Frequently‚ when evaluating the establishment of a franchise system many clients present me with information about their existing company and their plans for the future. These plans‚ typically involve the sale of stock for the purpose of raising capital. Similar to the sale of a franchise‚ selling stock is‚ also‚ a regulated activity that requires compliance with federal and state security laws. In franchising‚ prior to offering or selling a franchise‚ you must provide a prospective franchisee with your FDD. In the stock / securities world‚ prior to offering or selling stock in your franchise company (even if you are just selling to family and friends) you may be required to disclose and provide a securities prospectus (a disclosure document similar to your FDD but focused on the sale of stock).
In a recent article at the New York Franchise Law Blog‚ “Starting Your Franchise and Raising Capital: Beware of Violating Securities Laws”‚ I discuss some of the basics regarding the sale of stock and a frequently utilized private offering registration exemption. If selling stock is something that you are considering‚ it is important to know that this may be achieved in a relatively efficient way‚ however‚ you must review with your attorney issues of securities compliance.
If you are a franchisor or are looking to establish a franchise contact National Franchise Lawyer‚ Charles N. Internicola at 800.976.4904 to learn more about the franchise compliance and registration programs that he provides to his clients throughout the United States. To learn more about franchising and franchising compliance‚ order a complimentary copy of Mr. Internicola’s “FTC Compliance Guide” and Mr. Internicola’s Book‚ “The Franchise Formula: A Guide for Franchising Your Business in the New Economy“.
For additional articles by Mr. Internicola concerning franchising see below: