Nationwide Franchise Sales
The sale of a franchise is a highly regulated activity. The individuals or organizations designated as the sales representatives of the franchisor must be trained and educated in the rules of franchise sales. The failure to follow the federal and state laws and regulations pertaining to franchise sales runs the risk of having sales rescinded, in the lightest form of penalty, to being subjected to criminal sanctions at the worst.
- No sales can take place without the existence of a properly prepared FDD (Franchise Disclosure Document).
- In certain jurisdictions, no sales can take place without the registration of the FDD.
- The FDD must be updated no less than annually but more frequently whenever material changes or events occur.
- There are requirements regarding the delivery of the FDD to the prospective franchisee pertaining to time and accepting non-refundable funds.
- There are very specific requirements about what a sales person for a franchisor can say and cannot say with respect to the financial revenues of the franchisor.
- There are very unique rules in certain states about negotiating franchise agreements and reporting changes to franchise agreements.
- Depending upon the salesperson's relationship to the franchisor, the individual or organization may be required to be disclosed in the FDD.
The selection and approval of franchisees is a critical process for the franchisor. A franchisee will be someone who can work within the uniformity and structure of a franchise system and is not bent upon developing his or her own rules. Selling a franchise to a "warm body" or to a franchisee capable of implementing the goals of the franchisor can make all the difference as to whether or not the franchise system will stagnate or be vibrant and grow.
The FTC Rule requires that all current and recently terminated franchisees be listed in the FDD, along with their contact information. This is for the purpose of enabling prospective franchisees to do their due diligence about becoming a franchisee. Prospective franchisees will want to speak with the existing franchisee to obtain their view of the franchise. In other words, the franchisee can be your best or worst "salesperson." Since the franchisees are not actually sales persons, they are not constrained in what they can say to the prospective franchisee. Of course, the franchisor will want that franchisee to speak positively about his or her experiences and much of that goes back to the choice of the proper franchisee.
Contact Our Kissimmee Franchise Disclosure Document Attorney
Our office is in Orlando, Florida. Mr. Franzblau is licensed to practice law in Florida, New Jersey, Pennsylvania, Washington, D.C. and New York State. If you would like to speak to Mr. Franzblau, or have any other question, please contact our franchise law firm. We will respond promptly. It is our goal to be accessible to our clients.
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