UFOC's & FDD's

[abhb]

Hey YE,

I am in the process of building a business plan for a franchise opportunity that I have found. I would like to obviously gain investment but without strong financial data to back my projections for start up costs and opening sales I am already hitting a wall. Any ideas from current franchisees would be appreciated. I really dont need that much investment but lenders these days are very tight so it will be a struggle just to get what I need. For those who are unfamiliar with the abbreviations:

UFOC = Uniform Franchise Offering Circular

FDD = Franchise Disclosure Document

These items are said to be provided during the start up process with my franchise. Should I trust what they give me though? They even provide a listing of contact information for current owners and I feel even that could be a pre set list of owners who will be very artificial with the information they do disclose. Any help would be greatly appreciated, I have been researching this market and franchise specifically for over a year and its time to get started!


Thank you,
Allen B.

[David Rocci]

Does the franchisor offer in-house financing? any franchisor that encourages a franchisee to obtain their own financing (not uncommon) usually provides then with a canned business plan and a package of the required documents for you to submit to your lender. I suggest going for a home equity line of credit if you have any equity in your home and use those funds to purchase your franchise. Also, there are ways to use your 401k to invest in a business, too. Which franchise are you considering?

I franchise with Liberty Tax Service and they have all of the things I mentioned above - in-house financing for the right people and if not in-house, they have a list of resources to try for outside financings as well as canned business plans, financial projections and all the documents a bank would possibly need to make a lending decision.

Let me know if I can provide any additional assistance. Good luck!

[abhb]

Thanks Dave,

The Franchise does offer financing in house. The franchise I plan to pursue is Subway as well. The main issue standing in my way still is obtaning financing to open up 3 stores within 2 years. I plan to look for angel investors for the time being while I build my plan. I must do this because I dont have a home or 401k to leverage. With that being said, if I do plan to get bank loans are there any that you recommend? I heard JP Morgan Chase has great business lending services currently.


Allen

[Franchise Think Tank]

The Uniform Franchise Offering Circular (UFOC) and Franchise Disclosure Document are one in the same. They used to be called UFOC and are now referred to as the FDD, although they are still referred to interchangeably. Franchising is regulated by the Federal Trade Commission (FTC) and it is mandated that all prospective franchisees receive this. It is made up of 23 items, item 20 will list existing franchises. Call on them during your due diligence. You must have this document for at least 14 days before you can sign any agreements, so make sure you have a franchise attorney look at it during that time. Hope this helps.

This is not legal advice.

[Franchise Think Tank]

One more thing. Typically the FTC doesn't review the FDD unless there is a complaint and wants to start an investigation. Just make sure you have a franchise attorney look over the document.