Virginia Administrative Code › Title 21 - SECURITIES AND RETAIL FRANCHISING › Agency 5 - STATE CORPORATION COMMISSION › Chapter 110 - RETAIL FRANCHISING ACT RULES › Section 21VAC5-110-95 - Requirements for Franchise Disclosure Document preparation

Current through Register Vol. 40, No. 24, July 15, 2024
A. Applications for registration of a
				franchise, or applications for renewal or amendment of an existing franchise
				registration, must comply with the following requirements for preparing the
				contents of a Franchise Disclosure Document. Except for financial statement
				requirements for start-up franchise systems, as further discussed in Item 21,
				these requirements are substantively equivalent to the requirements adopted
				under the Federal Trade Commission Franchise Rule,
				16 CFR
				436.3 through
				16 CFR
				436.5, effective July 1, 2007.
Contents of the Franchise Disclosure
				  Document
The Cover Page
Begin the disclosure document with a cover page, in the order
				  and form as follows:
1. The title
				"
FRANCHISE DISCLOSURE DOCUMENT
" in capital letters and bold
				type.
2. The franchisor's name,
				type of business organization, principal business address, telephone number,
				and, if applicable, email address and primary home page address.
3. A sample of the primary business trademark
				that the franchisee will use in its business.
4. A brief description of the franchised
				business.
5. The following
				statements:
a. The total investment necessary
				to begin operation of a [franchise system name] franchise is [the total amount
				of Item 7]. This includes [the total amount in Item 5] that must be paid to the
				franchisor or affiliate.
b. This
				disclosure document summarizes certain provisions of your franchise agreement
				and other information in plain English. Read this disclosure document and all
				accompanying agreements carefully. You must receive this disclosure document at
				least 14 calendar days before you sign a binding agreement with, or make any
				payment to, the franchisor or an affiliate in connection with the proposed
				franchise sale. [The following sentence in bold type] Note, however, that no
				governmental agency has verified the information contained in this
				document.
c. The terms of your
				contract will govern your franchise relationship. Don't rely on the disclosure
				document alone to understand your contract. Read all of your contract
				carefully. Show your contract and this disclosure document to an advisor, such
				as a lawyer or an accountant.
d.
				Buying a franchise is a complex investment. The information in this disclosure
				document can help you make up your mind. More information on franchising, such
				as "A Consumer's Guide to Buying a Franchise," which can help you understand
				how to use this disclosure document, is available from the Federal Trade
				Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC
				at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You can also visit the
				FTC's home page at
www.ftc.gov
for additional
				information. Call your state agency or visit your public library for other
				sources of information on franchising.
e. There may also be laws on franchising in
				your state. Ask your state agencies about them.
f. [The issuance date].
6. A franchisor may include the following
				statement between the statements set out at subdivisions b and c of the cover
				page: "You may wish to receive your disclosure document in another format that
				is more convenient for you. To discuss the availability of disclosures in
				different formats, contact [name or office] at [address] and [telephone
				number]."
7. Franchisors may
				include additional disclosures on the cover page, on a separate cover page, or
				addendum to comply with state presale disclosure laws.
The Table of Contents
Include the following table of contents. State the page where
				  each disclosure item begins. List all exhibits by letter, as shown in the
				  following example.
Table of Contents
1. The Franchisor and any Parents,
				Predecessors, and Affiliates
2.
				Business Experience
3.
				Litigation
4. Bankruptcy
5. Initial Fees
6. Other Fees
7. Estimated Initial Investment
8. Restrictions on Sources of Products and
				Services
9. Franchisee's
				Obligations
10. Financing
11. Franchisor's Assistance, Advertising,
				Computer Systems, and Training
12.
				Territory
13. Trademarks
14. Patents, Copyrights, and Proprietary
				Information
15. Obligation to
				Participate in the Actual Operation of the Franchise Business
16. Restrictions on What the Franchisee May
				Sell
17. Renewal, Termination,
				Transfer, and Dispute Resolution
18. Public Figures
19. Financial Performance
				Representations
20. Outlets and
				Franchisee Information
21.
				Financial Statements
22.
				Contracts
23. Receipts
Exhibits
A. Franchise Agreement
B. Additional exhibits as
				applicable