Items in Uniform Franchise Offering Circular #3

Item 4: Bankruptcy

This section must disclose any bankruptcy in the last 10 years that involved “the franchisor, its affiliate, its predecessor, officers or general partner.” Carefully check over the section of the offering circular that refers to prior backruptcies. It is not uncommon to find that franchise founders have started franchises in different business areas and failed in each of them. Each endeavor may be subject to a bankruptcy, but the founder may walk away with a million dollars that is not subject to the proceedings involving his or her corporate entity.

Under the ameded rule, any bankruptcy of the parents or other individual who has management responsibility relating to the sale or operation of the franchise must be disclosed. Many great people have incurred numerous failures in their lives before reaching a pinnacle of success. Abraham Lincoln is just one of the many such examples. However, as a rule, people who have failed in the past will fail in the future.