Franchise and Business Opportunity FAQs
Consumers Want To Know
The five most frequently asked questions about franchise and business opportunities are:
- Where can I get a company's pre-sale disclosure document?
- How can I find out about complaints against a company?
- How can I file a complaint against a company?
- How do I know what must be included in a disclosure document or offering circular?
- How can I find a lawyer who specializes in franchising?
1. Where can I get a company's pre-sale disclosure document?
The Franchise Rule requires franchise and business opportunity sellers to provide to prospective purchasers a disclosure document or franchise offering circular. The FTC does not require filings of these documents, so we are unable to provide copies to consumers. A total of 13 states keep franchise offering circulars on file, and 26 states require business opportunity disclosure filings. Most states provide copies of these disclosures, usually by allowing visitors to their offices by appointment to review or copy the documents.
A few private companies may make franchise disclosure documents filed in one or more states available for a fee. The FTC doesn't support or endorse these companies:
FRANDATA Corporation
1665 North Fort Meyer Dr., Suite 410
Arlington, VA 22209
(703) 740-4707
www.frandata.com
FranchiseHelp, Inc.
101 Executive Boulevard, 2d Floor
Elmsford, NY 10523
(800) 401-1446
www.franchisehelp.com
Franchise-Insider.com
745 Campbell Way,
Herndon, Va 20170
(877) 674-6677
www.franchise-insider.com
Also, consumers searching for franchise documents may wish to check an online database maintained by the California Department of Corporations, known as Cal-EASI:
www.corp.ca.gov/caleasi/caleasi.htm
2. How can I find out about complaints against a company?
No federal or state agency or private organization can tell you whether a company is legitimate or operates in good faith. The FTC or the Better Business Bureau can report on whether consumers have complained about a company. But, operators of fly-by-night franchise and business opportunity scams know this, and may change the name and location of their company every few months to avoid a record of consumer complaints.
There is no substitute for checking the track record of a franchisor or business opportunity seller by personally talking to at least 10 prior purchasers. That's why the Franchise Rule requires companies to give consumers a list of the names, addresses and telephone numbers of at least 10 prior purchasers who are geographically closest to you. Interview these prior purchasers about their experiences. Ask questions to verify that they have purchased the franchise or business opportunity and that they are not being paid to provide a favorable review. A scheming promoter of a bogus business opportunity may line up "singers" who provide phony testimonials. Visit their business locations in person.
If you want information about consumer complaints from the FTC, request it in writing. Address your request to:
Freedom of Information Act Request
Federal Trade Commission
Washington, D.C. 20580.
Please identify your letter as a "FOIA Request" and include (1) your name, address and daytime phone number, and (2) the name and address of the company you are asking about.
In most cases, the FTC does not charge the public for searching, reviewing documents, or copying. Still, it is a good idea to state the maximum you are willing to pay, so we can contact you in the unusual event that any applicable fees for these services will be higher than your limit.
You can also request information from the Better Business Bureau and look up information about the franchise or business opportunity seller online at:
www.bbb.org
3. How can I file a complaint against a company?
If you are having a problem with a franchisor or business opportunity seller, consider talking with a private attorney about bringing a lawsuit, or taking other action that may help resolve the problem.
We encourage you to send your complaint to the FTC because consumer complaints help us identify companies and practices that affect a broad segment of the public, and are useful for law enforcement purposes.
Please describe your complaint in writing. Tell us what you think was misleading or deceptive in the company's promotional materials, disclosure document or offering circular. If you want your letter kept confidential, please print the words, "Privileged and Confidential," on the top of each page. Include your name, address, and a daytime telephone number where we can reach you. It will help if you can send us copies of any written claims in promotional materials or elsewhere that you believe are false. Send copies, not originals, of any documents you think we should have.
Please address your complaint to:
Consumer Response Center
Federal Trade Commission - Rm. 130
600 Pennsylvania Ave., NW
Washington, D.C. 20580.
4. How do I know what must be included in a disclosure document or offering circular?
The Franchise Rule states what must be disclosed and provides its own disclosure format. It is published in the Code of Federal Regulations, Volume 16, Part 436 (16 CFR § 436), which may be found by link to the following page:
www.ftc.gov/ftc/legal.htm. The Commission also permits the use of an alternative disclosure format, called the Uniform Franchise Offering Circular (UFOC), issued by the North American Securities Administrators Association, for Franchise Rule compliance. Guidelines for preparing UFOC disclosures are available from:
North American Securities Administrators Association 750 First Street, Suite 710
Washington, DC 20002
(202) 737-0900 www.nasaa.org/Industry___Regulatory_Resources/
Uniform_Forms/
Franchisors who use the UFOC must follow these guidelines to comply with the Franchise Rule. You can also find the current state and federal guidelines in the Business Franchise Guide, published by Commerce Clearing House, Inc., in many law libraries.
5. How can I find a lawyer who specializes in franchising?
Check with your state or county bar association. Many of them allow their members to identify their specialties; franchise or distribution law is a recognized specialty in an increasing number of states.
You also may contact the American Bar Association for referrals. More information is at
www.abanet.org/forums/franchising.
American Bar Association
Service Center
321 North Clark Street
Chicago, IL 60610
(800) 285-2221 |
