Sunday, May 9, 2010

What is a UFOC?

What is a Ufoc?
May 8th, 2010 | Author: admin

After multiple episodes of franchisors defrauding franchisees, in 1978 the Federal Trade Commission enacted a law that made submitting a UFOC mandatory for all businesses selling franchises. The purpose of a UFOC is to provide enough information on a company to help prospective franchisees in their effort to make an informed decision.

A UFOC typically contains all of the following information on the franchisor.

- The company’s history

- The principal officers

- Any legal issues or litigation history

- Estimated investment amount

- An overview of the business concept

- A copy of the franchise agreement

All this information allows potential franchisees to research the company’s claims before signing any agreement. The UFOC must be presented in a consistent, easy to understand manner so that franchisees know what they are getting themselves into.

After receiving the UFOC, you must wait at least ten days before signing or completing any contract or paperwork. After your ten days pass, the franchisor may begin the consideration process. At this point, the company’s Franchise Review Committee will begin by reviewing your financial status. Essentially, the committee reviews your basic financials to determine if you have enough money to open and successfully operate a franchise. The exact details on what the Franchise Review Committee is looking for will vary greatly from franchise to franchise. Many freestanding restaurant franchises require liquid assets of half a million dollars or more, while other franchises may require a very little franchise fee and startup costs of under fifty thousand dollars. To be approved by any franchisor you need to have ample funds to not only open the business, but also to successfully run the business for years to come. The marketing and day to day costs of running a business can be higher then some franchisees will prepare for. Fortunately the committees are experienced and will analyze your finances in detail so that you know exactly what funds you will need.

One of the most common questions franchise service representatives receive is “what exactly is the difference between a UFOC and a franchise agreement?” However, there is not a clear answer to that question because the UFOC and franchise agreement really are not two separate documents. The franchise agreement is the actual document that a potential franchisee reviews and signs when they agree to invest in a franchise business. The UFOC on the other hand is a much longer document and contains the actual franchise agreement among other items. The purpose of the UFOC is to present a wealth of information on the franchisor in easy to understand terms. As part of this, the franchise agreement is included so that the potential franchisees can look over the document for at least ten days before making any decisions.

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