Trudy wishes to buy a national franchise. What information is the seller legally required to provide before she buys the franchise?
The Federal Trade Commission requires the seller of the franchise to provide Trudy with a Franchise Disclosure Document (FDD) at least 14 calendar days before any contract is signed or money is paid. This disclosure statement must provide the following information:
• The history of the franchisor and its key executives
• Litigation with franchisees
• Bankruptcy filings by the company and its officers and directors
• Costs to buy and operate a franchise
• Restrictions, if any, on suppliers, products, and customers
• Territory—any limitations (in either the real or virtual worlds) on where the franchisee can sell or any restrictions on other franchisees selling in the same territory
• Business continuity—under what circumstances the franchisor can terminate the franchisee and the franchisee's rights to renew or sell the franchise
• Franchisor's training program
• Required advertising expenses
• A list of current franchisees and those that have left in the prior three years
• A report on prior owners of stores that the franchisor has reacquired
• Earnings information is not required; but if disclosed, the franchisor must reveal the basis for this information
• Audited financials for the franchisor
• A sample set of the contracts that a franchisee is expected to sign
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Indicate whether the statement is true or false
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In assessing the debt ratios, analysts customarily vary the standard in relation to the stability of the firm's earnings and cash flows from operations. Banks have liabilities to assets ratios, typically
a. over 10%. b. over 30%. c. over 50%. d. over 70%. e. over 90%.