A Uniform Franchise Offering Circular (also known as a UFOC, a
"disclosure document" or an "offering
prospectus") is a detailed set of prescribed disclosures the
law requires every franchisor to deliver at least a couple weeks
before the completed franchise sale. All UFOCs follow the same
guidelines regarding structure and content. That makes them useful
for comparing two or more franchise programs side-by-side.
Reading the UFOC thoroughly gives you a substantial advantage.
It's chock-full of information you can use. Thankfully,
it's also well-organized into 23 items of narrative
descriptions, and includes up to three years of audited financial
statements from the franchisor and a copy of the franchise
agreement you'll be asked to sign.
Here's a quick summary of the topics addressed in a
UFOC:
Content Continues Below
Items 1 through 4:
Background information about the franchisor, key executives, and
the company's litigation and bankruptcy history.
Items 5 and 6: Fees charged
by the franchisor, with continuing fees organized in chart
form.
Item 7: An estimate of your
total investment in establishing the business.
Item 8: Restrictions and
details on purchase limitations for products sold.
Item 9: The franchisee's
obligations.
Item 10: Franchisor-provided
financing, if any.
Item 11: A summary of
services provided by the franchisor, such as training and site
selection.
Item 12: Territory
protections.
Items 13 and 14: Description
of trademarks, patents and copyrights.
Item 15: The
franchisee's obligations to participate in the actual operation
of the business.
Item 16: Restrictions on
what the franchisee can sell in the business.
Item 17: A chart showing
renewal, termination, transfer and dispute resolution provisions of
the franchise agreement.
Item 18: Details regarding
public figures promoting the franchise.
Item 19: Business and
financial performance statistics.
Item 20: System statistics
and lists of franchisees and former franchisees.
Andrew A. Caffey is a practicing attorney in the Washington,
DC, area specializing in franchise law.
Originally published in the January 2002 issue of Entrepreneur Magazine