"Franchise Business Opportunities"
A franchise or business opportunity may sound appealing, especially if you have limited resources or business experience. However, you could lose a significant amount of money if you don't investigate a business carefully before you buy. The Federal Trade Commission's Franchise and Business Opportunity Rule requires franchise and business opportunity sellers to give you specific information to help you make an informed decision.
A franchise or business opportunity seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase. You can use these disclosures to compare a particular business with others you may be considering or simply for information. The disclosure document includes:
FTC to Publish Proposed Revised Franchise Rule
The Federal Trade Commission is seeking public comment on proposed revisions to its Trade Regulation Rule titled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" -- (Franchise Rule). The proposed revisions would reduce inconsistencies in federal and state disclosure requirements governing franchise sales, address changes in the marketing of franchises, such as the sale of franchises through the Internet, and provide expanded disclosures concerning franchise relationships. Comments will be accepted until December 22, 1999.
State Offices Administering Franchise Disclosure Laws
Fifteen states have franchise investment laws that require franchisors to provide pre-sale disclosures, known as "offering circulars," to potential purchasers. Thirteen of these state laws treat the sale of a franchise like the sale of a security. They typically prohibit the offer or sale of a franchise within their state until a franchise offering circular has been filed on the public record with, and registered by, a designated state agency. Two of the fifteen states do not require a filing of offering circulars, as noted in the list of state offices below.
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