Current through Register Vol. 49, No. 13, September 23, 2024
Subpart 1.
Sequential order.
The letters, numbers, and titles used herein merely outline
the disclosure information in an orderly fashion and are not a required part of
the public offering statement. However, the following sequential order should
be followed.
Subp. 2.
Franchisor.
The public offering statement shall include:
A. the name of the franchisor, the name under
which the franchisor is doing or intends to do business, and the name of any
parent or affiliate that may engage in business transactions with the
franchisees;
B. the franchisor's
principal business address and the address of its agent in this state
authorized to receive service of process;
C. the business form of the franchisor,
whether corporate, partnership, or otherwise, and the state or other
jurisdiction under which the franchisor is organized;
D. the business experience of the franchisor,
including the length of time the franchisor has conducted a business of the
type to be operated by the franchisee, the length of time the franchisor has
granted franchises for such business, and the length of time the franchisor has
granted franchises in other lines of business and, if so, a description of
these other lines of business.
Subp.
3.
Identity and business experience of persons affiliated
with franchisor.
The public offering statement shall list by name and office
held the officers, directors, trustees, general partners, or other persons who
will have management responsibility in connection with the franchisor's
business operations that relate to the franchises being offered. With respect
to each person listed, state their principal occupations during the past five
years. List the subfranchisors for this state, if any.
Subp. 4.
Litigation.
State whether the franchisor or any person identified in the
public offering statement:
A. Has,
during the ten-year period immediately preceding the date of the public
offering statement, been convicted of a felony, pleaded nolo contendere to a
felony charge, or been held liable in a civil action by final judgment if such
felony or civil action involved fraud, embezzlement, fraudulent conversion,
restraint of trade, unfair or deceptive practices, violation of any franchise
law, or misappropriation of property. If so, set forth the name of the person
convicted, the court and date of conviction or judgment, and any penalty or
damages assessed.
B. Is subject to
any currently effective order, decree, consent judgment, or other assurance
relating to the business which is the subject of the franchise offered under
any federal or state securities, antitrust, monopoly, franchise, trade
practice, or trade regulation law. If so, set forth:
(1) the name of the person or entity
involved;
(2) a summary of the
allegations;
(3) the date, nature,
terms, and conditions of the order, decree, judgment, or assurance;
and
(4) the court or agency
involved.
C. Has any
material administrative, civil, or criminal actions pending against him or her
concerning the business that is the subject of the franchise offered, alleging
fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or
deceptive practices, violation of any franchise law, or misappropriation of
property. If so, set forth the name of the person, the court, nature and
current status of any such pending actions, and an opinion of defendant's
counsel regarding defendant's position on issues in any such pending
actions.
D. State whether the
franchisor has been, during the 15-year period immediately preceding the date
of the public offering statement, adjudicated a bankrupt, or reorganized due to
insolvency. As to any other person identified in the public offering statement,
state whether the person is or has been a principal officer of a corporation or
general partner in any partnership involved in any of the foregoing
proceedings. If so, set forth the name of the person or corporation and the
court, date, nature, and current status of the proceedings.
Subp. 5.
Investment of
franchisee.
Set forth in detailed tabular form the total initial
investment that will be required of the franchisee. This statement should
include, but is not limited to, a description of the following items:
A. State the franchise fee or initial
payment, if any, charged upon the signing of the franchise agreement, whether
payable in lump sum or installments.
B. If an identical franchise fee or initial
payment is not charged in connection with each franchise agreement, state the
method or formula by which the amount is determined.
C. State whether any of the fees set forth in
items B and C are refundable and, if so, under what conditions.
D. Include a statement indicating the
proposed use of the proceeds to be raised from such fees.
E. State any other fees or payments or
charges required by the franchisor in connection with the franchisee's
preparation for entrance into the franchise.
F. State the fees or payments other than the
initial franchise fee that the franchisee or subfranchisor is required to pay
to the franchisor, including royalties, and payments or fees which the
franchisor collects in whole or in part on behalf of a third party.
G. State to whom the above payments are due,
when the payments are due, and the method by which the payments are to be
made.
H. Include a statement
estimating the following expenditures that prospective franchisees should
anticipate making in connection with the franchised business (a low-high range
may be stated, if applicable):
(1) equipment,
fixtures, other fixed assets, construction, remodeling, and leasehold
improvements and decorating costs, whether financed by contract or installment
purchase, leasing, or otherwise;
(2) initial working capital, deposits, and
prepaid expenses;
(3) all other
initial goods and services, including inventory, which the franchisee could
reasonably be expected to purchase or lease.
I. Describe the real property requirements
for the business that is the subject of the franchise offered. This should
include the approximate size of the property and building involved, the
probable location (shopping center, downtown, suburban, rural, highway, etc.),
and a general statement concerning the purchase or lease costs, if
estimable.
Subp. 6.
Financing arrangements.
State the terms and conditions of any financing arrangements
offered directly or indirectly by the franchisor or the franchisor's agent or
affiliate.
State any past or present practice of or any intent of the
franchisor to sell, assign, or discount, in whole or in part, to a third party
any note, contract, or other obligation of the franchisee or
subfranchisor.
Describe any waiver of defenses or similar provisions in any
financing note, contract, or other instrument to be executed by the franchisee
or subfranchisor.
Subp. 7.
Obligations of franchisee to purchase items.
State whether, by the terms of the franchise agreement or by
other intentional device or practice, the franchisee or subfranchisor is
required to purchase or lease from the franchisor or its designated sources any
goods, services, supplies, products, fixtures, equipment, inventory, or real
estate relating to the establishment or operation of the franchise business,
together with a general description thereof.
State the means by which the franchisor may derive income, if
any, as a result of such required purchases or leases. To the extent known or
estimable by the franchisor, state the magnitude of such required purchases or
leases in relation to all purchases or leases that the franchisee will make or
enter into in the establishment and the operation of the franchised
business.
Subp. 8.
Terms of franchise.
State the following with respect to the franchise and any
related agreements:
A. the term and
whether the term is affected by the term of any other agreement;
B. the conditions under which the franchisee
may renew or extend;
C. the
conditions under which the franchisor may refuse to renew or extend;
D. the conditions under which the franchisor
may terminate;
E. the conditions
under which the franchise may terminate;
F. the obligations of the franchisee after
termination of the franchise, whether such termination be by the franchisor,
the franchisee, or the expiration of the franchise;
G. the conditions under which the franchisee
or its owners may sell or assign, in whole or in part;
H. the conditions under which the franchisor
may sell or assign, in whole or in part;
I. the conditions under which the franchisor
may repurchase, in whole or in part (if the franchisor has the right or option
to repurchase the franchise, state whether there will be an independent
appraisal of the franchise and recognition of goodwill or other intangibles
associated therewith in the repurchase price to be given to the
franchisee);
J. describe the
provisions regarding the franchisee's equity upon sale, termination, or refusal
to renew or repurchase;
K. the
conditions under which the franchisee may modify;
L. the conditions under which the franchisor
may modify;
M. the contractual
rights of the heirs or personal representative of the franchisee to the
franchise upon the death or incapacity of said franchisee; and
N. the conditions of any covenant not to
compete.
Subp. 9.
Limitation on goods and services offered by franchisee.
State any restriction or condition imposed by the franchisor,
whether by the terms of the franchise agreement or by other device or practice
of the franchisor, whereby the franchisee is limited in the goods or services
offered to customers.
State fully the obligation of the franchisee, whether by the
terms of the franchise agreement or any other device or practice, to
participate personally in the direct operation of the franchised
business.
Subp. 10.
Obligations of franchisor.
State the obligations that the franchisor agrees, by contract
or otherwise, to perform, both prior to the opening of the franchise business
and during the operation of the franchise business.
When the obligations are to be completed by a certain date or
within a specified time period, state the date or period. If the obligations
previously mentioned are not performed, state the rights of the franchisee to
any refund of money paid or to rescission of the franchise contract or other
transaction related thereto.
Describe the method, if any, used by the franchisor to select
the location for the franchisee's business.
Describe the training program, supervision, and assistance
the franchisor will provide the franchisee, including:
A. the location, duration, and content of the
promised training program;
B. when
the training program is to be conducted;
C. the amount of experience the instructors
have had with the franchisor;
D.
who shall bear the expenses, including travel and living expenses, incurred in
connection with the training program; and
E. the number of and average length of
training programs and refresher courses made available to the franchisee after
the initial training period and whether the franchisee will be required to
attend the same.
Subp.
11.
Arrangements with public figures.
State any compensation or other benefit given or promised to
a public figure arising, in whole or in part, from the use of the public figure
in the name or symbol of the franchise or the endorsement or recommendation of
the franchise by the public figure in advertisements, and the extent to which
such public figure is involved in the actual management of the
franchisor.
State whether the franchisee has the ability to use the name
of a public figure or celebrity in promotional efforts and advertising and any
charges to be made to the franchisee in connection with such usage.
For the purposes of this disclosure, "public figure" shall
include any cartoon or fictionalized character.
Subp. 12.
Exclusive area or
territory.
State whether the franchisee or subfranchisor receives an
exclusive area or territory. State whether the franchisor may establish another
franchisee or a company owned operation within that area or territory.
State whether the franchisor specifies a defined area or
territory within which it can conduct, or grant franchises for the conduct of,
a limited number of franchised businesses.
State whether the franchisor or its parent or affiliate may
establish other franchises or company owned operations selling or leasing
similar products or services under a different commercial symbol within that
area or territory.
State whether the continuation of the exclusivity of the
grant is dependent upon the volume of sale generated or penetration of the
potential market by the franchisee. State whether, and under what
circumstances, the area or territory can be reduced.
If applicable, attach a map of the area or territory drawn to
scale.
Subp. 13.
Other franchises.
State, as of the filing date of this statement, the
following:
A. the total number of
franchises presently operating in the United States, and of that number, the
total number of franchises presently operating in the state of Minnesota (if
the franchisor owns or operates any of the outlets, the number of such
operations shall be stated independently);
B. the number of franchises in the United
States and the state of Minnesota for which a business is not yet operational
although a franchise agreement has been signed;
C. estimate the total number of franchises to
be sold or granted in the United States for the 12-month period following the
date of this statement; of that number, estimate the total number of franchises
to be sold or granted in the state of Minnesota for the 12-month period
following the date of this statement;
D. state that a list of the names, addresses,
and business telephone numbers of all franchisees in the state of Minnesota
will be given to the prospective franchisee immediately upon request and that
the prospective franchisee will be permitted to retain the list. The list of
all franchisees in the state of Minnesota, as of the date of application,
together with the date upon which the franchise agreement was signed by each,
shall be filed with the commissioner as a condition of registration.
Subp. 14.
Estimated or
projected operations.
The public offering statement shall include a copy of any
estimated or projected franchisee earnings, proforma statements, or break even
statements prepared for presentation to prospective franchisees or
subfranchisors. Include a statement setting forth the assumptions or data upon
which the estimations or projections are based. This statement should clearly
indicate such information as the number of operations involved, the length of
time the operations were in business, the period covered by the data, and the
ownership status of the operations (purely franchised versus owned, operated,
or controlled by the franchisor). All such estimations or projections shall
indicate the percentage of the franchises not owned, controlled, or operated by
the franchisor which were in operation during the entire preceding 12-month
period which have, to the franchisor's knowledge, actually attained or
surpassed that estimated or projected level.
Subp. 15.
Franchise contract.
The public offering statement shall include a copy of the
entire franchise contract or agreement proposed for use, including all
amendments thereto.
Subp.
16.
Financial statements.
The public offering statement shall include a copy of the
financial statements that meet the requirements of parts
2860.1200 to
2860.1600. These statements are to
be an actual part of the public offering statement rather than contained in a
separate document.
Statutory Authority: MS s
80C.18
