What is the Disclosure Document?
The purpose of the Disclosure Document is to give the potential purchaser a full and fair explanation and other details about the intended business operation. By making this clear at the beginning, the potential franchisee and his or her advisers would be able to arrive at a full decision as to whether proceed or not.
The Disclosure document should contain a full outline of the franchise including:
- The history of the system.
- Trademarks involved.
- Details of payments that need to be made to the franchisor.
- The terms and conditions of the purchase of goods.
- All conditions relating to termination, renewal or reassignment of the franchise.
- Summary of the main obligations of the franchisor.
- Commissions and how they are calculated.
- The financial aspects of the business including its history and working capital requirements etc.
- References from existing franchisees as well as other people the franchisor deals with.
- The projections the franchisor has for that particular franchise business.
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