Buying a business opportunity, franchise, licensee opportunity or distributorship is a big decision, one you shouldn’t take lightly. Thankfully there are some serious regulations in place at the federal level as well as within many states that are designed to protect you from making a bad decision or being taken in by a fraudulent enterprise, starting with the critically important disclosure statement.
The disclosure statement is a document that any seller of a business opportunity, franchise or similar concern is required to provide to you as a potential buyer by law. It details everything you need to and should know about the business in question and must be given to you if not during the first “personal meeting,” then within a specified timeframe. Although the disclosure requirements as delineated by the U.S. Federal Trade Commission (FTC) are considerable, they are not overruled by those set forth by the 26+ states that also have them. So be certain to check the regulations in your state in addition to those of the FTC before you sign on the dotted line or give the seller any money.
Remember, oral statements, exchanges or promises that are made to you by the seller or between the two of you are not legally binding! This is precisely why knowing what comprises a comprehensive disclosure statement is so important.
So here it is, a brief overview of what a truly solid disclosure statement should contain as stipulated by the FTC:
In addition, the FTC stipulates that a number of CAUTION notices be included in the disclosure statement, just to ensure there is no confusion as to what is being promised. Where you see one, pay attention. Finally, any seller of a business opportunity, franchise, licensee opportunity or distributorship that promises you a specific level of income is doing so at their own peril, unless the context in which they are providing the information meets with some pretty specific requirements. For a more in-depth look at what those are, as well as the overall disclosure statement content as prescribed by the FTC that is outlined here, please click on the Commission’s Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures webpage now.