References in periodicals archive ?
One of the first financial data requirements for the Franchise Offering Circular is a table disclosing a new franchisee's anticipated initial investment.
The disclosure document must include audited statements for the preceding three years, or such shorter period the franchisor has been in existence, and interim financial statements (which need not be audited) dated within 90 days of filing the proposed offering circular with the government.
Normally, each of the following financial statements of the franchisor must be part of the offering circular:
* A balance sheet, which need not be audited, dated within 90 days of filing the proposed offering circular in that state.
* If an unaudited balance sheet is used to meet the above requirement, an audited balance sheet dated as of the end of the franchisor's last fiscal year ending 90 days or more before the filing date of the offering circular.
Some states permit the offering circular to include the above financial statements of the parent company.
The initial compliance letter should remind the franchisor about the state and federal requirements to update the offering circular as material changes occur.
If no earnings claim has been included in the offering circular, the letter should explain the strict prohibitions against any type of response to an inquiry regarding income possibilities, and the exception for the sale of an existing unit.