The Federal Trade Commission (“FTC”) Rule on Franchising requires pre-sale disclosure on 23 items of information, which is disclosed in what is called a Franchise Disclosure Document (“FDD”). The FTC Rule requires that the FDD be presented at least 14 days prior to the signing of the Franchise Agreement and has certain delivery and updating requirements and also requires that all agreements and audited financial statements be attached to the FDD. We prepare legally compliant state-of-the-art franchise agreements and Franchise Disclosure Documents.
Certain states require presale registration and approval of franchise documents by state authorities. The states that require franchise registration are California, Hawaii, Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. Michigan requires a Notice of Intent to be filed and also requires state-specific language to be included in an addendum to the Franchise Disclosure Document (although the actual addenda need not be filed or registered). The Company will also need to register its franchise documents with state authorities under the business opportunity laws of Florida, Kentucky, Nebraska, Texas and Utah.
In addition, until the Company is awarded a federal trademark registration from the United States Patent and Trademark Office it must comply with the business opportunity registration requirements Connecticut, Maine, and North Carolina. Until the Company obtains a state or federal trademark it will also be required to comply with the business opportunity laws in Georgia, Louisiana and South Carolina. Certain of these states may require the Company to post a bond prior to the sale of any business opportunities in the state.
In addition to preparing legally compliant franchise disclsoure documents and undertaking to obtain pre-sale approval in those states in which it is required, we also encourage and assist our clients in making a complaint Financial Performance Representation in Item 19 of their FDD.