What is ufoc

Since , U. A prospect and a franchisor can now meet as many times as they choose, but the prospect cannot buy a franchise until he or she has had the FDD in hand for at least 14 calendar days. By the way, the number used to be 10 business days. An FDD will often include a franchise agreement, which is the document that the franchisor and franchisee sign.

Franchisors are required to provide a prospect with a final franchise agreement at least 7 calendar days before executing the document. Used to be 5 business days. Next is a section that contains a brief summary of the officers, directors, and other executives. Read carefully to determine their level of experience and expertise. See if any have ties with suppliers or vendors from whom you'll purchase supplies or inventory and whether such ties present conflicts of interest.

The UFOC will also include a brief description of any major civil, criminal or bankruptcy actions that the officers and executives have been involved in or that the franchise company is a party to. Lawsuits are common today, and the fact that someone has been sued or has filed suit does not necessarily indicate problems. However, if the lawsuits involve problems with franchisees or vendors, or if they are numerous, investigate further to determine the stability and integrity of the franchisor.

The terms of the franchise agreement are one of the most crucial parts of the UFOC and one that you need to review carefully. Many franchisors offer initial terms of five to ten years with options to renew for additional periods. However, it is not uncommon to encounter agreements for five-to-ten year terms with no option for renewal. This means that when the initial term expires, the franchisor may terminate the franchise and open his own company store, or charge the franchisee a large fee to continue.

If the franchise agreement does not give you an option to renew, you have no protection and could lose all the goodwill you built up during the period you operated the business. Franchisors are required to list an approximation of the initial costs of starting the franchise in addition to the franchise fees. Those costs usually include equipment, inventory, operating capital, and insurance.

Keep in mind that these costs are estimates and are not inclusive. In fact, many franchise litigation specialists point out that franchisors show zero working capital or an unrealistically low figure.

By providing such detailed information and resources on the front end, it is possible for both parties to be clear on the obligations they have, and be willing to meet those obligations before ever entering into a legally binding business relationship.

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