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For Franchise Buyers: What the UFOC Tells You

Written by: Mary Tomzack

Article Overview: Tips on how to understand and use the Uniform Franchise Offering Circular.

For Franchise Buyers: What the UFOC Tells You

Each franchisor must produce a document called Uniform Franchise Circular (UFOC), which is submitted to the Federal Trade Commission. This document, with its 23 required items of information, is essential reading for any prospective Franchisee.

Although the contents of the UFOC are prescribed, many franchisors will only present the minimum information needed to get by. So, to get an accurate assessment of the Franchisor, you will need to do some reading between the lines and ask a lot of additional questions.

The analysis of a Franchisor’s UFOC is too big a subject to cover in one article so let me just give you some important tips to keep in mind while you’re reading through the document. More of these follow in additional articles.

Tips

•Read the litigation section carefully, looking especially for an excessive number of law-suits by Franchisees. That might indicate that a Franchisor is not living up to its agreement. A real flag: Franchisors that are involved in class action suits and/or expulsions from securities associations.

•Franchisors are often adamant about the Franchisee’s use of their approved suppliers. The prudent franchise investor should compare alternate supply sources with the Franchisor’s approved ones for price and quality.

•Franchisors that offer financial assistance to prospective Franchisees provide a service. Just make sure that the terms and conditions of the system-sponsored financing are fair to the Franchisee.

•When you examine a company’s advertising program and strategy, look for clear-cut goals and effective use of funding. You don’t want to find out that most of the advertising dollars go toward attracting new Franchisees, not customers.

•Most major points of the franchise agreement will not be negotiated by the Franchisor, so if there’s something you cannot live with, be ready to walk away from the deal.

•Be very sure you’ve settled on the right franchise, because, once you have paid the fee, it’s doubtful you will get it back if you change your mind. Most fees are not-refundable.

•Don’t be enticed by Franchisor’s very low franchise fee. Find out what it covers. If training, support and marketing aren’t included in the initial fee, you can end up paying much more on a piecemeal basis than you would with a higher fee that includes all these things.

•Ask yourself this question when considering a royalty fee (especially one that seems high in comparison to other Franchisors): Does the franchise have such powerful name recognition that the high royalty is warranted?

•Find out if Franchisees are paying their royalties. It spells trouble if they aren’t. Either they’re not doing well enough to pay the fee or they’re not satisfied with the Franchisor’s support and services.

Related Articles
  Franchise information that is pertinent to your investigation is disclosed in the Uniform Franchise Offering Circular (UFOC).
  Big Changes Coming in Franchise UFOC Meet the FDD
  Franchise Financial Information
  Things to Watch Out for When Buying a Franchise
  What is the Franchise Ufocs Role

Article Tags: Circular UFOC, essential reading, Federal Trade Commission, Franchisees, Franchisor, Franchisor, Franchisor, Franchisor, Franchisor, Franchisor, Franchisor, Franchisors, Franchisors, Franchisors, Franchisors, franchisors, prospective Franchisees, reading between the lines, UFOC, 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: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
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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