2011-08-16 What is required for a company to become a franchise system? Legally the Federal Trade Commission is the federal organization that oversees franchise sales and growth. The industry has grown a great deal over the past fifty years, along with growth and popularity come regulations and rules for doing business in the franchise world. In the end, it is a very good thing to have tightly knit rules covering the process of franchising a business. Franchise regulations came into place initially to protect the buyer and have since evolved somewhat namely over the past 20 years in franchising. The buyer must be given full disclosure for what type of relationship they are entering into, the full terms of the relationship, what they will receive in conjunction for the fees they pay and who are they getting into business with.
The main <a href="http://www.the-franchise-shop.com/"> franchise </a> contract is the Uniform Franchise Disclosure Document, it is a very similarly structured agreement to that of Securities rules when adhering to SEC Blue Sky Laws when a company goes to raise investor capital. Have you ever heard the phrase, "Good Fences help make Good Neighbors?" For a franchise relationship to be effective and manageable, the franchisor needs to have the appropriate and well defined relationship in place within the franchise agreement. The documents are broken into two pieces, the bulk of this contract is made up of the Franchise Offering Circular, this piece is consists of 23 points of disclosure. Step by step the document walks the potential franchisee through a description of their total investment in the business, the training processes, backgrounds and bios on the owners/managers within the franchisor organization. Everything is disclosed up front to the buyer so no one is potentially "duped" into a franchise purchase. Good franchise sales processes will carefully walk buyers through these sections and explain each part in detail. A Uniform Franchise Disclosure document is intimidating and probably more importantly extremely boring to read. UFDD's have never and will never help with a franchise sale! It is up to the franchisor to explain and make sure that the buyers have an exquisite level of understanding for every part of the Offering Circular. 
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