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Since 1979, federal franchise law has required franchisers to give a document known as the Uniform Franchise Offering Circular (UFOC) to franchisees before any contract is signed or any money exchanged. UFOCs contain detailed information about a franchiser, which is intended to give educated information to aid a potential franchisee in deciding whether or not to invest in a particular franchise. Read More »
Many of the terms surrounding the purchase of a hotel business can sound familiar--"franchise," "turn key operation" and "operating results" are all terms that are used in business fields outside of the hospitality industry, so you're likely to have encountered them if you're a business owner. Happily, in the hospitality industry, they generally retain the basic meaning that you're familiar with. Read More »
This valuable and voluminous document contains detailed information about the franchise, which will help you evaluate the business to determine if it's right for you. The document contains three main components:
The Uniform Franchise Offering Circular, or UFOC, is a legal document outlining a franchise opportunity to any potential buyers of the franchise. Revisions were made to what this document requires by the Federal Trade Commission, and since then it has also become known as a franchise disclosure document, or FDD.
A seller of a franchise, or franchisor, has to provide information in over twenty categories for this document. A potential buyer of the franchise, or franchisee, will usually have to produce a business plan for any necessary financing arrangements. The UFOC should enable the franchise to make a valid business plan.
Some of the important information that has to go into a UFOC includes the initial franchise fee, any other fees or expenses that may arise, what the key roles in the business are, details of any litigation involving the franchisor, details of bankruptcy proceedings involving the franchisor or its executives, and details on earning claims.
As a UFOC allows the production of a detailed business plan, with both parties knowing their obligations and potential expenses, it reduces the risk associated with starting a franchise.
If you want to learn more about the Uniform Franchise Offering Circular, click on the links on this page, which were compiled and researched by Business.com.