The franchise disclosure document, a required form for a franchisor to present to a franchisee, differs from state to state.

When an entrepreneur expresses interest in a franchise opportunity, the franchise company must present the disclosure document. No matter the state laws involved or the nature of the franchise industry chosen, the Federal Trade Commission (FTC) (through the North American Securities Administrators Association) mandates that the document contain a State Cover Page.

The cover page must present the franchise's registration with the state commission, if one exists. Since states vary in the handling of franchise law and the keeping of records on business' past practices, this clause is necessary regardless of the degree to which the state government is involved.

A legal risk factor clause is also included on the State Cover Page. This outlines the course of action should a dispute arise between the franchisor and franchisee, and specifies whether cases will be handled in or out of the courtroom. The risk factor is important to consider when taking up a small business opportunity, as limiting disputes to mediation may not allow appeals. The clause may also restrict the handling of legal disputes outside of the franchisee's state.

The State Cover section of the disclosure document must be presented in the format made publicly available by the FTC. Franchises must disclose all information that varies from business to business or state to state. For example, some companies require franchisees to completely renew their agreements with the franchisor at the end of each term, while others may have roll-over contracts or simply require a fresh signature.

Some U.S. states keep a record of local operating franchises. The regulations of registration and business practices may be heavy or light, and a number of states have no registration requirements at all. The FTC asserts that while states may present a catalogue of eligible, approved franchises to the public, none of those companies are endorsed by the local government by being listed.

The State Cover Page should directly follow the FTC cover page. State franchise administrators must be listed, in addition to where disputes will be tried (whether in the franchisee's district, the franchise headquarters' state or another related area) and the pertinent state law. The state page should be reviewed closely to determine legal risk, the effects of state laws and the possibility of learning more about the franchise through state registration.

About Liberty Tax Service

Liberty Tax Service is the fastest-growing retail tax preparation company in the industry's history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.

Liberty Tax Service is the only tax franchise on the Forbes "Top 20 Franchises to Start," and ranks #1 of the tax franchises on the Entrepreneur "Franchise 500." Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.