The Uniform Franchise Offering Circular is a document a Franchisor is required by the Federal Trade Commission to give you once the franchisor has determined that you are a serious candidate to become a franchisee. The UFOC is meant to protect your interests as the franchisee. It helps to insure that you, as a franchisee get information essential to making a good decision about a franchise opportunity. So important is this document to the Federal Trade Commission that by law a franchisor must present it to you either at your first personal meeting, or 10 business days before you sign a Franchise Agreement, or pay any money to the Franchisor.

Franchisors are required to update their UFOC annually at the very least. If changes in their business occur they may have to update it more often. The UFOC must disclose financial information including how much it will cost you initially in start-up costs, royalties, franchise fees, and they must estimate your total possible investment to get up and running. It will also spell out costs you can expect to pay during the life of the franchise.

A Franchisor must disclose their past activities to you, including who the officers of the company and board of directors are, and what experience they have. Any negative information that could affect your franchise must be disclosed, including any legal actions past and present, or bankruptcy information The FTC allows Franchisors to determine how they will provide you with expected earnings claims.

They can include what similar franchisees make, averages of all franchisees, or other statistics. However they do it, they must be sure the information is as accurate as possible. Any claims like, “a franchisee should be able to make $100,000 profit in the first year”, must be labeled as an assumption if they don’t have solid data to back that claim up. One of the most important items a franchisor must provide is a list of current franchisees, and their contact information. I can’t emphasize enough the importance of contacting other franchisees. You should have already done this probably, but this may give you some more information, to contact more franchisees.

This is where you’re going to get the information most valuable in deciding whether or not to purchase a franchise. The rest of the UFOC will spell out the requirements of both you and the franchisor. What you can and cannot do. What the Franchisor is going to provide you with, in financing, training, advertising, startup assistance and every other aspect of the business. Any restrictions to your operation should be spelled out, including territorial, pricing, and operational restrictions to name a few. Your obligations to the franchisor as far as consistency of product, whether you can sell your business, where, and what kind of franchising you are going to be able to procure.

The information contained in a UFOC can be a little overwhelming to some, but once you have it, its decision time. You don’t have to hire a franchise attorney or an accountant to read through the UFOC,But you’re going to need them to read through any franchise agreement you may sign down the road, so you may want them to review the UFOC as well. It’s really a good idea to do that, but now it’s going to start costing you money. It can be money well spent if they find something you overlooked, or didn’t quite understand.

How about your cousin Vinney, the lawyer who does some contracts? That’s probably not a good idea. He may be able to handle it, but Franchise contracts are a little bit different than other business contracts. The reason for that is the consistency of products and services franchisors insist on. Some franchisors are fanatical about it. Franchise lawyers understand the problems that can arise if you,as the franchise owner put six or nine meatballs on sandwiches that your franchisor specifies must have eight meatballs. It seems like a small thing, but not to a franchisor.

They must protect their brand, trademark, and good name. As long as you’re going to be paying big money for a lawyer and an accountant to represent you, have them go over the UFOC. They may help you to understand something that would be a deal breaker if you’d have understood the language.

The FTC requires this to protect you from getting into a bad deal as a franchisee. Take advantage of that, and do your due diligence in all areas of the franchise transaction, including making the best use of the UFOC. Franchisors, particularly smaller ones don’t like to just give out UFOCs to everyone who inquires about a franchise. They like to be sure you’re a serious prospect for a couple different reasons.

There is a cost associated with distributing these documents, and you may have to prove you’re viable before you get one. Larger franchise companies may have them printed up already, but smaller companies may have to write a new one for a particular state. State laws about UFOCs and Franchise agreements vary, and they may have to have 10 of 20 different ones depending on the states where they do business.

There is also a lot of financial information about the franchise in there they’d rather their competitors didn’t just have handed over to them. You may have to provide some personal and financial information to a franchisor before they give you one, but once they do you can be assured they are serious, so you should be too.