Deck 13: Franchise Legal Documents

Question 1

Why do most franchisors use the UFOC format for disclosure?

A)not all states accept the FTC rule format.
B)the UFOC covers more ground than the FTC rule format.
C)the FTC rule format covers more ground and is more complicated to use.
D)the UFOC is accepted in more registration states than the FTC rule format.

Answer 1

A
The UFOC is accepted in ALL registration states,but not all states accept the FTC Rule format.For this reason,the great majority of franchisors use the UFOC format for disclosure
With only a few exceptions,the two formats cover the same ground,but the UFOC is as close as the franchise community comes to a universally accepted document.

Question 2

Which of the following allows a developer to build a num?ber of franchised businesses in a particular market area?

A)Franchise Agreement
B)Sub-Franchising Contract
C)Area Development Agreement
D)UFOC

Answer 2

C
Some franchise programs feature variations on the basic single unit franchise relationship.The most common of these is the Area Development Agreement.This contract will allow a developer to build a num?ber of franchised businesses in a particular market area and each one will be governed by the terms of a Fran?chise Agreement granted by the franchisor.

Question 3

When must the disclosure document be delivered,according to the FTC Rule?

A)at the first personal,face-to-face meeting
B)10 business days before the franchisee executes a binding legal document or makes any payment
C)whichever of these comes first
D)whenever the franchisor deems it appropriate

Answer 3

C
The FTC Rule insists on two timing requirements.First,the disclosure document must be delivered at whichever of these comes earlier: the first personal,face-to-face meeting for discussing the sale or possible sale of a franchise;or at least 10 business days before the franchisee executes a binding legal document or before the payment by the prospective franchisee of any consideration for the franchise.

Question 4

What sort of disclosure document is required by the FTC Rule?

A)the format prescribed by the FTC
B)the UFOC,or uniform franchise offering circular
C)both of the above formats
D)one of the above formats

Question 5

Which of the following is NOT true about the Franchise Agreement?

A)most of its components are the subject of specific disclosure under the FTC rule.
B)it is generally a static,unchanging document.
C)it is useful for a broad spectrum of businesses.
D)it has evolved as a result of the way franchising has come to be regulated by state and federal laws.