What is included in a franchise disclosure document?
- Thursday, May 24, 2012
Before you sign a contract, a franchisor must send you a franchise disclosure document. Legally required and regulated by the Federal Trade Commission (FTC), the document contains pertinent information on the stability of the business venture, your financial responsibilities and the obligations of both parties.
It is your task as a potential owner of a new business opportunity to attain a copy of the franchise disclosure document. According to the FTC, a majority of state agencies can provide copies of these papers. In addition, there are also a few private organizations that may provide the information for a fee. The information must be updated annually after the franchise's fiscal year ends, regardless of the industry, size or the history of the brand.
Here are six key facts a franchise disclosure document must contain:
1. Litigation history. If the brand has been involved in any suites or filed for bankruptcy, it will be required to report this so that you may make an informed decision about tying your financial wellbeing to a potentially unstable business venture.
2. The franchisor and predecessors. Knowing who exactly you are dealing with, even if you will never speak to them due to the size of the organization, is an important facet to your decision making process.
3. Investment costs. Located within the document should be a breakdown of the initial capital investment and any fees or expenses required from you. In addition to the presentation of associated costs, the paperwork may include any available financing arrangements.
4. Statistics. Statistics on existing franchisees such as failure and success rates will be included to provide you with insight into the stability of the investment.
5. Obligations. Any number of additional requirements will be listed, such as whether you are contractually obligated to purchase or lease specific equipment or materials from a designated source. Other qualities that may crop up are the responsibility to follow procedures already set in place or to hire and structure the business in a certain manner.
6. Materials. Much of the benefit of opening a franchise involves capitalizing on a brand that has already built a name and customer following. Therefore, a franchisor will specify how, where and when logos, trademarks, trade names and commercial symbols will be used to protect the brand.
The Liberty Tax Service franchise opportunity is appealing to a diverse America, and ranked highly for its affordability and potential. Entrepreneur magazine has ranked Liberty Tax Service on its “Franchise 500” list of best franchise opportunities since 1998. Liberty Tax Service is the only tax franchise
on the Forbes magazine’s “Top 20 Franchises for the Buck.” (2012) Our tax franchise is an affordable and viable business choice. Each office provides thorough, computerized tax preparation coupled with superior customer service. For the best small business opportunity
in the income tax franchise industry, choose Liberty!