When you receive your UFOCs from your shortlist of franchise opportunities, it should be comprised of the following 23 categories. The omission of any one category should raise a red flag and should be discussed with your lawyer or the Franchisor.
Here is a brief outline of each category in the UFOC.
- 1. The Franchisor, Its Predecesors and Affiliates
The Franchisor is required to disclose any legal issues in this section, such as a lawsuit, even if the company evolved from a previous transfer or sale or recently merged with another.
- 2. Business Experience
This section should outline the biographies and educational background of the key figures in the franchise operations.
- 3. Litigation
Franchisors must tell prospect Franchisees of any lawsuits brought against them and/or their staff.
- 4. Bankruptcy
Any executive who has filed for personal bankruptcy in the last 10 years has to state this truth here.
- 5. Initial Franchise Fee
The Franchisor has to reveal the amount of this fee and the terms of payment and refund options, if any. Also, to state whether the fee has increased or decreased over time.
- 6. Other Fees
Any other fees are listed here.
- 7. Initial Investment
This is supposed to give prospect Franchisees an ideas of how much money will need to be invested to get the business up and running. These figures may be averaged amounts from a number of previous franchise openings.
- 8. Restrictions on Sources of Products
This section states what rebates or “kickbacks” the Franchisor receives from suppliers for making Franchisees buy inventory or equipment from these suppliers.
- 9. Franchisee's Obligations
These obligations are listed here.
- 10. Financing
The Franchisor informs you whether they offer in-house financing and all pertinent details, or whether financing is being offered through another organization.
- 11. Franchisor's Obligations
This is an important section and you should review it carefully. It is supposed to outline in fine detail what the Franchisor is going to do for its Franchisees, covering such areas as advertising and site selection.
