A Sampling of UFOC Items
Below is a list of some of the 23 items that must be listed in every franchisor’s UFOC document:
Name – The complete, full, and legal name of the franchisor, its predecessors, and affiliates.
Litigation – A clear statement on how litigation will be handled and where. It must also include statements on if arbitration is an option, and both the franchisor’s and franchisee’s rights to litigation.
Franchising Fees – The UFOC must fully disclose not only any initial franchising fees but fees for advertising and promotional tools and if the franchisee has the right not to utilize any advertising or promotional tools or deny them in participation agreements.
Initial Investment – It must clearly state what the franchisor's initial investment requirement will be for the franchisee.
Vendors – A list of franchisor vendors and what the franchisee requirements are as far as purchasing from franchisor vendors.
Territory – Outline the territory your franchise falls into. This can be important to you as the franchisee, especially if a franchisor attempts to open another franchise in your territory.
Participation Agreements – Define the rules and regulations of the franchisor's trademarks, copyrights, mandatory production items and the like.
Restrictions – This must list any restricted products or services the franchisee is not allowed to offer, sell, or promote.
Contracts - A list of every contract, including approved vendor, equipment, and advertising contracts a franchisee must sign, including the franchise agreement itself.
Every franchisor has different rules and regulations and every state has different franchise laws. However, all franchisors must follow the rules of the FTC and annually produce a UFOC to their franchisees.
Use the UFOC to negotiate items you feel you can’t afford or don’t wish to participate in, or to tailor the UFOC to your market area. Some UFOCs are non-negotiable, and the FTC does require that a prospective franchisee has the right to see the UFOC before any franchise fees are paid.
If you don’t understand what obligations and rules franchises have to follow, read all your agreements including the UFOC or ask for help from a franchise attorney so you don’t sign up for anything that could break your business.