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Explaining the UFOC

Written by: Michael Hemenway

Article Overview: The UFOC should be presented at the time the franchisee is asking for information. It sets the guidelines, which the franchisee and the franchisor are supposed to follow.

Explaining the UFOC

The UFOC is the most important document in the franchising world. If you are thinking of entering the franchising market and looking for prospective franchisors, the document that you are supposed to go through minutely is the UFOC. Each franchisor must give you minimum 10 days to read the UFOC, before asking you to sign any paper. For a layman, the UFOC can be a very daunting task; it has so many sections that it can confuse a newcomer. So, the best way to read the UFOC is by taking the help of your lawyer and your accountant. In addition, you can also go through the following paragraphs in order to understand the UFOC in a nutshell.

The UFOC has many sections – totaling 23. Broadly speaking, it can be divided into the following parts:

1. Sections on the franchisor: The total background of the company will be given in theses sections UFOC. Going through the sections, you will learn about the history of the company along with the business experience it has. These sections will also make you aware whether this company was brought from someone else or was formed as a merger. You will also know about the people who are running the show and their educational as well as other qualifications. The sections will also include the history of litigation the company has faced and whether the people responsible have experienced any bankruptcy or other cases in the past. Then there will be section on the past and present franchisees of the company and the number of franchisees that have been closed down or resold. The section will also include the status of the patent, copyright, trademark and proprietary information regarding the products/services as well as the brand name of the company. The sections are 1 to 4, 13, 14 and 20.

2. Sections on the franchisee and franchisor relationship: These sections will spell what the franchisor will do for the franchisees and what they are required to do in return. You will also know about the products it can sell and from where it can source the material. Moreover, you will learn about the agreement period and whether you can have an exclusive territory or not. Some sections will speak about how any dispute among the franchisees or between the franchisor and franchisee will be settled. The sections are 8,9,11,12,15,16 and 17.

3. The financial aspects and fees: The fees and other charges the franchisees have to pay are discussed in these sections. Besides, the sections will also include the financial statement of the franchisor, earning claim (if there’s any) and also any financial program the company offers. The sections are 5, 6,7,10, 19 and 21.

4. There are some extra sections like 18 that say which public figure is associated with the franchisor. Section 22 talks about any contract that you may have to sign whereas Section 23 is a receipt that you received the UFOC.

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Article Tags: accountant, bankruptcy, brand name, business experience, daunting task, franchisee, franchisees, franchisor, lawyer, layman, litigation, merger, newcomer, nutshell, paragraphs, patent, proprietary information, prospective franchisors, theses, ufoc



Related Forum Posts
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.
Franchise Territories - [quote="franchisebrief.com":1dfdbmhp]This information will be included in the UFOC. If the UFOC states that there is no protected territory, then I would be suspicious. If UFOC states that each franchisee will have its own territory, then there should not be any problem.[/quote:1dfdbmhp] Any franchises that I'm familiar with have a territory or distance provision that prevents franchisees from overlapping their territories. This is only a problem when you have an underproducing franchisee - but they should also have a provision to give a franchisee a set amount of time to make a go of the location and territrory. Shri
Re: Franchise Territories - [quote="litekepr":24ik1lrb] Any franchises that I'm familiar with have a territory or distance provision that prevents franchisees from overlapping their territories. [/quote:24ik1lrb] Quizno's didn't have this provision included in their UFOC. Some Quizno's owner ended up having another Quizno's restaurant a few blocks away, which of course doesn't make sense at all. I believe they have now changed their UFOC, and their general franchise policy.
Non-medical homecare franchise business model - I have spoken with their CEO's, gone through their web based discovery day and have copies of their UFOC. I'm just looking for additional feedback or any first hand experience that anyone has had with this industry or any of the above franchises. Thanks!


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