Franchise and Business Opportunity FAQ's

The five most frequently asked questions about franchise and business opportunities are:

1. Where can I get a company's pre-sale disclosure document?
2. How can I find out about complaints against a company?
3. How can I file a complaint against a company?
4. How do I know what must be included in a franchise disclosure document?
5. How can I find a lawyer who specializes in franchising?

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1. Where can I get a company's pre-sale disclosure document?

The Franchise Rule requires franchise and business opportunity sellers to provide to prospective purchasers with a Franchise Disclosure Document. The FTC does not require filings of these documents, so we are unable to provide copies to consumers. A total of 13 states keep franchise offering circulars on file, and 26 states require business opportunity disclosure filings. Most states provide copies of these disclosures, usually by allowing visitors to their offices by appointment to review or copy the documents.

A few private companies may make franchise disclosure documents filed in one or more states available for a fee. The FTC doesn’t support or endorse these companies:

FRANDATA Corporation
1665 North Fort Meyer Dr., Suite 410
Arlington, VA 22209
(703) 740-4707
www.frandata.com

FranchiseHelp.com
154 Grand St.
New York, NY 10013
(888) 491-3726
www.franchisehelp.com

Franchise-Insider.com
745 Campbell Way,
Herndon, Va 20170
(877) 674-6677
www.franchise-insider.com

In addition, two non-commercial services make Franchise Disclosure Documents filed in California available on line without charge:

Cal-EASI (Documents not word-searchable)
California Department of Corporations
1515 K Street, Suite 200
Sacramento, CA 95814-4052
866 ASK-CORP
http://www.corp.ca.gov/CalEASI/caleasi.asp

OpenFran - The Franchise Openness Project (Documents word searchable)
PO Box 25514
Scottsdale, AZ 85255
480-264-0050
http://www.openfran.org

2. How can I find out about complaints against a company?

No federal or state agency or private organization can tell you whether a company is legitimate or operates in good faith. The FTC or the Better Business Bureau can report on whether consumers have complained about a company. But, operators of fly-by-night franchise and business opportunity scams know this, and may change the name and location of their company every few months to avoid a record of consumer complaints.

There is no substitute for checking the track record of a franchisor or business opportunity seller by personally talking to at least 100 prior purchasers. That’s why the Franchise Rule requires companies to give consumers a list of the names, addresses and telephone numbers of at least 100 prior purchasers who are geographically closest to you. Interview these prior purchasers about their experiences. Ask questions to verify that they have purchased the franchise or business opportunity and that they are not being paid to provide a favorable review. A scheming promoter of a bogus business opportunity may line up "singers" who provide phony testimonials. Visit their business locations in person.

If you want information about consumer complaints from the FTC, request it in writing. 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 asking about.

In most cases, the FTC does not charge the public for searching, reviewing documents, or copying. Still, it is a good idea 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 be higher than your limit.

You can also request information from the Better Business Bureau and look up information about the franchise or business opportunity seller online at: www.bbb.org

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3. How can I file a complaint against a company?

If you are having a problem with a franchisor or business opportunity seller, consider talking with a private attorney about bringing a lawsuit, or taking other action that may help resolve the problem.

We encourage you to file your complaint with the FTC because consumer complaints help us identify companies and practices that affect a broad segment of the public, and are useful for law enforcement purposes.

You can file your complaint online using our Complaint Assistant at: https://www.ftccomplaintassistant.gov, or by telephone at 1-866-382-4357.

We also accept complaints in writing, but please be aware that postal mail to federal agencies is subject to delays for security reasons. Please describe your problem or concern writing. Tell us what you think was misleading or deceptive in the company's promotional materials, disclosure document or offering circular. If you want your letter kept confidential, please print the words, "Privileged and Confidential," on the top of each page. Include your name, address, and a daytime telephone number where we can reach you. It will help if you can send us copies of any written claims in promotional materials or elsewhere that you believe are false. Send copies, not originals, of any documents you think we should have.

Please address your complaint to:

Consumer Response Center
Federal Trade Commission - Rm. 130
600 Pennsylvania Ave., NW
Washington, D.C. 20580.

4. How do I know what must be included in a Franchise Disclosure Document?

The amended Franchise Rule states what must be disclosed. It is published in the Code of Federal Regulations, Volume 16, Part 436 (16 CFR § 436). The Franchise Rule Compliance Guide, which is designed to assist franchisors in complying with the amended Rule are available at: www.ftc.gov/bcp/edu/pubs/business/franchise/bus70.pdf.

There are franchise registration and disclosure laws in a number of states that require a filing of a franchisor’s Franchise Disclosure Document (“FDD”) with a state agency. In most of those states, it is unlawful to offer or sell a franchise until the agency has registered the franchisor’s FDD after reviewing the filing. Information about these state law requirements can be obtained from:

North American Securities Administrators Association
750 First Street, Suite 710
Washington, DC 20002
(202) 737-0900
www.nasaa.org/Industry___Regulatory_Resources/Uniform_Forms/

You can also find the current state and federal guidelines in the Business Franchise Guide, published by Commerce Clearing House, Inc., in many law libraries.

5. How can I find a lawyer who specializes in franchising?

Check with your state or county bar association. Many of them allow their members to identify their specialties. Franchise or distribution law is a recognized specialty in an increasing number of states.

You also may contact the American Bar Association’s Forum Committee on Franchising for referrals. More information is available at www.abanet.org/forums/franchising.

American Bar Association Service Center
321 North Clark Street
Chicago, IL 60610
(800) 285-2221

Source: http://www.ftc.gov/bcp/franchise/faq1.shtm#5

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