What’s a UFOC?

Since 1979, the US Federal Trade Commission (FTC) has required that companies offering franchises for sale (the franchisors) provide potential buyers (the franchisees) with a document called a Uniform Franchise Offering Circular (UFOC).

The UFOC is also sometimes referred to as an “offering circular” or the “disclosure document.” It provides detailed information, which must be set out in clear, understandable language (“plain English” according to the FTC), on more than 20 substantive topics. Each and every UFOC follows this same format and must contain information on the same topics.

The 23 items, as numbered and set forth in a UFOC, are:

1.   The Franchisor, its predecessors and affiliates
2.   Business Experience of the Franchisor’s senior management
3.   Litigation
4.   Bankruptcy
5.   Initial Franchise Fee
6.   Other Fees
7.   Initial Investment
8.   Restriction on sources of products and services
9.   Franchisee’s obligations
10. Financing available
11. Franchisor’s obligations
12. Territory
13. Trademarks
14. Patents, copyrights and proprietary information
15. Obligations to participate in the actual operation of the franchise business
16. Restrictions on what the franchisee may sell
17. Renewal, termination, transfers and dispute resolution
18. Public figures
19. Earnings claims
20. List of franchise outlets
21. Financial statements for the franchisor
22. Contracts to be signed
23. Acknowledgement of Receipt

A franchisor is not required to give its UFOC out to everyone who asks for one or to give it out to everyone who inquires about buying a franchise. A franchisor must, however, provide the UFOC at the time of the first serious discussion with a candidate and at least 10 days prior to accepting any money from a potential franchisee or signing a franchise agreement with the candidate.

To determine whether you have the financial ability and are also otherwise qualified to join the franchisor’s system and become a franchisee, a franchisor will usually require that you complete an application before it will provide you with a UFOC.

Some franchisors will mail a UFOC to a prospective franchisee while others will only deliver them in a personal meeting. To acknowledge your receipt and confirm when the 10 day period begins, the law requires the franchisor to have you sign an acknowledgement of receipt when you receive the UFOC.

The purpose of these regulations is to ensure that franchisors provide uniform, detailed information about their business to prospective buyers.

BUT BEWARE

It is absolutely critical to note, however, that simply because a business is offered as a franchise and therefore is subject to these disclosure regulations, does NOT mean that the business is a good business or that it can be run profitably! 

The federal government, the FTC and the state governments DO NOT, by regulating franchises, endorse any offering.

Because something is written in a UFOC does not mean it is true, complete or accurate. Note that the FTC requires that every UFOC contain this disclosure:

“… we’ve required your franchisor to give you this information. We haven’t checked it and don’t know if it’s correct.”

The lesson: The UFOC is a great source for information but it is only the beginning and you must conduct your own Due Diligence.

Again, simply because a franchisor complies with the disclosure regulations and has a UFOC does not mean that the franchisor has made accurate disclosures. It is incumbent on you to fully investigate each opportunity and conduct due diligence to determine if a particular franchise opportunity is a prudent investment for you.

Franchise Success Center

A franchisor’s UFOC is a virtual treasure trove of valuable information. The key, however, is to know the most important information to consider and to learn what to do with the information obtained from the UFOC.

For many people, the review of the UFOC and the Franchise Agreement are tasks for which they need assistance from a team member. Hire a franchise lawyer or accountant, as appropriate, to assist you. You might also consider utilizing the Business Review services offered by Franchise Success Center.

At Franchise Success Center, through our member presentations and coaching programs, we guide our clients through the entire process of buying a franchise business.

Our Gold Members, for example, receive our exclusive Due Diligence Resource Package to assist them through this process. Be sure to consider which membership program best suits your needs.

Of course, the first step is to determine which of the thousands of franchise opportunities out there may, potentially, be a great fit for you.  There is no cost, no risk and no obligation to add us to your Team. Sign up for your Free Consultation here.

After your broker representative has helped you narrow your options and identified the best available franchise opportunities for you to consider, you will submit an application to these select franchisors, obtain their UFOCs and begin your Due Diligence.

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With no risk and no obligation you can add Franchise Success Center to your Success Team today!

The process of identifying and acquiring the right franchise business opportunity can be daunting and you can make very costly mistakes if you try to do it on your own. We designed our educational, coaching and broker/referral program to help you avoid making those costly mistakes. Our goal is to make you a more informed, smarter buyer and to help you become a successful franchise business owner.

Register now for your Free Consultation with one of our franchise broker representatives and you will be on your way to owning your own franchised business.

We look forward to your success!

Franchise Success Center provides educational and broker services but is not qualified to advise in any part of the purchase of a franchise or business opportunity. This report in no way offers business advice. Investing in a franchise is a complicated and serious matter. You are urged to seek professional advice and to consult with a franchise attorney, an accountant, and/or other professionals before you make your decision.