D-Day! New Franchise Rule Kicks In

Washington, D.C. (Blue MauMau) - Today is the first day that the Federal Trade Commission's new franchise rule permanently kicks in. The original Uniform Franchise Offering Circular, implemented in 1993, is now simplified in name to Franchise Disclosure Document. The Federal Trade Commission and some thirteen states now require companies that sell franchises to file  new information about themselves in a new disclosure format.

So why is that important?

Craig Tregillus, the Federal Trade Commission's Franchise Rule Coordinator, explains that the new disclosure template provides significant benefits to buyers, one being that a potential franchise buyer now has a more comprehensive listing  of those involved in running franchise stores. He states that the new disclosure document "includes contact information not only for franchisee associations, but also for current and former franchisees, so that any potential purchaser can confirm with them that what the franchisor says in the FDD is accurate."

Some 13 States that accept registration have prepared during these past couple of years to accept franchise registration applications that conform to the new Guidelines (pdf).  Franchisors can no longer use the old UFOC guidelines to prepare the new franchise disclosure documents.

States have been working with the North American Securities Administrators Association (NASAA) to adopt the new federal guidelines to individual registration state requirements. 

Mark Leyes, Director of Communications for the California Department of Corporations, states, "As of today, the new Franchise Disclosure Document will be replacing the old UFOC format. The California Department of Corporations has been engaged with NASAA in developing and adopting the new rules for California to minimize any confusion or frustration. California’s efforts in adopting the new rule earlier this year should result in an effective and efficient process for the current and future franchise owning community."

Further reading:

• An Interview with the FTC about the New Franchise Rule
• FTC Answers Technical Questions about Its Amended Franchise Rule