Franchise Outlet Resales: Important Information for Prospective Franchisees
As a Prospective Franchisee the acquisition of a Franchisee may occur by (a) establishing a "New" Franchised location or (b) purchasing an existing Franchise unit that was previously established. So what is involved when dealing with "Franchise Resale Units"? A franchise resale unit is a unit that was previously under another franchisee and the franchise unit is now being resold through the franchisor. When purchasing a "resale unit" as opposed to establishing a new location the Franchisor is not required to provide you with its critically important "Franchise Disclosure Document" (FDD). Nevertheless you must seek out request and ask your Franchise lawyer to get a current copy of the Franchisor's FDD.
Some of the important information that you should review in the FDD includes "unit resales" Franchise Disclosure Documents (FDD) for franchise units being resold must have franchise outlet resale information included in Item 20 of the FDD according to the Federal Trade Commission. The Federal Franchise Rule requires franchisors to disclose information about former franchisees who have owned the franchise unit at the specific franchise outlet location being resold to prospective franchisees interested in buying the franchise outlet being resold. According to the Federal Trade Commission the following information must be disclosed to prospective franchisees interested in a franchise outlet resale location:
Information for each previous owner of the outlet;
The time period when the previous owner controlled the outlet;
The reason for each previous ownership change; and
The time period(s) when the franchisor retained control of the outlet.
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