by Josan García. (CFE)

Sorry, I´m here as a intruder because “Made in USA” section obviously is for US collegues, but in this case, considering that I´m aswering to a US slide presentation, I prefer to write in english.

These slides are a response to this Blue Maumau presentation, that I´m deeptly disagree with.

Franchising is something really good. It doesn´t matter in some people use franchising in a bad way, that´s not change what it is.Franchising is about share a competitive advantage, we built it with zor´s, zee´s and providers together and Í like it in that way.

That´s what I´m trying to reflect in my presentation. Please Enjoy it !!!

Tags: franchising, reasons to franchise, Josan Garcia

Tags: franquicia

Por Liz Dillon de Gray Plant Mooty ( Traducción libre de Josan García)

Las Leyes Federales de Estados Unidos prohiben a los franquiciadores vender una franquicia sin cumplir antes con determinados requisitos informativos.La “Federal Trade Commission” requiere que los franquiciadores provean de una completa y extensa información al candidato a través de un documento escrito. La idea fundamental de las leyes de “información de franquicia” es asegurar que el candidato recibe suficiente “información material” del franquiciador y del sistema de franquicia de forma que le permita evaluar correctamente su elección.

Hasta la reciente reforma, (la Regla de Franquicia que no se había tocado desde 1970), y como consecuencia de ella, todos los franquiciadores han tenido que adaptar sus documentos de información precontractual al nuevo documento de información previa (new franchise disclosure document o FDD ) bajo el formato requerido por la ley desde el 1 de Julio de 2008.

La reforma de la Ley adapta gran parte de los contenidos de la UFOC (Uniform franchise Offer Circular) anterior, en la cual los franquiciadores se veían obligados a entregar información específica de su enseña incluyendo: la experiencia de la misma y la experiencia de su staff directivo, así como todas aquellas personas con responsabilidades en la gestión de la central, el histórico de litigios y de insolvencias ( aquí concurso de acreedores ). La Ley reformada requiere también información respecto a las condiciones del contrato de Franquicia y a la relación de Franquicia, canones y royalties, restricciones territoriales, datos económicos y de marca. Además el franquiciador debe aportar una estimación inicial de la inversión de la unidad y puede ( si quiere) presentar una cuenta de explotación tipo prevista.

En cualquier caso los cambios más importantes son los siguientes:

1.- Momento de entrega de la información: Conforme a la antigua ley antes de la reforma se requería al franquiciador entregar la información en el momento más temprano entre la primera entrevista personal o 10 días antes de la firma de cualquier acuerdo o de la entrega de cualquier cantidad al franquiciador por cualquier concepto. Con la reforma de la ley se agradece el cambio que supone que a partir de ese momento basta con entregar la información con 14 días de antelación a la firma de cualquier acuerdo de cierre,o a cualquier pago al franquiciador o a un representante suyo. Es importante resaltar que la reforma obliga a los “brokers” o vendedores de franquicia a presentar la información en los mismos tiempos que el franquiciador, como consecuencia lógica de lo que la ley pretende.

2.- Soporte electrónico de la información.- La reforma aporta claridad y flexibilidad en la forma de aportar la información.Permite al franquiciador aportar la información por cualquier forma que permita al candidato almacenar, descargar, imprimir o cualquier otra forma que permita mantener una copia como futura referencia. Esto significa que la información puede ser completada via e-mail o a través de la pagina web del franquiciador. Después de comunicar el FDD ( Franchise Disclosure Document) al candidato, el franquiciador debe comunicarle los formatos disponibles y los requisitos requeridos para obtener y revisar la información precontractual en los formatos disponibles. Adicionalmente la reforma prohibe la inclusión de cualquier material no requerido expresamente por la ley federal o del Estado en cuestión, incluyendo cualquier herramienta multimedia como audio, video, animación, pop-up bunners o links a información exterior.

3. Información histórica sobre pleitos. Entre los cambios más significativos de la reforma se encuentra la ampliación de la información que debe entregarse relativa a los litigios de la compañía franquiciadora. Entre lo más importante está que la reforma obliga al franquiciador a especificar anualmente en el apartado 3 todo procedimiento judicial o arbitral iniciado relativo a la relación de franquicia durante el anterior año fiscal.Los pleitos deben ser “materiales” y la Federal Trade Commission entiende la materialidad desde el punto de vista mejor para el franquiciado, es decir, el Franquiciador debe estar dispuesto a reportar incluso los procedimientos iniciados contra sus franquiciados. El nuevo documento de información precontractual standard incluye las acciones civiles inicadas contra el franquiciado para hacer respetar sus obligaciones contractuales directamente relacionadas con las operaciones del negocio ( como pago de royalties y obligaciones de formación). La obligación de información no incluye demandas relacionadas con terceros ( por ejemplo provedores), representantes u otros franquiciadores. Para ayudar a los franquiciadores en este punto la reforma les permite listar procedimientos individuales similares bajo denominación común, ( por ejemplo “reclamaciones de cantidad por royalties impagados”) . La idea de este extremo es presentar una “foto instantanea” del momento y no precisa ser actualizada antes del año.

4. Información financiera de desempeño. Con la reforma, las cuentas de explotación tipo se han convertido en información financiera de desempeño. Considerando que el punto 19 es uno de los más importantes de la reforma esencialmente en lo que se refiere a política anti-fraude en la información, la FTC (Federal Trade Commision) permitia antes muchas formas para que los franquiciadores pudiesen compartir la información económica y razonables proyecciones financieras con los candidatos a franquiciados. Como se esperaba, la reforma permite que estas informaciones financieras de desempeño queden como “voluntarias” favoreciendo una libertad de mercado frente a la presentación obligatoria de este dato.

Como punto de partida para las Guías UFOC la reforma elimina las referencias a la información de “gastos” de la definición de información financiera de desempeño. Este cambio permite a los franquiciadores entregar información a los candidatos de gastos sin incluirlos obligatoriamente en una “información financiera de desempeño” en su FDD. Así los gastos “puros” se pueden entregar fuera del FDD, sin embargo su porcentaje en relación a las ventas u otras cantidades son informaciones financieras de desempeño que deben incluirse por los franquiciadores en la FDD.

5. Exenciones. Adicionalmente y para retener 4 exenciones de la antigua norma ( pagos de menos de 500 Dolares, franquicia parcial, arriendo de departamento, y acuerdo oral) la reforma añade una nueva exención para las “relaciones” como consecuencia de “la ley de marketing de las petroleras” y más significativamente tres nuevas exenciones para “inversores sofisticados” que pueden ofrecer a los franquiciadores una mayor en el cierre de ciertos tratos excepcionales. De forma genérica las exenciones son las siguientes:

• Gran Inversión. Exime de documento de información precontractual a aquellos acuerdos en los que el franquiciado invierta inicialmente un millon de dolares o más, excluyendo el coste del establecimiento como suelo, y cualquier inversión en la cual el franquiciador o alguno de sus representantes proporcione financiación
• Franquiciado Experimentado. Exime de información precontractual relativa a ventas, a aquellos franquiciados o parientes de franquiciado o de sus representantes” que hayan operado una unidad al menos durante 5 años y hayan tenido unos ingresos de no menos de 5.000.000 de dolares.
• “Propietario, miembro del staff o directivo” .Exime de cierta información de ventas cuando durante 60 dias cuando uno o más de los compradores con al menos el 50 % de interés en la franquicia: (1) ha sido, al menos dos años propietario de una entidad franquiciadora con al menos el 25 % de “interés” o (2) un miembro del staff, director, asociado general o individual con responsabilidades de gestión en la oferta de venta de unidades franquiciadas,o Administrador de una Central franquiciadora

Es importante resaltar que la reforma de la ley no pretende saltarse la ley de los Estados, si acaso extender sus limites a éstos cuando sean inferiores. En otras palabras, la reforma de la ley establece un mínimo de cumplimiento obligado para los franquiciadores en todas las jurisdicciones, pero los Estados pueden imponer restricciones adicionales. Asimismo hay determinados Estados que exigen que el franquiciador registre su Documento de Información Precontractual en el propio estado.

Tags: Franchise disclosure document, Amended FTC Franchise Rule, Federal Trade Commission, Liz Dillon, Gray Plant Mooty, Franchise, Franchisor, Franchisee

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By Liz Dillon from Gray Plant Mooty

Only english version available

(Spanish version translated by Josan Garcia in process)

Federal franchising laws in the U.S. prohibit a franchisor from selling a franchise to a prospective franchisee before complying with certain disclosure requirements. The U.S. Federal Trade Commission (“FTC”) requires that franchisors provide full and complete disclosure to a prospective franchisee through a written disclosure document. The fundamental policy underlying the disclosure laws is to ensure that a prospective franchisee has enough material information about the franchisor and the franchise system to allow the person to make an informed decision in evaluating the franchise opportunity.

Recently, the FTC amended its old FTC Rule, which it had not touched since the 1970s, to create the amended FTC Franchise Rule (“Amended Rule”). All franchisors offering and selling franchises in the U.S. had to convert their old disclosure documents to the new franchise disclosure document or FDD format required under the Amended Rule by July 1, 2008.

The Amended Rule adopts in large part the “UFOC Guidelines” disclosure model, which most franchisors in the U.S. were previously using. Similar to the UFOC Guidelines, the Amended Rule requires the franchisor to provide specific information about the franchisor, including its business experience and the business experience of its officers, directors and individuals with management responsibility, its litigation history and its bankruptcy history. The Amended Rule also requires the franchisor to disclose information about the franchise agreement and the franchise relationship, including obligations of both the franchisee and the franchisor, fees paid, territory restrictions, financing and trademarks licensed. Further, the franchisor must provide an estimated initial investment for a franchisee to enter into the franchise and it may, at its option, provide a financial performance representation (formerly referred to as an “earnings claim”).

There were several changes from the old FTC Rule and UFOC Guidelines to the Amended Rule. Here are some of the most notable changes:

1. Timing of Disclosure. Under the old FTC Rule, franchisors were required to disclose prospective franchisees at the earlier of (a) the first personal meeting; or (b) 10 business days before a franchisee signs an agreement or pays any consideration. In a welcome change, the Amended Rule does not contain the first personal meeting requirement and simply requires a franchisor to disclose a prospective franchisee “at least 14 calendar days before the prospective franchisee signs a binding agreement with, or makes any payment to, the franchisor or an affiliate in connection with the proposed franchise sale.” Please note that the Amended Rule does require franchise sellers to provide full disclosure earlier in the sales process, if reasonably requested.

2. Electronic Disclosure. The Amended Rule provides clarification, and flexibility, as to the method or media of disclosure. The Amended Rule permits franchisors to deliver the disclosure document in any manner that permits a prospect “to store, download, print, or otherwise maintain a copy for future reference.” This means that disclosure can be completed by e-mail as well as through a franchisor’s website. Before delivering the FDD, the franchisor must simply advise a prospect of available disclosure formats, and any requirements for obtaining and reviewing disclosure in a particular format. Further, the Amended Rule expressly prohibits the inclusion of any material not specifically required under the Amended Rule (or by applicable state law) – including any multimedia tools such as audio, video, animation, pop-up screens, or links to extraneous information.

3. Litigation Disclosures. The expansion of litigation disclosures under the Amended Rule is among the most significant changes for franchisors. Most importantly, the Amended Rule requires a franchisor to disclose annually in Item 3 all franchisor-initiated litigation involving the franchise relationship filed during the previous fiscal year. While franchisor-initiated litigation must be “material,” the FTC intends to view materiality from the reasonable prospective franchisee’s vantage point. In other words, franchisors should be prepared to disclose most lawsuits brought against franchisees. The new disclosure standard includes civil actions that a franchisor initiates against a franchisee to enforce contractual obligations directly relating to the operation of the franchised business (such as royalty payment and training obligations). The obligation to disclose does not include actions involving third parties (such as suppliers), affiliates or other systems, or indemnification for tort liability. To aid franchisors in disclosing franchisor-initiated litigation, the Amended Rule does allow franchisors to list similar individual lawsuits under common headings (e.g., royalty collection suits). The disclosure of franchisor-initiated litigation is meant to cover a snapshot in time, and is not required to be updated.

4. Financial Performance Representations. Under the Amended Rule, “earnings claims” have become “financial performance representations.” Noting that Item 19 is one of the most important sections of the Amended Rule, particularly as it relates to anti-fraud disclosures, the FTC took several steps to allow franchisors to share material and reasonable financial performance representations with prospective franchisees. As expected, the Amended Rule provides that financial performance representations remain voluntary, favoring a free market approach over mandated disclosures.

In a departure from the UFOC Guidelines, the Amended Rule eliminated references to “expense” information from the definition of a financial performance representation. This change will allow franchisors to provide expense information to prospects without including a financial performance representation in their disclosure document. While pure “expenses” are fine to disclose outside of a franchisor’s FDD, expenses as a percentage of sales or other amounts are financial performance representations that must be included in the franchisor’s FDD.

5. Exemptions. In addition to retaining four exemptions from the old FTC Rule (i.e., exemptions for payment of less than $500, fractional franchise, leased department, and oral agreement), the Amended Rule adds a new exemption for relationships covered by the Petroleum Marketing Practices Act, and more significantly, three new “sophisticated investor exemptions” that may offer franchisors added flexibility in closing certain qualifying deals. Generally speaking, the new sophisticated investor exemptions are as follows:

” Large Investment. The “large investment” exemption exempts from disclosure those arrangements where a franchisee makes an “initial investment” of $1 million or more, excluding (1) the cost of unimproved land, and (2) any investments in which the franchisor (or an affiliate) provides financing.

” Large Franchisee. The “large franchisee” exemption exempts from disclosure franchise sales to a franchisee who is (or who has a parent or an affiliate who is) an entity that has been in business for at least five years and has a net worth of at least $5 million.

” Owner, Officer, and Manager. The “owner, officer, and manager” exemption exempts from disclosure certain franchise sales where within 60 days of the sale, one or more of the purchasers (of at least a 50% interest in the franchise): (1) has been, for at least two years, an owner of the franchisor entity (at least a 25% interest); or (2) an officer, director, general partner, or individual with management responsibility for the offer and sale of the franchisor’s franchises, or the franchisor’s administrator of the franchised network.

It is important to note that the Amended Rule will not preempt state franchise laws, except to the extent these laws are inconsistent with the Amended Rule, such as registration of disclosure documents or more extensive disclosures. In other words, the Amended Rule will set a minimum compliance level with which all franchisors must comply in all U.S. jurisdictions, but the states may impose additional restrictions. In addition, there are a number of states that require the franchisor to register its franchise disclosure document with the state.