Like this article? PLEASE +1 it! Evan Signature
Evan Carmichael Top Header
Share for a Cause









Franchise Rule Changes

Written by: Anne Barr

Article Overview: Several years ago, the Federal Trade Commission announced that it intended to overhaul its Franchise Rule. It has now finalized those changes and they must be complied with by all franchisors no later than July, 2008. This article was written particularly for those who are currently exploring franchise opportunities or intend to do so in the near future. It behooves us all to stay current on laws and changes that may affect our future.

Free Download - Transfers vs. New First Time Franchisees By Anne Barr
Name: Email:

Franchise Rule Changes

Several years ago, the Federal Trade Commission announced that it intended to overhaul its Franchise Rule. It has now finalized those changes and they must be complied with by all franchisors no later than July, 2008.

Here are some highlights of what you need to know:

• UFOC is now the FDD - Uniform Franchise Offering Circular has become the Franchise Disclosure Document
• Disclosure Delivery Rule – rather than the prospect receiving the disclosure document at the first personal meeting, it can now be delivered anytime as long as there are 14 calendar days before the franchisee signs any agreement or pays any consideration. E-Disclosure is now permitted as long as potential franchisees are advised of the different formats available and the franchisee must be able to store and print the version made available by the franchisor.
• Final Agreement Delivery Rules – the old “5 business day” rule has been eliminated. Now the form of agreement attached to the disclosure document serves as the final agreement for purposes of delivery. However, if the franchisor makes unilateral changes to the agreement, it must deliver the new version at least seven days before signing.
• The most significant change to the disclosure requirements is a completely revamped Item 20 (which shows changes in the number of system outlets over a three-year period). The new disclosure document mandates a fully reconciled tabular summary of the inflow and outflow of franchised and company-owned outlets over the course of each year. It also establishes a separate table for transfers, which ultimately do not affect the total number of operating outlets.The Rule also contains definitions of specific events and creates rules to avoid double-counting of those events. For example, if the franchisor terminates a franchise but then repurchases the outlet, those rules would focus on the “last-in-time” event, and, thus, it would be characterized as a repurchase.
• Earnings Claims are now called: Financial Performance Representations. The FTC has confirmed that it will not mandate the use of such representations in the disclosure document. However, the FTC has added specific preambles to Item 19, indicating that franchisors are allowed to provide financial performance representations and that prospects should not rely on unauthorized representations.
• No Protected Territory: If the franchisor does not provide any protected territory, the disclosure document must contain a warning legend about the franchisee’s lack of exclusivity and the possibility of competition from other channels of distribution.

So, what do all these changes mean to you if you are currently exploring franchise opportunities?

Possibly a more informative and streamlined process when you find a particular franchise that offers some serious probability for you. In addition to all these changes, depending on where you live, your state may have laws and regulations that franchisors must follow in your state. These laws may be in addition to the FTC rules.

There are currently 15 states that have imposed certain regulations for franchisors to operate in that state. They are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.

Certain other states require only a one-time or annual registration by the franchisor before they can bring franchisees on board who live in those states.

This article was written particularly for those who are currently exploring franchise opportunities or intend to do so in the near future. It behooves us all to stay current on laws and changes that may affect our future.

Related Articles
  Top tips for franchise success
  Franchise Financial Performance
  Finding a Franchise Online
  Benefits and Responsibilities of Franchise Ownership
  What You Should Know About Your Franchisor Before Signing On

Home > Franchises > Anne Barr > Franchise Rule Changes
Article Tags: franchise business, franchise disclosure document

About the Author: Anne Barr
RSS for Anne's articles - Visit Anne's website

Anne Barr has over 27 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company.

Click here to visit Anne's website
Dashed Line

More from Anne Barr
Franchise Rule Changes
Funding Your Franchise
Are You Ready For A Franchise
NonTraditional Sites For Franchises
Why Develop An Exit Plan


Related Forum Posts
Re: Enticing Franchises - Top 9 List 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... 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.
Franchising & Licensing Can Be The Same Thing Franchising & Licensing Can Be The Same Thing - FTC Rule 436 defines franchising as anyone offering an Agreement that contains these 3 things: 1. Licensing a "Mark" - which can be a trade name, service mark, commercial symbol, slogan, etc. 2. In the body of the Agreement, there contains, significant controls and assistance. 3. The licensee is paying the licensor in excess of $500 within the first six months of the actual offering of the business. Licensing and Franchising can mean the same thing today. If you do not decide to franchise and comply with FTC Rule 436, you may be in violation of Business Opportunity Laws that exist in 24 individual States.
how much for a franchise fee? how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.


Recommended Article for You close

  Top tips for franchise success

Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.



Featured Article


Bottom Footer
Share for a Cause












Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Name:
Email:
Popular Articles

The State of the Sustainable Furniture Industry

Email Marketing Made Easy #11 - Avoiding Spam

Leading from Authenticity is a Beautiful Thing

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.