Wiggin and Dana’s Franchise Law Blog has a discussion about the amended FTC rules for franchises.  The new rules require franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise, its officers, and other franchisees.

Required disclosure topics include, for example: the franchise’s litigation history, past and current franchisees and their contact information, any exclusive territory that comes with the franchise, assistance the franchisor provides franchisees, and the cost of purchasing and starting up a franchise. If a franchisor makes representations about the financial performance of the franchise, this topic also must be covered, as well as the material basis backing up those representations.  The new rules are designed to require more extensive disclosures in certain aspects of the franchisor-franchisee relationship.

The amended rules have a phased-in effective date: as of July 1, 2007, franchisors may follow the amended rules, or they may continue their current practice of complying with the original rule or individual state franchise disclosure laws that require an Uniform Franchise Offering Circular (“UFOC”); but by July 1, 2008, they will be required to follow the amended rules only.