Note that the FTC is another potential source of information about the offeror. Their website contains a summary of each of the FTC’s legal actions against offerors of franchises and business opportunities, along with information on specific types of fraudulent business opportunities that the FTC has become familiar with. The website contains a section of information called Franchises, Business Opportunities, and Investments , which provides resources to help people spot business opportunity and investment scams and includes the FTC’s Franchise Rule Compliance Guide , 16 C.F.R. section 436 (the FTC Franchise Rule). Remember that, as discussed in more detail in the Franchise Registration section of this Guide, the Minnesota Department of Commerce also will have copies of the registration statement made by the offeror of any franchise or business opportunity that is a franchise within the meaning of the Minnesota Franchise Act, Minn. Stat. Chapter 80C. SPECIFIC INFORMATION TO SEEK FROM THE OFFEROR If the franchise or business opportunity is a franchise under the Minnesota Franchise Act, the offeror is required to make certain filings, including the Uniform Franchise Offering Circular (UFOC) with the Minnesota Department of Commerce, before offering that franchise or business opportunity to anyone. See the section of this Guide on Franchise Registrations. Note that although the UFOC will contain certain detailed information on the business opportunity or franchise, including audited financial statements, it is not the job of the Minnesota Department of Commerce, or any other government agency, to assess the merits, completeness, or even accuracy of any of the information contained in a UFOC. That work is for the entrepreneur. Similarly, if a franchise or business opportunity does not meet the definition of a “franchise” for Minnesota state law purposes, it nevertheless may be subject to the FTC Rule. Similar to the Minnesota regulation of franchises and business opportunities, the offeror of a business venture covered by the FTC Rule must provide certain information to the prospective offeree. Also, and again similar to the Minnesota system of regulation, it is not the job of the FTC to assess the merits, completeness, or even accuracy of the information mandated by the FTC Rule. Even for ventures not regulated by the Minnesota Department of Commerce or the FTC, the FTC in its A Consumer’s Guide to Buying a Franchise brochure recommends that an entrepreneur seek the following information before investing or committing to a franchise or business opportunity: • Talk to any persons named as owners or investors in the opportunity. Don’t rely on persons listed as “references”, unless it is clear that they are truly owners or investors. • Carefully and thoroughly investigate any claims made about potential earnings. Seek written information on this topic, not just oral statements, and seek the most detailed information available (i.e., do not rely on broad claims such as “we are a ten billion dollar industry”). Independently analyze, if possible, the written basis for those claims. For example, the entrepreneur could hire his or her own CPA to independently audit that information. • Seek similar information from the business competitors of the offeror. For instance, seek the UFOCs from other offerors of similar franchises or business opportunities. • Be aware of high pressure sales tactics, and consider why they are being used; if the offeror does not have any other way to sell the franchise or business opportunity, do you really want it? Be wary of any oral statement that differs from any statement made in writing. Also be
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