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Figuring Out the Terms of Your Franchise (Part A)
When starting to franchise in New York, it is important that you establish the terms for your business franchisees. These terms may include the use of your company's intellectual property, the terms for financing, as well as the terms for royalty payments. These terms will need to be established in the Franchise Disclosure Document (FDD), which is also commonly referred to by its former moniker; the Uniform Franchise Offering Circular (UFOC).
If you need help to establish these terms, you can consult an experienced New York franchise attorney for guidance in best practices and how to proceed with this significant step in your business career.
What is the FDD (aka. the UFOC)?
The FDD, or UFOC, is the document in which you will provide the required disclosures to prospective franchisees. When selling a franchise, this document is required by the Federal Trade Commission, and must be submitted to a prospective franchisee at least 10 days before you sign a formal franchise agreement (or during your first in-person meeting, whichever may come first).
The FDD/UFOC is meant to provide franchisees with the information that they will require as they consider whether or not to buy your business franchise. Each FDD/UFOC will follow the same basic format, which is in 3 parts:
- Part 1 - This part of the FDD/UFOC will include 23 sections which describe the franchise program.
- Part 2 - This segment of the FDD/UFOC will include the franchisor's audited financial statements.
- Part 3 - The final section of the FDD/UFOC will include one copy of each of the forms and/or contracts that will be included in the franchise process.
When drawing up your FDD/UFOC, you will need to include the terms for franchising your business. Your New York franchise attorney can help you determine these terms. This can be a daunting aspect of getting your business plan successfully launched and your attorney can help you to ensure that everything is done correctly.
Your New York franchise attorney should have plenty of experience with FDD/UFOCs, and know what terms need to be included in the document. You may also want the help of your New York franchise attorney when determining your royalty fees, or drawing up the terms of your licensing agreement.
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