The Uniform Franchise Offering Circular Guidelines

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  • Topic: Franchising, Franchise, Bankruptcy
  • Pages : 95 (22833 words )
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  • Published : March 8, 2011
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90. Introduction: The Uniform Franchise Offering Circular ("UFOC") Guidelines consist of the Requirements, the Instructions and the Sample Answers. The UFOC Guidelines were prepared and adopted by the North American Securities Administrators Association ("NASAA") and its predecessor, the Midwest Securities Commissioners Association. The members of NASAA cannot create statutes since that is the constitutional province of state legislatures, but NASAA intends for the UFOC Guidelines to facilitate compliance with disclosure requirements under state franchise investment laws. Where possible, NASAA has developed uniform disclosure requirements, but differences in state laws bearing on the franchise relationship may necessitate changes. In addition, state administrators will continue to review the application for deficient disclosure and additional disclosure necessitated by special problems or risks in the proposed offering.

100. Follow these General Instructions and the Requirement and Instruction for each Item in franchise registration applications and disclosures in the Uniform Franchise Offering Circular. 110. Original Registration Application - Documents to File:

(a) Uniform Franchise Registration Application Page (also known as "Facing Page"); (b) Supplemental Information page(s);
(c) Certification page;
(d) Uniform Consent to Service of Process;
(e) Sales Agent Disclosure Form;
(f) If the applicant is a corporation or partnership, an authorizing resolution if the application is verified by a person other than applicant's officer or general partner; (g) Uniform Franchise Offering Circular;

(h) Application Fee;
(i) Auditor's consent (or a photocopy of the consent) to the use of the latest audited financial statements in the offering circular; and
(j) Advertising or promotional materials.
Examples of forms (a) through (f) are printed at the end of these Guidelines. 120. Renewal Application: When state law requires renewal, mark "renewal" on the application page. Submit all documents required for an initial application with additions to the previously filed documents underlined. Changes must be clearly marked so t hat the change is noticed easily. File a renewal application before the prior registration has expired. If the prior registration has expired, mark "Registration of an Offer or Sale of Franchises" on the facing page and pay the fee charged for initial registrations. Redlining and bracketing changes from the last filing will speed a re-registration. Do not mark the amendment boxes on the application page on the first renewal filing even if documents are revised.

150. "Disclose" means to state all material facts in an accurate and unambiguous manner. Disclose clearly, concisely and in a narrative form that is understandable by a person unfamiliar with the franchise business. For clear and concise disclosure avoid legal antiques 1

and repetitive phrases.
2 When possible,
use active, not passive voice.
Limit the length and complexity of disclosure through careful organization of information in the disclosure. Avoid technical language and unnecessary detail. Make the format and chronological order consistent within each Item.

160. Since prospective franchisees must have sufficient disclosure to understand economic commitments and to develop a business plan, Items 5, 6, 7, and 8 must disclose the minimum and maximum franchisee cost. The franchisor should provide reasonably available information to allow franchisees to forecast future charges listed in these Items and to be paid to persons who are independent of the franchisor. Future payments to the franchisor should be specific as is required by individual Items. 170. The disclosure for each UFOC Item should be separately titled and in the required order. Do not repeat the UFOC question in the offering circular. Respond to each question fully. If the...
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