VII. DEVELOPING A FRANCHISE COMPLIANCE PROGRAM

Franchisors should implement an effective and efficient regulatory compliance program. A compliance officer who will be responsible for ensuring compliance with federal and state laws regulating the offer and sale of franchises as well as state relationship statutes should be designated. The compliance officer should also be responsible for maintaining the documentation necessary to establish regulatory compliance information required to be reported in the UFOC and state renewal applications, as well as in the event of litigation or an administrative investigation or action. The compliance officer should also participate in any franchise sales training programs and ensure that the salesmen are aware of all potentially applicable laws.

A compliance program should include a pre-closing checklist, identifying, at a minimum, all of the documents which must be executed in connection with a franchise sale and providing a space for a "/" or initials to indicate that the required signatures have been obtained. Some franchisors use a pre-closing questionnaire or signed statement to elicit whether any franchisor representative involved in the franchise sales process made any earnings claims, or provided other information outside of the UFOC, as a means of mitigating any future claims. Some franchisors conduct audio-tape or videotape exit interviews with each franchisee to elicit the same information. Franchisors should also conduct periodic legal audits to ensure compliance with all applicable franchise sales laws and regulations. See Appendix "F" for a sample exit questionnaire.