SPECIAL SECTION: PART 4
Breaking Down
the FDD
Item 11: Franchisor’s Assistance, Advertising, Computer Systems, and Training
By Nicole Micklich
I
tem 11 is intended to provide an understanding of the franchisor’s obligations to his franchisees. For every one of the franchisor’s obligations disclosed in Item 11, the franchisor must include a citation to the specific section of the franchise agreement where the franchisor agrees to the obligation. Item 11 can be lengthy and complicated. This piece breaks down the topics Item 11 must cover: pre-opening assistance, post-opening assistance, optional assistance, advertising, computer requirements, and operating manuals. One thing to keep in mind is that the franchisor is only bound by obligations set forth in Item 11—so if a potential obligation isn’t mentioned in Item 11, the franchisor doesn’t have to act on it. In fact, the FTC requires franchisors to begin their Item 11 disclosure with the following statement, in bold print: “Except as listed below, [franchisor] is not required to provide you with any assistance.” PRE-OPENING ASSISTANCE Pre-opening assistance might include site location assistance, site requirements, and lease negotiation. In some systems, pre-opening assistance includes initial training.
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POST-OPENING ASSISTANCE Training: Franchisors are required to disclose information about their training programs including information about the staff who provide the training. Some training disclosures must be summarized in a table that must include: • a list of the subject matter of the training • the hours of classroom training on each subject • the hours of on-the-job training • the location of the training In addition to the table, franchisors must also disclose who is required to attend training, for example, whether a franchisee’s store manager must undergo certain training, as well as who pays for travel and living expenses during training, and whether refresher training is required. Advertising: The franchisor is required to disclose information regarding advertising assistance including: • whether the franchisor is required to conduct advertising • the media used for advertising, such as radio, television, Internet • the source of the advertising
