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Big Changes Coming in Franchise UFOC Meet the FDD

Written by: Michael Hemenway

Article Overview: The UFOC is going to have a major change as per new FTC ruling and will be renamed as FDD. It has to be implemented by July this year. The changes include modification of the name of the items and major alterations in litigation history disclosure.

Big Changes Coming in Franchise UFOC Meet the FDD

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.

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Article Tags: business for sale, calendar days, company background, company history, disclosure document, electronic media, emp, franchise brokers, franchise business, franchise disclosure, franchise industry, franchise system, franchisee, franchisor, franchisors, litigation history, management staffs, parent company, prospective franchisees, ufoc



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UFOC Clearly States - Every UFOC clearly states that no government agency has checked the information in the UFOC. It is up to you to check it. You cannot simply rely upon what is in the UFOC without checking it out. (One might think that this is a make work program for franchisee lawyers and consultants, except that few franchisees every check out the UFOC.) There are a lot of ways to check the information out. For example, Netfran Development's UFOC has no earnings claim in item 19. But since the UFOC also discloses that NetFran is a public company, and so it is useful to review the company's 10k's - a public document- to see what is says about its franchisees. Remember that it is up to you to check out the UFOC and report any inadequacies to the relevant state/fed authorities.
Internet consulting franchise - Do you think if you sent in an application to Netspace or to whatever franchise concepts you have an interest in developing and you possess the requisite net worth and cash to qualify that that might be a good way to get the UFOCs from these companies? The UFOC is the fountainhead for your due diligence otherwise asking inane questions on this forum or any other one is a waste of time. Now you could alternatively purchase the UFOC from a third party. If you have a UFOC then you have a list of current and former franchisees and I must point out that they likely have more useful information than the anonymous posters and those posters who just have an opinion.
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Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.


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