Franchise
and Business Opportunity FAQS
The five most frequently asked questions
about franchise and business opportunities are:
- Where
can I get a company's pre-sale disclosures?
- How
can I find out about complaints against a company?
- How
can I file a complaint against a company?
- Where
can I get the forms for drafting an offering circular?
- How
can I find a lawyer who specializes in franchising?
- 1. Where can
I get a company's pre-sale disclosures?
-
- The FTC does not require filings
of franchise and business opportunity disclosure statements
or offering circulars. For this reason, we are unable to
provide copies of them. There are 13 states that do keep
franchise offering circulars on file, and 23 states that
require business opportunity disclosure filings. Most states
aren't able to provide copies of these disclosures, but
usually will let you visit their offices and review or copy
the documents by appointment.
A few private companies may make available
franchise disclosure documents filed in one or more states
for a fee. These companies, which are neither supported
nor endorsed by the FTC, include:
FRANDATA Corporation
1725 Eye Street, NW
Suite 600
Washington, D.C. 20006
(202) 336-7632
www.frandata.com
- FranchiseHelp, Inc.
- 101 Executive Boulevard
- Elmsford, NY 10523
- (914) 347-6735
- www.franchisehelp.com
-
- List
of state offices with franchise disclosures
-
- List
of state offices with business opportunity disclosures
-
- 2. How can I
find out about complaints against a company?
-
- No federal or state agency or private
organization can tell you whether or not a company is legitimate
or operates in good faith. We can only report on whether
we have received consumer complaints about a company. Operators
of fly-by-night franchise and business opportunity scams
know this, and may change the name and location of their
company every six to twelve months so they never have a
record of consumer complaints.
There is no substitute for checking
the track record of a franchisor or business opportunity
seller by talking to at least ten prior purchasers in
person. That is why the Franchise Rule requires companies
to include in their disclosures a list of the names, addresses
and telephone numbers of at least the ten prior purchasers
who are geographically closest to you.
If you want information about consumer
complaints, we must ask that your request be in writing.
We need to check whether complaints have been received
not only in Washington, but also in our 10 regional offices.
You can 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 checking on.
In most cases, there are no fees for
searching, document review, or copying for members of
the general public. It is a good idea, however, 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 cost more than the limit you set.
- 3. How can I
file a complaint against a company?
-
- We regret that you're having a
problem with a franchisor or business opportunity seller.
We'd like to help, but can't guarantee we'll be able to,
because the Commission lacks the resources to investigate
every individual complaint it receives. For this reason,
we urge that you also consider talking with a private attorney
about the feasibility of bringing a private lawsuit, or
taking other individual or group action that may help resolve
the problem.
We would like to encourage you to send
us your complaint because consumer complaints give us
important information. They help us identify companies
and practices that affect a broad segment of the public,
and are useful for law enforcement purposes.
We ask that all complaints be in writing,
but no special form is required. A short one- or two-page
letter is fine. Just tell us what you think was misleading
or deceptive in the company's promotional materials, disclosure
statement or offering circular. If you want your letter
kept confidential, please print the words, "Privileged
and Confidential," on the top of each page.
Be sure your letter includes your name,
address, and a daytime telephone number where we can reach
you. It will help if you can provide the names and telephone
numbers of other purchasers who have experienced the same
problems, and if you can send us copies of any written
claims in promotional materials or elsewhere that you
believe are false. Be sure to send copies, not originals,
of any documents you think we should have.
Please address your complaint to:
- Franchise & Business
Opportunity Complaint
Federal Trade Commission - Rm. 238
Washington, D.C. 20580.
-
- 4. Where can
I get the forms for drafting an offering circular?
-
- The Franchise Rule provides its own disclosure
format, which is published in the Code of Federal Regulations,
Volume 16, Part 436 (16 CFR § 436). The Commission also
permits the use of an alternative disclosure format called
the Uniform Franchise Offering Circular, or "UFOC,"
issued by the North American Securities Administrators'
Association, for Franchise Rule compliance. A copy of the
Guidelines for preparing UFOC disclosures, which franchisors
wishing to use the UFOC must follow to comply with the Franchise
Rule, can be obtained from:
-
-
- North American Securities
Administrators' Association
10 G St NE
Ste 710
Washington, DC 20002
(202) 737-0900
The current Guidelines are also reprinted
in the Business Franchise Guide published by Commerce
Clearing House, Inc., which is available in many law libraries.
- 5. How can I
find a lawyer who specializes in franchising?
-
- You can start by checking with
your state bar association. Many state bar associations
allow member lawyers to identify the areas of practice in
which they specialize, and franchise or distribution law
is a recognized specialty in an increasing number of states.
The American Bar Association also publishes
a Membership Directory of the Forum Committee on Franchising.
The Directory, which is organized by state and city, lists
the names, addresses and telephone numbers of attorneys
who are members of the Forum Committee. To obtain a copy
of the directory, an individual must be a member, it is
not for sale to the public. Individuals may contact the
ABA leadership for referrals or may be faxed a partial
listing. Please visit www.abanet.org/forums/franchising
for more information.
- American Bar Association
Service Center
750 North Lake Shore Dr.
Chicago, IL 60611
(312) 988-5522
Last Updated:
Thursday, June 26, 2003
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