- Front Page
- Biz Tools
The Franchise Disclosure Document is a specific format of disclosure document required of franchisors (the franchise seller) to franchise buyers by certain states. It is designed to provide some degree of protection to the public by providing information about the franchising company before a franchise purchase is realized.There is no federal government agency that will receive the filing of a franchisor’s UFOC.
The Uniform Franchise Offering Circular (UFOC) format, now called the Franchise Disclosure Document as of July 1, 2008, was adopted in 1993 by the North American Securities Administrators Association (NASAA), which was later approved by the FTC.
Many states have implemented their own individual franchise rules and disclosure requirements. A minority of states, 13, has franchise filing requirements. 15 states have led franchising regulation by adopting more stringent standards of the UFOC format rather than the federal Franchise Rule.
If a franchisor is authorized to sell in the states below, the company must be registered with the following offices there.
Since franchisors who want to sell in these 14 states must use the tougher UFOC, franchisors want to minimize their disclosure efforts by issuing their prepared UFOC in 35 states. However, a franchisor in these states is only required to provide a disclosure document compliant with the federal Franchise Rule. No record of these documents need be registered with the State.
The circular has 23 categories (*.doc) of information that needs to be provided to the franchise buyer.
It is important that the franchise buyer thoroughly investigate the potential opportunity. One of the first steps is understanding what is in the UFOC, its reliability and what is not there. Franchise411 has organized an instructional guide, Franchising, Introduction to the Uniform Franchise Offering Circular and the Franchise Agreement that is worth a read.