The Franchise UFOC is Required Reading
The Franchise UFOC is Required Reading
While it would be unusual indeed for someone to partner with a complete stranger, what qualities would you look for in such a new relationship? You would want a partner who is hard working, has a successful track record along with good sphere of influence. In addition you seek to measure the relationships they have had with previous partners and if they operate with integrity. You would also want someone whose talents and abilities will complement your own — whose strengths balance your weaknesses and vice versa. While finding such an individual partner might be a challenge, finding such a company is not — at least when it comes to franchises.
That’s because franchises fully disclose all the information you need to know in order to determine if they are the right partners for you. In fact, the franchise industry is highly regulated in this regard and is mandated by the federal government to provide full disclosure. This is why you may have heard that franchises are safer type of investments. Franchises distribute their UFOC (Uniform Franchise Offering Circular), a document every franchise is required to make available to all serious candidates. The UFOC contains all the critical details you need to fully evaluate the business opportunity and the company that stands behind it.
Actually, UFOC could stand for “Unlimited Facts on Company”, because it’s far more than a circular. Every UFOC contains 23 standard items; we’ve seldom seen one that’s less than 100 pages. And while a UFOC is not exactly exciting reading, it should be viewed as required reading by anyone seriously considering a franchise. Here are the federally mandated items every UFOC must contain:
• Items 1 through 4: The franchiser’s background, the experience of key executives and the company’s litigation and bankruptcy history.
• Items 5 and 6: All the fees charged by the franchiser.
• Item 7: An estimate of the total investment needed to establish the business model.
• Item 8: Restrictions on the purchase of products to be used and sold in the unit.
• Item 9: The franchisee’s obligations.
• Item 10: Financing that the franchisor makes available.
• Item 11: A summary of the services, such as training and site selection that the franchiser provides in relation to the franchise program.
• Item 12: Territory- how is it determined.
• Items 13 and 14: The status of the trademarks, copyrights and patents associated with their program.
• Item 15: Obligations of the franchisee to participate in the actual operation of the franchised business.
• Item 16: Restrictions on what the franchisee can sell- multiple profit centers.
• Item 17: Renewal, termination, transfer and dispute resolution provisions.
• Item 18: Public figures used to promote the franchise.
• Item 19: A description of how well the franchises perform financially.
• Item 20: System statistics and lists of franchisees along with former franchisees.
• Item 21: Financial Statements
• Item 22: Contracts
• Item 23: Receipt
Clearly, that’s a lot of information to digest, but it’s critical that you take the time to do so. In fact, the Federal Trade Commission ( www.ftc.gov ) ensures that you have that time to thoroughly review the UFOC. The FTC enforces a minimum waiting period of 10 business days before any money is paid and any agreement to purchase is signed.
As a legal document, the UFOC can be daunting and while some items are shorter and easier to understand by the average person, others may warrant a review by an accountant or attorney. And while no single item should be considered unimportant, some will be of particular interest — like Items 19 and 20.
Item 19 addresses financial performance and may answer the question every franchisee candidate wants to ask: “How much money will I make?” It is here that the franchisor may state earnings claims based on the average financial performance of existing franchisees. There are two important things to keep in mind. First, most franchisors do not publish earnings claims in their UFOC (although for those that do, it should be viewed as a positive reflection of the company’s confidence and consistency).
Secondly, franchisors are strictly prohibited from making any earnings claims (verbally or in writing) that are not included in their UFOC. Important note: Telling you “Our top 3 franchisees grossed more than $400,000 last year” is not an earnings claim. Stating, “You can expect to gross $400,000 per year on average” is an earnings claim. And if it is not printed in the UFOC, the franchisor cannot and should not communicate it in any other way.
If a UFOC does not explicitly state earnings claims, then Item 20 provides the details that enable you to ascertain financial performance. It is here that the franchisor lists current and former franchisees. And unlike any personal or professional references one might include a resume, the franchisor is required to list all franchisees, not just the best ones. If you’re a serious candidate, you’ll want to contact as many of these people as possible to inquire about their individual financial success.
A few additional thoughts I would like you to remember. First, a franchise is not required to provide their UFOC to just anyone who requests it. Most will want to have at least an initial conversation with you and possibly have you submit a formal application. That’s because they qualify you just as you are qualifying them. If you see them as a prospective business partner, they want to see you as a serious candidate as well. Your success as a franchisee is critical to the success of the entire system; therefore they have a vested interest to thoroughly screen all candidates.
Never acquire a UFOC from any source other than the franchise itself. A franchise will never charge you for the document, but there are third-party companies that claim to provide any UFOC for a fee. However, such companies may not have the most current version since franchisors regularly update their UFOC — some as often as every 12 months.
There is no benefit to researching a franchise in “stealth mode”, so never hesitate to talk with the franchise directly. It is absolutely the best way to get all your questions answered and it is the only way to secure a free copy of their current UFOC. Also, do not assume the company views the dialogue as a sign that you are ready to move forward. They understand that they are likely one of many opportunities you are investigating (just as you are one of many candidates they are considering).
In conclusion, while the UFOC is perhaps the single most comprehensive resource in finding the best franchise business partner, it’s not the only one. There are many other factors, not the least of which is taking the opportunity to meet the franchise management face to face. Almost all franchises regularly schedule candidate visits to their corporate headquarters, commonly called “Discovery Days”, because it’s these events that allow you to talk with top level management, get a real insight to their training program, ongoing support, and personally meet those with those whom you may be working with years to come. Meanwhile, think of the UFOC as the franchise’s resume— a very large one indeed — and use it to determine if it’s time for you to take them more seriously.
David R. Waldman is the founder of PIR & Associates Inc. providing no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and goals. PIR & Associates Inc., features over 400 different types of franchise concepts.
Contact us at 1-877-615-5177 or visit our web site at: www.PIRandAssociates.com
The Franchise UFOC is Required Reading - To learn more about this author, visit David R Waldman's Website.
Like this article? Share it with your friends
If I asked you to give me the three most common words that start with the letter ‘R’ you might say: Results, Random and Reactive. But when it comes to partnering in business, the letter ‘R’ stands for: Risk, Reward and Responsibility. If you are going to go into business with a partner, you want someone who will minimize the risk, maximize the reward and share the responsibility to make the enterprise successful. Realistically, most people choose a friend, a spouse or a relative — a partner they believe is predisposed to make an equal and positive contribution to the business. However, such business partnerships have ended friendships — even marriages — and close relationships were lost as the businesses failed.
While it would be unusual indeed for someone to partner with a complete stranger, what qualities would you look for in such a new relationship? You would want a partner who is hard working, has a successful track record along with good sphere of influence. In addition you seek to measure the relationships they have had with previous partners and if they operate with integrity. You would also want someone whose talents and abilities will complement your own — whose strengths balance your weaknesses and vice versa. While finding such an individual partner might be a challenge, finding such a company is not — at least when it comes to franchises.
That’s because franchises fully disclose all the information you need to know in order to determine if they are the right partners for you. In fact, the franchise industry is highly regulated in this regard and is mandated by the federal government to provide full disclosure. This is why you may have heard that franchises are safer type of investments. Franchises distribute their UFOC (Uniform Franchise Offering Circular), a document every franchise is required to make available to all serious candidates. The UFOC contains all the critical details you need to fully evaluate the business opportunity and the company that stands behind it.
Actually, UFOC could stand for “Unlimited Facts on Company”, because it’s far more than a circular. Every UFOC contains 23 standard items; we’ve seldom seen one that’s less than 100 pages. And while a UFOC is not exactly exciting reading, it should be viewed as required reading by anyone seriously considering a franchise. Here are the federally mandated items every UFOC must contain:
• Items 1 through 4: The franchiser’s background, the experience of key executives and the company’s litigation and bankruptcy history.
• Items 5 and 6: All the fees charged by the franchiser.
• Item 7: An estimate of the total investment needed to establish the business model.
• Item 8: Restrictions on the purchase of products to be used and sold in the unit.
• Item 9: The franchisee’s obligations.
• Item 10: Financing that the franchisor makes available.
• Item 11: A summary of the services, such as training and site selection that the franchiser provides in relation to the franchise program.
• Item 12: Territory- how is it determined.
• Items 13 and 14: The status of the trademarks, copyrights and patents associated with their program.
• Item 15: Obligations of the franchisee to participate in the actual operation of the franchised business.
• Item 16: Restrictions on what the franchisee can sell- multiple profit centers.
• Item 17: Renewal, termination, transfer and dispute resolution provisions.
• Item 18: Public figures used to promote the franchise.
• Item 19: A description of how well the franchises perform financially.
• Item 20: System statistics and lists of franchisees along with former franchisees.
• Item 21: Financial Statements
• Item 22: Contracts
• Item 23: Receipt
Clearly, that’s a lot of information to digest, but it’s critical that you take the time to do so. In fact, the Federal Trade Commission ( www.ftc.gov ) ensures that you have that time to thoroughly review the UFOC. The FTC enforces a minimum waiting period of 10 business days before any money is paid and any agreement to purchase is signed.
As a legal document, the UFOC can be daunting and while some items are shorter and easier to understand by the average person, others may warrant a review by an accountant or attorney. And while no single item should be considered unimportant, some will be of particular interest — like Items 19 and 20.
Item 19 addresses financial performance and may answer the question every franchisee candidate wants to ask: “How much money will I make?” It is here that the franchisor may state earnings claims based on the average financial performance of existing franchisees. There are two important things to keep in mind. First, most franchisors do not publish earnings claims in their UFOC (although for those that do, it should be viewed as a positive reflection of the company’s confidence and consistency).
Secondly, franchisors are strictly prohibited from making any earnings claims (verbally or in writing) that are not included in their UFOC. Important note: Telling you “Our top 3 franchisees grossed more than $400,000 last year” is not an earnings claim. Stating, “You can expect to gross $400,000 per year on average” is an earnings claim. And if it is not printed in the UFOC, the franchisor cannot and should not communicate it in any other way.
If a UFOC does not explicitly state earnings claims, then Item 20 provides the details that enable you to ascertain financial performance. It is here that the franchisor lists current and former franchisees. And unlike any personal or professional references one might include a resume, the franchisor is required to list all franchisees, not just the best ones. If you’re a serious candidate, you’ll want to contact as many of these people as possible to inquire about their individual financial success.
A few additional thoughts I would like you to remember. First, a franchise is not required to provide their UFOC to just anyone who requests it. Most will want to have at least an initial conversation with you and possibly have you submit a formal application. That’s because they qualify you just as you are qualifying them. If you see them as a prospective business partner, they want to see you as a serious candidate as well. Your success as a franchisee is critical to the success of the entire system; therefore they have a vested interest to thoroughly screen all candidates.
Never acquire a UFOC from any source other than the franchise itself. A franchise will never charge you for the document, but there are third-party companies that claim to provide any UFOC for a fee. However, such companies may not have the most current version since franchisors regularly update their UFOC — some as often as every 12 months.
There is no benefit to researching a franchise in “stealth mode”, so never hesitate to talk with the franchise directly. It is absolutely the best way to get all your questions answered and it is the only way to secure a free copy of their current UFOC. Also, do not assume the company views the dialogue as a sign that you are ready to move forward. They understand that they are likely one of many opportunities you are investigating (just as you are one of many candidates they are considering).
In conclusion, while the UFOC is perhaps the single most comprehensive resource in finding the best franchise business partner, it’s not the only one. There are many other factors, not the least of which is taking the opportunity to meet the franchise management face to face. Almost all franchises regularly schedule candidate visits to their corporate headquarters, commonly called “Discovery Days”, because it’s these events that allow you to talk with top level management, get a real insight to their training program, ongoing support, and personally meet those with those whom you may be working with years to come. Meanwhile, think of the UFOC as the franchise’s resume— a very large one indeed — and use it to determine if it’s time for you to take them more seriously.
David R. Waldman is the founder of PIR & Associates Inc. providing no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and goals. PIR & Associates Inc., features over 400 different types of franchise concepts.
Contact us at 1-877-615-5177 or visit our web site at: www.PIRandAssociates.com
The Franchise UFOC is Required Reading - To learn more about this author, visit David R Waldman's Website.
Like this article? Share it with your friends
| |||
 |
No article feedback found. | ||
|
Leave Your Feedback | ||
|
|||
 Franchise information that is pertinent to your investigation is disclosed in the Uniform Franchise Offering Circular (UFOC).
| |||
| Each franchise is obligated by law to disclose pertinent franchise information to its prospect, prior to that prospect making a commitment to the franchise i.e. signing an agreement or paying a deposit. |
|||
|
Franchise Financial Performance
| |||
| Your status as either a potential purchaser or merely a curious member of the public partially determines the amount and quality of information you'll be able to discover about the financial performance of a specifi... |
|||
|
What is the Franchise Ufocs Role
| |||
| Learn more about the UFOC before buying a franchise. Franchising is a contract system between two parties-the franchisor and the franchisee. As with any contractual agreement, there are legal documents and agreement... |
|||
|
Franchise Financial Information
| |||
| As dictated by the Federal Trade Commission (FTC), franchisors are required to give prospective franchisees a copy of their Uniform Offering Circular (UFOC) document, which contains financial and material informatio... |
|||
|
Big Changes Coming in Franchise UFOC Meet the FDD
| |||
| 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 ... |
|||
| |||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
Anne BarrAnne Barr has over 26 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. - Visit Anne Barr's Website |
|||
Michel NerayMichel Neray has over 25 years of experience as an award-winning copywriter, an Internet pioneer, a tradeshow pitchman and a senior sales and marketing executive. An online pioneer, he was one of the first marketing professionals to embrace the Internet by building websites as early as 1993. In 1994, Michel co-authored a book entitled "The Great Crossover: Personal Confidence in the Age of the Microchip", which made it to Jack Canfield's Achiever's Recommended Reading List. Michel founded Portfolios.com in 1995, the world's first online source directory for creative professionals and one of the first websites based on community generated content. Since creating The Essential Message in 2003, Michel has helped thousands of independent professionals and entrepreneurs as well as growing corporations find a better way to differentiate, position and brand themselves. In 2005, his chapter "Everything Starts With A Conversation" was selected as the lead for the book, "Sales Gurus Speak Out" and re-published in 2008 for 'Awakening The Workplace Volume 3'. He is also a co-author of "In the Company of Leaders" (2008) with 40 top North American leadership experts. - Visit Michel Neray's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
 David R Waldman (Visit David's Website) David R. Waldman has spent the last fifteen years working with franchise organizations. He has been instrumental in developing infrastructure and training for large companies with over 240 locations nationwide as well as new emerging franchise organizations. Because of his real-world experience working for large Franchise systems and seeing the tremendous success of franchisees, he created The Franchise Maker. The Franchise Maker is a franchise development firm that takes small businesses to the next level of growth by working with them to duplicate their business model and transform their business into a franchise opportunity. The Franchise Maker provides expertise, relationship, service and goes beyond simply orchestrating all the pieces necessary to successfully franchise a business nationwide. The Franchise Maker has teams of professionals available to clients even after they become a franchisor. The Franchise maker makes franchising a business affordable and being sensitive to budgets, offers a Pay-As-You-Go program. Businesses are encouraged to call for a Free Consultation anytime 1-877-615-5177 www.TheF ranchiseMaker.com
|  |
 |
|
|
 |
|
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
 |
 | ||
 |
||
 |
||
|
||
|
| ||
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 |
 Social Bookmarking Guide Networking Impacts Income Workplace Culture Termination Suit Pro-Forma Template |
|
 | ||
 |
Top 50 Geek Business Blogs
Top 50 Geek Business Blogs | |
 |
Top 50 Business Plans
Top Business Plan Blogs | |
| ||
 |
|
|
|
|
||||||||||||||||||
 |
|
|
||||||||||||
