As practiced in retailing, franchising offers franchisees the advantage of starting up quickly based on a proven trademark, and the tooling and infrastructure as opposed to developing them.
The franchisor must meet a list of requirements for registration, among which are:
- the standard franchise agreement, working Manual and working capital requirements,
- track-record of operations, and ample ability to supply materials, and
- long-term operational guidance.( provided by us )
- the franchise agreement must have a minimum 1 year term
Among other provisions is:
- The franchisor will be liable for certain actions of its suppliers
- Monetary and other penalties apply for infractions of the regulations.
The Disclosure has to take place 20 days in advance. It has to contain:
- Details of the franchisor’s experience in the franchised business with scope of business
- identification of the franchisor’s principal officers
- litigation of the franchisor during the past five years
- full details about all franchise fees
- the amount of a franchisee’s initial investment
- a list of the goods or services the franchisor can supply, and the terms of supply
- the training franchisees will receive
- information about the trademarks,including registration, usage, and litigation
- demonstration of the franchisor’s capabilities to provide training and guidance
- statistics about existing units, including number, locations, and operational results, and the percentage of franchises that have been terminated; and
- an audited financial report and tax information (for an unspecified period of time)
Other elements of this legislation are:
- The franchisee’s confidentiality obligations continue indefinitely after termination or expiration of the franchise agreement.
- If the franchisee has paid a deposit to the franchisor, it must be refunded on termination of the franchise agreement; and, upon termination, the franchisee is prohibited from continuing to use the franchisor’s marks.
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