PREPARING DISCLOSURE DOCUMENTS: Uniform Franchise Offering Circular (UFOC)

The comprehensive regulation of franchise sales by the federal and state governments requires that a franchisor provide accurate, detailed disclosure to prospective franchisees. A Uniform Franchise Offering Circular, prepared without detailed attention to applicable regulations and guidelines, is bound to be defective. At the Franchise Law Source, we assure that clients’ offering circulars contain the precise disclosures mandated by law and detailed in the NASAA Uniform Franchise Offering Circular Guidelines. To make this process effective one needs a detailed understanding of the company’s franchise offering and of its history and structure. Using templated documents purchased on the internet, or even samples prepared by competent franchise lawyers, is risky. Working with an attorney experienced in franchise law and regulation is the only way to ensure you get the documentation you need.

Guidelines Run To Over 70 Pages
The Uniform Franchise Offering Circular Guidelines under which UFOCs are created are promulgated by the North American Securities Administrators Association. These detailed guidelines run to over seventy pages. A 2007 change in the Federal Trade Commission Franchise Rule and complex changes in the UFOC Guidelines present new challenges even to experienced counsel. A Uniform Franchise Offering Circular must be prepared in strict compliance with all of these guidelines and regulations. Disclosure made without strict compliance may seem to make full and fair disclosure. Franchisors must, however, comply technically and fully with the Uniform Franchise Offering Circular Guidelines or else pay the price in franchisee litigation later. Defects in a franchisor’s UFOC are the main bases of franchisees’ claims and lawsuits against franchisors. Rarely does a plaintiff’s lawyer bring suit against a franchisor without an allegation that a violation of the FTC Franchise Rule in the disclosure document or a departure from the UFOC Guidelines amounts to an unfair trade practice. This is the primary legal theory that franchisor’s face in franchisee lawsuits, and this is why investing in the drafting of a solid Uniform Franchise Offering Circular (UFOC) is essential for every good franchisor.

We Make Sure You Comply
We take the time to learn our clients’ businesses and their capital and corporate structures so that we can assist them in complying fully with franchise sales and disclosure laws. We frequently assist clients who already have a disclosure document that may need work, and we draft Uniform Franchise Offering Circulars for new franchisors.

Protect Your System
For a new franchisor, creating the company’s first UFOC is an important and expensive proposition. The essence of the franchisor business model is to use franchisees’ capital to build a distribution system. This is why franchisor’s balance sheets show so few capital assets. The brick and mortar, the equipment and rolling stock all belong to franchisees. It is their investment that enables the franchisor to rapidly expand the distribution of its brand. In lieu of investing in tangible capital assets, franchisors must invest in a few very important intangible assets. These include the intellectual property that makes up the operating system, training program, and marketing program. They also include the all important franchise agreement and Uniform Franchise Offering Circular that the franchisor will use in the sale of franchises. The company’s long term income is based completely on its ability to sell franchises to hard working dealers who will become profitable, happy, long-term distributors of the franchisor’s brand. Don’t underestimate the importance of the legal details that make up these documents. Spend the time and the money to insure that your UFOC will protect your system as it grows.

Once drafted, the Franchise Law Source can Register Your UFOC in the States where it is required.

Protect your investment. Get your UFOC right the first time. Call on the Franchise Law Source to create franchise documents that comply with the FTC Franchise Role, the Uniform Franchise Offering Circular Guidelines and all the various states’ franchise laws.

Once drafted, the Franchise Law Source can Register Your UFOC in the States where it is required.

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