Beruflich Dokumente
Kultur Dokumente
Kosnar
The Kosnar Group
2306 Wales Drive
Cardiff by the Sea, CA 92007
Phone: (760) 632-8402
Mobile: 619-994-2258
Fax: (760) 632-0772
MEMORANDUM
To:
Date:
_________________________________________________________________________
The FTC Franchise Rule requires you to disclose in a basic disclosure document certain
background information about the franchising company, you and the other principals, financial condi-
tion, existing franchisees and most provisions of the franchise agreement. The basic disclosure docu-
ment, including a franchise agreement and all other agreements that the franchisee will be required to
sign, must be given to a prospective franchisee at least 14 days before signing a binding agreement
or paying any fee. The franchisee must also receive completed copies of all contracts at least five
days before signing them. This basic franchise disclosure document can be in one of two formats:
(i) the FTC Disclosure Document; or (ii) the state Franchise Disclosure Document ("FDD") format.
The FDD format is more comprehensive.
1
The franchise laws provide that no person may offer or sell a franchise by means of any
written or oral communication that includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements, in light of the circumstances under which
they were made, not misleading. A violation of these laws may result in administrative, civil and/or
criminal sanctions, for the corporation and its principals. Responding completely to the information
required to be disclosed in a FDD is considered the “minimum” level of disclosure. The greater the
disclosure, the lower the exposure to claims of fraud and misrepresentation. Err on over disclosure
rather than basic disclosure.
This Questionnaire FDD uses on information you are required to disclose in your FDD.
Please try to answer the questions as fully as possible. If you are unable to answer any questions
completely, respond as best you can.
We have tried to eliminate redundant questions already asked and answered in completing the
Franchise Agreement Questionnaire.
If any question is inapplicable to your franchise program, respond with "N/A." We have tried
to explain the reasons for many of the questions and have given you a choice of several possible
answers based on our franchising experience, where appropriate. These proposed answers are only
possibilities, not required responses. If you have a different answer, let us know. When responding
to questions about your franchise program, be reasonable and base your responses on any experience
you may have had to make your own business successful. We will review your responses to the
questions and schedule a time to discuss them with you.
This Questionnaire will be used to prepare an FDD for a prospective franchisee purchasing
one single-unit franchise. More complex franchise arrangements such as area development (multiple-
unit) agreement, subfranchising (master franchising) and area representative (development agents)
require additional documents and disclosures. Most start-up franchisors concentrate on single-unit
sales initially.
Responses consistent with the AAFD Fair Franchising Standards are highlighted in
bold.
2
-
- ITEM 1 - THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.
000000001. Does the franchisor maintain a principal business address outside of the United
States?
Yes No
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2. Most franchise registration states require the franchisor to appoint a designated government
official within that state as the franchisor's agent for service of process within that state.
However, in non-registration states, the franchisor will be required to designate an agent for
service of process. This agent is generally the individual identified on the franchisor's
corporate formation documents.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
3
4. Describe the business to be operated by a franchisee:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Yes No
If yes, state how many and the states where they are located:
State Number
______________________________ ____________
______________________________ ____________
______________________________ ____________
______________________________ ____________
______________________________ ____________
______________________________ ____________
6. Describe the market for the goods or services offered by the franchisor (for example, general
public, limited market segment, target age group, target professions, etc.):
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
7. Are there any laws or regulations that are applicable specifically to the industry in which the
franchisees will be operating?
Yes No
4
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
8. Describe the businesses the franchisees have to compete with (for example, independent retail
outlets, national or regional department stores, etc.):
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
a. The length of time the franchisor has conducted a business of the type to be operated
by the franchisees:
__________________________________________________________________
_____________________________, 20___
Yes No
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
e. Identify the length of time the franchisor has offered each other franchise:
5
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Predecessors
Under the FDD Guidelines, the franchisor must also disclose required information about each
of its predecessors. For purposes of the FDD, a predecessor is defined as "a person from
whom the franchisor acquired directly or indirectly the major portion of the franchisor's
assets." You need only provide information on any entity that qualifies as a predecessor
within the last 10-year period.
Yes No
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
a. The length of time each predecessor has conducted a business of the type to be
operated by the franchisees:
__________________________________________________________________
6
_____________________________, 20___
_____________________________, 20___
Yes No
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. Identify the number of franchises each predecessor sold in each other line of business:
__________________________________________________________________
e. Identify the length of time each predecessor has offered each other franchise:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
7
Affiliates
Also required under the FDD Guidelines is the same information regarding each affiliate of
the franchisor. For purposes of the FDD, an affiliate is defined as "a person (other than a
natural person) controlled by, controlling or under common control with the franchisor,
which is offering franchises in any line of business or is providing products or services to the
franchisees of the franchisor."
Yes No
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
a. The length of time each affiliate has conducted a business of the type to be operated
by the franchisees:
__________________________________________________________________
8
b. When did each affiliate begin selling franchises?
_____________________________, 20___
_____________________________, 20___
Yes No
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. Identify the number of franchises each affiliate sold in each other line of business:
__________________________________________________________________
e. Identify the length of time each affiliate has offered each other franchise:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
List by name and position held (title) the directors, trustees and/or general partners, as the
case may be, the principal officers (including the chief executive officer and chief operating
officer, president, financial, franchise marketing, training and operations officers) and other
executives and subfranchisors who will have management responsibility in the operation of
the franchisor and all franchise brokers. If the franchise broker is a company, the principals
will need to be disclosed in the same manner as the franchisor's principals.
9
a. Name: ____________________________________________________________
_______________________ ___________________________/20__to____/20___
b. Name: ____________________________________________________________
c. Name: ____________________________________________________________
10
_______________________ _______________________ ____/20__
to____/20___
d. Name: ____________________________________________________________
e. Name: ____________________________________________________________
11
to____/20___
17.0 Referral Program. Some franchisors will pay a referral fee, in cash or merchandise credits,
to an existing franchisee who refers a prospective franchisee to the franchisor who actually
buys a new franchise. They are technically not franchise brokers, but any referral program
should be disclosed.
Yes No
ITEM 3 - LITIGATION.
The franchising company and every predecessor, affiliate, affiliated person and franchise
broker listed in the sections addressing ITEMS 1 and 2 above must disclose certain litigation
in which he, she or it has been a party during the last 10 years consisting of:
a. Are there any administrative, criminal or material civil actions (including arbitration
proceedings) pending against any person identified in this Questionnaire that involved
an allegation of a violation of a franchise, antitrust or securities law, fraud, unfair or
deceptive practices or comparable allegations?
Yes No
Date of filing:_______________________________________________________
12
Relief sought:_______________________________________________________
Conclusions of law:__________________________________________________
Conclusions of fact:__________________________________________________
Current status:______________________________________________________
b. Are there any other actions pending (including arbitration proceedings), not involving
the specified allegations, that are significant in the context of the number of
franchisees and in the size, nature or financial condition of the franchise system or its
business operations?
Yes No
Date of filing:_______________________________________________________
Relief sought:_______________________________________________________
Conclusions of law:__________________________________________________
Conclusions of fact:__________________________________________________
Current status:______________________________________________________
20.0 Concluded Actions. Are there any actions (including arbitration proceedings) concluded
within the previous 10-year period in which any person identified in this Questionnaire was
convicted of a felony or pleaded nolo contendere to a felony charge, or was held liable in a
civil action by final judgment or was the subject of a material action involving a violation of a
franchise, antitrust or securities law, fraud, unfair or deceptive practices, or comparable
allegation?
Yes No
13
If yes, provide the following:
Date of filing:_____________________________________________________________
Names of parties:__________________________________________________________
Relationship of parties:_____________________________________________________
Relief obtained:___________________________________________________________
Conclusions of law:________________________________________________________
Conclusions of fact:________________________________________________________
Terms of settlement:_______________________________________________________
20. Injunctions and Restrictive Orders. Is any person previously identified in this
Questionnaire subject to a currently effective injunctive or restrictive order or decree relating
to the franchise being offered or under a federal, state or Canadian franchise, securities,
antitrust, trade regulation or trade practice law resulting from a concluded or pending action
or proceeding brought by a public agency?
Yes No
Date of filing:_____________________________________________________________
Names of parties:__________________________________________________________
14
Factual nature of each claim:________________________________________________
Conclusions of law:________________________________________________________
Conclusions of fact:________________________________________________________
15
ITEM 4 - BANKRUPTCY.
The franchisor, and any affiliate, predecessor, officer or general partner of the franchisor must
disclose any bankruptcy proceedings during the past 10 years, including if that person was a
principal officer of any company or a general partner in any partnership that was adjudged
bankrupt or reorganized due to insolvency during or within one year after the period that the
officer or general partner of the franchisor held a position in the other company or
partnership.
Yes No
________________________________________________________________
__________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
_____________________________________________________________________
____________________________________________________________________
__________________________________________________________________
16
i. Date of confirmation of a plan of reorganization (Chapter 11 or 13) or the date of
discharge (Chapter 7):
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
To protect you and us, all persons listed in this Questionnaire will be required to sign sworn
affidavits relating to their employment, litigation and bankruptcy history.
22.0 The Franchise Agreement Questionnaire that you have already completed has provided us
with the information on the franchisor's initial franchise fee. We also need to know whether
the franchise fee is identical for all franchisees. For example, if the franchisor will negotiate a
lower franchise fee for certain franchisees, this fact must be disclosed. In addition, if the
franchisor offers a discount for additional units purchased by the same franchisee, this must
also be disclosed.
Yes No
a. Identify the range of the amounts of the initial franchise fees or the method or
formula by which the initial franchise fee is determined:
__________________________________________________________________
b. Identify the factors affecting the amount of the initial franchise fee:
__________________________________________________________________
23.0 The bulk of information that will be included in ITEM 6 of the FDD has been described in the
Franchise Agreement Questionnaire that you have already completed. In addition to this
information, the franchisor must also disclose information about the voting arrangements for
cooperatives that collect fees from franchisees.
17
Yes No
__________________________________________________________________
b. If company units have controlling power, state the range for the fee that may be
imposed by the cooperative:
__________________________________________________________________
24.0 Describe in detail the type of expenditure (by category), the exact or estimated cost (high-
low range), method of payment (for example, lump sum, installments, etc.), due date (for
example, on signing franchise agreement, upon obtaining site, before opening, etc.), to whom
payment is made (for example, franchisor, landlord, contractors, government authorities,
suppliers, third parties, etc.) and whether refundable and under what conditions. Footnotes
may provide explanatory details, if necessary to understand the disclosures (for example,
inventory and lease costs are based on a 3,000 sq. ft. building). Categories listed below are
possibilities and are not necessarily applicable to all franchise systems. Add any relevant
categories that are not included but are applicable to your operation.
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Improvements
Utilities
Deposits
Licenses and
Permits
Initial
Promotional
Advertising
Expenses
Professional
Fees
Travel, Lodging,
Meals, Etc. for
Initial Training
Additional Funds
Finance Costs
Miscellaneous
Start-Up Costs
Working Capital
to Break-Even
( months)
Other
Other
Other
Other
19
Attach additional pages for any explanatory details. Historical numbers from existing
operations should be reviewed. You may want to have your accountant help you on this.
25. Describe the types of premises that are required for operation of the franchise:
________________________________________________________________________
26. Additional funds are described as those required by the franchisee before operations begin
and during the initial phase of franchise operations. A reasonable time for the initial phase of
the business is at least 3 months or a reasonable period for the franchisor's particular industry.
What time period has been used for the franchisor's initial phase in calculating the "Additional
Funds" section of the previous chart?
________________________________________________________________________
27. Describe the factors, basis and experience used by the franchisor to determine the amount of
time necessary for the initial phase:
________________________________________________________________________
________________________________________________________________________
28. May any part of the franchisee's initial investment be financed by the franchisor or an affiliate?
Yes No
20
ITEM 8 - RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES.
29.0 Is the franchisee required to purchase or lease any goods, real estate or services from the
franchisor or the franchisor's designees (meaning any affiliates of the franchisor, or a single
unaffiliated source) relating to the establishment or operation of the franchise?
Yes No
a. The items required to be purchased or leased from the franchisor or its designees:
__________________________________________________________________
___________________________________________________________________
___________________________________________________________________
__________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
30.0 Describe how the franchisor formulates and modifies specifications and standards:
________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
32. Are the specifications and standards issued to franchisees, subfranchisors or approved
suppliers?
Yes No
21
33. Describe how suppliers are evaluated, approved or disapproved:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
35. Are the franchisor's criteria for supplier approval available to franchisees?
Yes No
36. Describe the procedure to be followed by a franchisee when attempting to secure approval of
a new supplier:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
37. Is the franchisee required to pay any fee in order to secure approval of a new supplier?
Yes No
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
22
38. State the manner in which approval previously given by the franchisor is revoked:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
39. Does the franchisor or an affiliate derive income as a result of any required purchases (either
from the franchisee, an affiliate or a third party supplier)?
Yes No
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
c. The franchisor's total revenues from all required purchases and leases:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
23
__________________________________________________________________
g. The percentage of the affiliate's total revenues represented by the required purchases:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
j. The percentage or flat amount of any supplier's payments to the franchisor or affiliate:
__________________________________________________________________
40.0 State to the extent known or estimable by the franchisor the magnitude of these required
purchases and leases in relation to all purchases and leases by the franchisee of goods, real
estate and services that the franchisee will make or enter into in the establishment and
operation of the franchised business:
Yes No
Yes No
42. Does the franchisor provide any material benefits (renewal or granting of additional
franchises) based on a franchisee's use of approved suppliers?
Yes No
24
If yes, describe the benefits: _______________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
43. The bulk of a franchisee's obligations are contained in the franchise agreement and other
contracts to be signed by a franchisee. In certain cases, however, a franchisor will impose
obligations upon a franchisee that are not contained in the franchise agreement.
Does the franchisor impose any obligations on the franchisee that are not identified in the
franchise agreement or related contracts?
Yes No
________________________________________________________________________
________________________________________________________________________
ITEM 10 - FINANCING.
44. Does the franchisor or any affiliate, directly or indirectly, offer financing to a franchisee?
Indirect includes referring a prospective franchisee over to a third party lender. Financing
does not include payments due within 90 days on open account financing.
Yes No
__________________________________________________________________
__________________________________________________________________
25
b. Terms of any financing:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
f. Annual interest rate charged (include a recent rate if the rate is variable):
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Yes No
26
Yes No
Yes No
k. Potential liabilities on default (for example, acceleration clause, court costs and
attorneys' fees for collection, termination of franchise, or other potential liabilities):
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
n. Are there any provisions that require the franchisee to waive asserting any defenses?
Yes No
If yes, describe:
__________________________________________________________________
45.0 Does the franchisor have any past or present practice or intent to sell, assign or discount any
note or other instrument executed by the franchisee?
Yes No
__________________________________________________________________
__________________________________________________________________
27
b. Will the franchisor remain primarily liable to furnish the goods or services?
Yes No
46.0 Does the franchisor receive payments from any person for placement of financing?
Yes No
a. Type of payment:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
28
ITEM 11 - FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS,
AND TRAINING.
The Franchise Agreement Questionnaire that you have already completed has provided us
with most of the information we need about the franchisor's obligations under the franchise
agreement. The following questions request information in addition to those already given.
47.0 The franchise agreement describes the marketing fund administered by the franchisor. For this
marketing fund, provide the following information:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. Under what conditions will the franchisor permit the franchisees to use their own
advertising materials?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
e. If all advertising fees are not spent in the year they accrue, how does the franchisor
use the remaining amount?
__________________________________________________________________
__________________________________________________________________
f. Will franchisees receive a periodic accounting of how advertising fees are spent?
29
Yes No
If yes, how does a franchisee obtain an accounting of how advertising fees are spent?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
g. What percentage of advertising funds is used for the solicitation of new franchisees:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Yes No
__________________________________________________________________
b. Is the council advisory only or does it have operational or decision making power?
__________________________________________________________________
__________________________________________________________________
c. Does the franchisor have the power to form, change or dissolve the advertising
council?
__________________________________________________________________
__________________________________________________________________
Yes No
30
If yes, provide the following information:
_________________________________________________________________
__________________________________________________________________
___________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Yes No
Yes No
Yes No
If yes, how often:
__________________________________________________________________
Yes No
31
h. Does the franchisor have the power to require the cooperative to be formed,
changed, dissolved or merged?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Yes No
__________________________________________________________________
__________________________________________________________________
Yes No
Yes No
_________________________________________________________________
__________________________________________________________________
___________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Yes No
32
g. Are financial statements of the advertising funds available for review by franchises?
Yes No
h. Describe the use of each advertising fund in the most recent fiscal year, including:
____________________________________________________________
51.00000 Does the franchisor or an affiliate receive payment for providing goods or services to
any advertising fund?
Yes No
If yes, describe:
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________
52. Does the franchisor require franchisees to buy or use electronic cash registers or computer
systems?
Yes No
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
33
b. Identify each hardware component and software by brand, type and principal
function:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
c. Who has the contractual right or obligation to provide ongoing maintenance, repairs,
upgrades or updates (franchisor, affiliate, third party):
__________________________________________________________________
d. What is current annual cost of any optional or required maintenance and support
contracts, upgrades and updates:
__________________________________________________________________
__________________________________________________________________
Yes No
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
34
f.0 The length of time the component or program has been in continuous use by the
franchisor:
__________________________________________________________________
53.0 Identify all compatible equivalent components or programs that perform the same function:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Yes No
55. Do the franchisees have any contractual obligation to upgrade or update any hardware
component or software program?
Yes No
If yes, are there contractual limitations on the frequency and cost of this obligation?
Yes No
If yes, describe:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
57. What type of business information or data will be collected or generated by the system or
program:
________________________________________________________________________
35
58. Will the franchisor have independent access to this information and data?
Yes No
If yes, are there any contractual limitations on the franchisor's right to access the information
and data?
Yes No
59. Is the franchisor obligated to provide or assist the franchisee in obtaining the required
electronic cash registers or computer systems?
Yes No
60. You will be required under the FDD Guidelines to either: (a) disclose the table of contents of
the operating manual as of the franchisor's last fiscal year end or any more recent date; or (b)
show the franchisee the complete operating manual before purchasing a franchise only after
signing a confidentiality agreement. Which option do you elect?
61.0000 What factors does the franchisor consider in selecting or approving sites for
franchised businesses?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
62. What is the typical length of time that passes between signing the franchise agreement and the
actual opening of the franchise?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
64. ITEM 11 of the FDD must describe the franchisor's initial training program. Describe the
following aspects of the franchisor's initial training program:
36
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. How many hours of on-the-job training are provided for each subject?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
f. What is the minimum experience of these instructors in teaching the subjects taught
and in the franchisor's operations?
__________________________________________________________________
37
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
h. If the initial training program is not mandatory, what percentage of new franchisees
have enrolled in the training program during the previous 12-month period?
__________________________________________________________________
ITEM 12 - TERRITORY.
65.0 You have already identified whether an exclusive or protected territory will be granted to a
franchisee in the Franchise Agreement Questionnaire that you have already completed. What
is the minimum area that will be granted to a franchisee?
________________________________________________________________________
66. If no exclusive or protected territory is granted to a franchisee, describe the conditions under
which the franchisor will approve the establishment of additional franchise units in the vicinity
of existing units:
________________________________________________________________________
________________________________________________________________________
67. Has the franchisor established or does the franchisor intend to establish alternative channels
of distribution for the trademarked products?
Yes No
________________________________________________________________________
68. Has the franchisor established franchised or company-owned units or dissimilar channels of
distribution for selling or leasing a product or service similar to that being granted in the
franchise?
Yes No
38
a. Describe the similar goods or services: _________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. Will the other units or channels of distribution solicit or accept orders within a
franchisee's protected or exclusive territory: _____________________________
__________________________________________________________________
69.0 Does the franchisor or its affiliates have plans to establish other franchises or company-
owned units or alternative channels of distribution selling or leasing similar products or
services under a different trademark than that franchised under this system?
Yes No
a. Describe how the franchisor will resolve conflicts between the franchisor and the
franchisees and between franchisees of each system regarding territory, customers
and franchisor support:
__________________________________________________________________
__________________________________________________________________
b. Identify the principal business address of the franchisor's similar operating business:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
c. Does the franchisor maintain or plan to maintain physically separate offices and
training facilities for similar competing businesses?
Yes No
39
ITEM 13 - TRADEMARKS.
70.0 Please identify below all the trademarks, service marks, copyrighted materials, patents, and
other proprietary property rights that will be used by your franchisees in the operation of the
franchise. Also, provide us with copies of all registrations, if any.
Name, address and telephone number of trademark, patent and copyright counsel.
Type of registration,
if any (identify by
Owner:federal or state):
Type of registration,
if any (identify by
Owner:federal or state):
Copyrighted
materials: ________________ __________ ________________________
40
secret recipe products,
trade secrets, etc.): ________________ __________ ________________________
We would like to receive some small camera-ready copies of the franchisor's logo for
inclusion in the upper left-hand corner of the cover page of the FDD. We will also use the
logo on the cover pages of some of the other franchise-related documents.
71. Will a predecessor or a company other than the franchisor own the trademarks, patents,
copyrights and other information?
Yes No
Yes No
If yes, please supply us a copy. If no, we will prepare the license agreement at your
request.
41
ITEM 14 - PATENTS AND COPYRIGHTS AND PROPRIETARY INFORMATION.
72. Does the franchisor own any patents or copyrights that are material to the franchise?
Yes No
73. Is there any other confidential information or trade secrets that are material to the franchise?
Yes No
If yes, describe the general subject matter of the confidential information or trade secrets:
________________________________________________________________________
________________________________________________________________________
74. Describe the terms for use by a franchisee of the confidential information or trade secrets:
________________________________________________________________________
________________________________________________________________________
75. A vast majority of information we need to prepare ITEM 15 is included the Franchise
Agreement Questionnaire that you have already completed. If the franchise agreement does
not require personal participation of the franchise owner, does the franchisor recommend
participation by the franchise owner in the direct operation of the franchised business?
Yes No
76. Other than as contained in the franchise agreement and related contracts, are there any
limitations that the franchisee must place on his or her managers (for example, whether the
manager must complete the franchisor's training program, the amount of any equity interest
that the manager must have in the franchise, etc.)?
Yes No
________________________________________________________________________
42
77. All the information we need to complete ITEM 16 of the FDD has been provided to us in the
Franchise Agreement Questionnaire that you have already completed.
78. All information that we need to complete ITEM 17 of the FDD has been provided to us in
the Franchise Agreement Questionnaire that you have already completed.
79. Are there any public figures used in the name or symbol of the franchise or used for the
endorsement or recommendation of the franchise in advertisements?
Yes No
a. Describe the compensation or other benefit given or promised to the public figure:
___________________________________________________________________
__________________________________________________________________
Yes No
If yes, describe the position and duties of the public figure in the franchisor's business
structure:
__________________________________________________________________
__________________________________________________________________
Yes No
____________________________________________________________
____________________________________________________________
____________________________________________________________
43
(ii) Describe the extent to which the investment is for services performed or to be
performed by the public figure:
____________________________________________________________
____________________________________________________________
80.00000 A vast majority of franchisors do not make representations on how much a franchisee
can earn. We recognize that this makes it more difficult to sell a franchise. If a representation
is made it must be in the form of an earnings claim. An "earnings claim" generally is defined
as information given to a prospective franchisee by, on behalf of or at the direction of
franchisor or its agent, from which a specific level or range of potential or actual sales, costs,
income or profits from franchised or nonfranchised units may be easily ascertained. Included
would be projections, pro formas, statements of actual or average historical performance,
cash flows and comprehensive cost estimates that enable a prospective franchisee to compile
profits by inserting any sales figure (for example, cost of goods sold).
An earnings claim made in connection with an offer of a franchise must be included in full in
the disclosure statement and must have a reasonable basis at the time it is made. An earnings
claim must include a description of its factual basis and the material assumptions underlying
its preparation and presentation. If no earnings claim is to be made, the disclosure statement
must contain a negative disclosure to that effect.
We can discuss the advantages and disadvantages of making an earnings claim. If the
franchisor wants to make an earnings claim, we will need to work closely with your
accountant. The Fair Franchising Standards requires a franchisor to make an earnings
claim.
Yes No
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ITEM 20 - LIST OF OUTLETS.
81. If the franchisor is in a start-up mode, it will have nothing to disclose initially concerning
existing franchisees. Are there any existing franchisees?
Yes No
If yes, please provide the following information for the previous 3 fiscal years:
2000
Number
That Number
Left of
Number Number the Franchises
Canceled Number Reacquire System Operating
State Number Number Number Or Not d by the For at Year-
Located Sold Opened Transferred Terminated Renewed Franchisor Other end
Reasons
45
2099
Number
That Left Number
the of
Number Number System Franchises
Canceled Number Reacquire For Operating
State Number Number Number Or Not d by the Other at Year-
Sold Opened Transferred Terminated Renewed Franchisor Reasons end
Locate
d
2098
Number
That Left Number
the of
Number Number System Franchises
Canceled Number Reacquire For Operating
State Number Number Number Or Not d by the Other at Year-
Sold Opened Transferred Terminated Renewed Franchisor Reasons end
Locate
d
82. The franchisor will be required to provide a list of names, addresses and telephone numbers
of all existing franchises. Attach a list to this Questionnaire.
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83. The franchisor must also include the name and last known home address and home telephone
number of every franchisee under a franchise agreement with the franchisor whose franchise
has, within the previous 12-month period, been terminated, canceled, not renewed or has,
during the same time period, otherwise voluntarily or involuntarily ceased to do business
under a franchise agreement or who has not communicated with the franchisor within the
past 10 weeks. Are there any franchisees that meet this description?
Yes No
84. The franchisor must also disclose the number of company-owned units. For company-owned
units, provide the following information as of the franchisor's last fiscal year end:
Units
Units Closed Units Opened Operating
State Where Located During Year During Year at Year-End
85. Are there any franchises for which a franchise agreement has been signed, but the unit has not
yet begun operation?
Yes No
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86. The franchisor must identify, by state, the number of expected company-owned units to be
opened within the current fiscal year. Provide this estimate below.
__________________________________ ____________________________________
__________________________________ ____________________________________
___________________________________ ____________________________________
___________________________________ ____________________________________
___________________________________ ____________________________________
87. The franchisor must identify, by state, the number of expected franchised units to be opened
within the current fiscal year. Please provide this estimate below.
___________________________________ ____________________________________
___________________________________ ____________________________________
___________________________________ ____________________________________
___________________________________ ____________________________________
88. The financial statements will need to be audited by an independent certified public accountant
("CPA"), ideally one who knows franchising. If you need a recommendation in this regard,
we can recommend one.
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If the franchising company has been in business for 3 or more years, the last 3 years of
financial statements must have been audited and must be included in the disclosure document
in a comparative format. If the franchising company has been in business for less that 3
years, all prior years' financial statements must have been audited and must be included in the
disclosure document in a comparative format. If we are in the process of incorporating the
franchising company, the opening balance sheet and income statement must be audited by an
independent CPA.
The accountant must sign a CPA consent form for certain states (which we will send to him
or her) consenting to the inclusion of the franchisor's financial statements in the disclosure
document.
Please supply us with the name, address and telephone number of the franchisor's accountant:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
_(_____)__________________________________
ITEM 22 - CONTRACTS.
89. The franchisor is required to attach as an exhibit to its FDD a copy of all documents that a
franchisee might be required to sign during the course of purchasing a franchise, including the
franchise agreement, any personal guarantees, security agreements, financing documents
(including third party financing documents if the franchisor will be directly or indirectly
arranging the financing) and all other agreements that the franchisee must sign. Please
identify all documents that the franchisee will be required to sign.
Franchise Agreement
________________________________________________
________________________________________________
________________________________________________
________________________________________________
ITEM 22 - RECEIPT.
ACKNOWLEDGMENT OF RECEIPT
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This Franchise Disclosure Document summarizes certain provisions of the
Nutrition Zone Franchise Agreement and other information in plain language. Read
this Franchise Disclosure Document and all agreements carefully.
You must also receive a Nutrition Zone Franchise Agreement containing all
material terms at least 5 business days before you sign a Nutrition Zone Franchise
Agreement.
There are no subfranchisors or franchise brokers offering this Nutrition Zone Franchise for
us.
________________________________________________
individually
________________________________________________
as an officer or partner of
________________________________________________
name of entity
_____________________ state corporation or partnership (circle one)
This Questionnaire may not have included all your ideas or concepts. If we have not addressed
something please let us know.
We hope that this Questionnaire has been helpful in the formulation and initial fine-tuning of your
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franchise program. We look forward to going over this Questionnaire and any other questions or
comments you may have and then to drafting your FDD.
Sincerely,
Carl J. Kosnar
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