The Franchise King® | Learn How To Become A Franchisee

Franchise Legal Magic. The UFOC Disappears!

The month of July marked the end of the infamous Uniform Franchise Offering Circular.
{UFOC}

(This post may contain affiliate links. Please read my disclosure policy).

POOF!

Rest In Peace…….

The Uniform Franchise Offering Circular has been slammed by industry and non industry types for years.This required reading document for prospective franchisees although pretty darn boring, is really important. It was just revamped, and renamed. The FDD, or Franchise Disclosure Document. It has some changes, which are pretty positive for the consumer. I discussed the “boring” factor a bit on the MSNBC Business Blog, recently.

When the Federal Trade Commission overhauled its “Franchise Rule” last year, it came up with this new disclosure format. It was one which adopted the UFOC disclosure requirements, but added to them as well.

These are the items that are to be included in every FDD:

1. The Franchisor, its Predecessors and Affiliates

2. Business Experience

3. Litigation

4. Bankruptcy

5. Initial Franchise Fee

6. Other Fees

7. Initial Investment

8. Restrictions on Sources Of Products And Services

9. Franchisee’s Obligations

10. Financing

11. Franchisor’s Obligations

12. Territory

13. Trademarks



Free Franchise Quiz
Find Out If You Should Own A Franchise Before You Write the Check
Invalid email address


14. Patents, Copyrights and Proprietary Information

15. Obligation To Participate In The Actual Operation Of The Franchise Business

16. Restrictions On What The Franchisee May Sell

17. Renewal, Termination, Transfer And Dispute Resolution

18. Public Figures

19. Earnings Claims

20. List Of Outlets

21. Financial Statements

22. Contracts

23. Receipt

The major differences between the now old UFOC, and the new FDD are:

1. The new law encourages more disclosure about earnings. Information about business costs can be freely disclosed, and financial results can be given in the FDD for a subset of franchisees without having to compare them to the entire chain.
2. The FDD and other informational documents may be sent electronically–a change that will really save franchisors money and maybe even encourage them to send information to prospects sooner.{It is also pretty darn Green!}
3. Franchisors must disclose contact information for all of the franchisee associations in their system, including ones approved by the franchisor as well as independent associations. Before, prospects had to find independent associations on their own.
4. If a franchisor’s corporate parent guarantees the business or provides supplies to franchisees, its contact and financial information has to be disclosed. Previously, corporate parents did not have to be disclosed, at all.
5. More litigation disclosure is now required. Franchisors must list suits they’ve filed against franchisees over the previous year.

The FDD is a welcome change to the UFOC, which has been around for many years, and should provide a little more transparency for potential franchise buyers.

Please Share This Article!
0Shares
Note: When you buy through links on our site, we may earn an affiliate commission. In addition, I've started to use AI to help me craft better article titles and headings.
joel libava

I'm The Franchise King®, Joel Libava. I help prospective franchise owners avoid bank account emptying mistakes.
For 23 years, I’ve been showing people how to make smart, informed decisions on franchises to buy, and I can help you, too!
P.S. I'm not a franchise consultant/broker.

Straightforward Advice
Joel, thank you for taking the time to speak with me yesterday. It was refreshing to finally speak with someone in franchising who dishes out straightforward, candid advice. You provided me with some insightful ideas that I'm giving a good deal of thought and consideration to. I look forward to speaking with you on our next consultation call."
- John Timmins, Columbia, South Carolina
Free Franchise Tools Franchise Compatibility Quiz Net Worth Calculator
VIP Franchise Newsletter

Recommended Reading
How Franchises Work
How Much Is A Franchise?
Pros And Cons Of A Franchise What Is The Franchise Fee? How To Buy A Franchise
Best Franchises To Own

Top 33 Business Ideas
6-Figure Home Businesses Starbucks Franchise Facts
Featured Franchises!
10 Best Franchise Websites
About Franchise Consultants
How To Read A FDD
Questions To Ask Franchisors
Questions To Ask Franchisees Franchise Discovery Day Franchise Reviews
Top 10 Franchise Buying Tips