y calling its toll-free helpline at 1-877-FTC-HELP (877-382-4357).
The company's disclosures may change between the time you receive the disclosure document and the time you sign the franchise agreement. For example, the company may have updated its disclosures; it is required to do that at least annually after its fiscal year ends. You have the right to ask for a copy of any updated information before you sign the franchise agreement. An updated disclosure document may indicate the filing of new suits by or against the franchisor, changes in the franchisor's management team, new financial data and more current financial performance data, among other information.
Currently, there are fifteen states that have enacted laws adopting franchise registration and offering disclosure requirements:
- New York
- North Dakota
- Rhode Island
- South Dakota
These state laws give franchise purchasers important legal rights, including the right to bring private lawsuits for violation of the state disclosure requirements.
Well-established and successful franchisors are usually unwilling to make significant changes to their standard franchise documents. Less established franchisors, needing to expand their business base, might be somewhat more flexible. In setting up a franchised business, third parties, such as landlords and lenders, may also be involved.
Consult with Attorney and Accountant
Because of the complexity and length of the franchise agreements and the added complexity of third-party arrangements, you should consult with a franchise attorney
and accountant early in the process of considering or negotiating a franchise agreement. An attorney can help you understand your obligations under the franchise contract. An accountant can help you understand the company's financial statements, develop a business plan, assess any earnings projections and the assumptions they're based on, and help you pick a franchise system.