So, what is the UFOC? The UFOC is the document most often used by franchisors when making required disclosures to potential franchisees. Generally, all franchises are subject to disclosure requirements imposed by both federal and state law before any offer or sale of a franchise can be made. Franchisors make these disclosures, as required under the Federal Trade Commission’s FTC Rule or state disclosure laws.The disclosures required in the UFOC provide basic information to potential franchisees about the franchisor, the franchised business, and the franchise agreement. The UFOC must be prepared in conformity with the UFOC Guidelines, which are administered by the North American Securities Administrators Association, Inc. (NASAA) and consist of the disclosure requirements, specific instructions, and sample answers for 23 separate Items that must be included in the UFOC.
While the UFOC document is not specifically required by the FTC Rule, the FTC will accept this document as a valid form of disclosure. However, some states that have franchise disclosure statutes will only accept disclosures in the UFOC format. Therefore, it makes economic sense for a franchisor to draft a single UFOC that is accepted under both the FTC Rule and state laws, especially where the franchisor wishes to sell franchises across a multi-state geographic area.
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