D-Day! New Franchise Rule Kicks In

July 4, 2008 by Angela | 0 Comments

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Today is the first day that the Federal Trade Commission’s new franchise rule permanently kicks in. The original Uniform Franchise Offering Circular, implemented in 1993, is now simplified in name to Franchise Disclosure Document. The Federal Trade Commission and some thirteen states now require companies that sell franchises to file new information about themselves in a new disclosure format.

So why is that important?

Craig Tregillus, the Federal Trade Commission’s Franchise Rule Coordinator, explains that the new disclosure template provides significant benefits to buyers, one being that a potential franchise buyer now has a more comprehensive listing of those involved in running franchise stores. He states that the new disclosure document “includes contact information not only for franchisee associations, but also for current and former franchisees, so that any potential purchaser can confirm with them that what the franchisor says in the FDD is accurate.”

Some 13 States that accept registration have prepared during these past couple of years to accept franchise registration applications that conform to the new Guidelines (pdf). Franchisors can no longer use the old UFOC guidelines to prepare the new franchise disclosure documents.

States have been working with the North American Securities Administrators Association (NASAA) to adopt the new federal guidelines to individual registration state requirements.

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