Tom’s Franchise Information Blog

Remember that thick document your franchiser gave you when you bought your franchise? It was probably called a UFOC, and there are complex rules dictating what information it was required to include. If your franchiser neglected to give you a UFOC, or gave it to you late, or gave you a UFOC that didn’t fully comply, you might still have the right to give your franchise back and get a full refund, even if its been a few years since you bought it. You might even be able to get the franchiser to reimburse any losses you’ve had, and to pay your attorney fees.

Franchises are subject to rules of the Federal Trade Commission, but individuals do not have the right to sue if the franchiser does not comply with these federal rules. Only the Federal Trade Commission can sue, and an individual cannot count on having the FTC go to bat for them. Fortunately, many states have their own franchise laws. Typically, these require the franchisers to prepare a detailed disclosure document like the UFOC. In some states, the document must be reviewed by state officials and registered before it can be used, but in other states the law does not require any prior state review. Only about 35 states have laws like this, but franchisees in those states can sometimes use these laws to get their money back. As a practical matter, it’s very difficult to prepare a UFOC which does not contain significant mistakes, and these mistakes can form the basis for a claim against the franchiser which can get the franchisee his money back.

Sometimes a relationship is created which looks like a franchise but is labeled something else, like a Trademark License or a Partnership. These relationships often feature the use of a trademark, and significant control over one party’s business by the other party. Sometimes these are just franchise relationships masquerading as something else, and the relationships are still covered by state franchise laws. Often no disclosure document is provided in such cases, and the state laws then provide an easy route to get the “franchisee” his money back.

If you are a franchisee who’s lost money on his investment, you should consult a franchise lawyer to discuss this possibility. Only a knowledgeable franchise law expert should be consulted, because the lawyer will need to be able to analyze whether your UFOC failed to comply with the complex rules governing preparation of the UFOC.

Our law firm has successfully represented franchisees who have received hundreds of thousands of dollars in loss reimbursements from their franchisers. We would be pleased to help.

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