisor is not going to provide any exclusive territory in the franchise agreement, then a warning notice has to be given in the relevant section.

Franchise information that is pertinent to your investigation is disclosed in the Uniform Franchise Offering Circular (UFOC).

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Factoring Offers Hope for Companies Struggling with Cash Flow - By Michael Hemenway

About the Author: Michael Hemenway

RSS for Michael's articles - Visit Michael's website
Founder/CEO of brandEXPANSION the only firm of its kind serving all aspects of franchising. With our industry background and successful franchise units established around the world, we have a time tested strategy to assist you in locating, developing, advertising, marketing and executing the optimal franchisor and franchisee strategy. brandEXPANSION brings over a dozen years of hands on experience in the field. This gives us an insider’s perspective on the business of franchising, which is an invaluable asset in supporting your objectives. We simplify the franchise experience by providing on going consulting and support designed to deliver the most profitable franchise investment you can attain. brandEXPANSION has placed franchise units in over 1000 locations nationwide. This includes the strategy and writing of franchise documents, over 600 franchise real estate locations selected, over 200 construction projects completed and over 250 proven franchise companies currently represented. The company also operates the leading franchise-industry social networking site, http://www.FranchiseUltraLounge.com.
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