Concept of the Information Disclosure Statement
Concept of the information disclosure statement
- The term "information disclosure statement" describes a document that contains information such as the current status of the franchise business of a franchiser, the work experience of the executive officer, charges of franchisee, conditions of and business activities, education and training for franchisee, and cancellation, revocation, renewal, etc. of the franchise agreement (Subparagraph 10 of Article 2 of the 「Fair Transactions in Franchise Business Act」).
※ An information disclosure statement is a document that contains information that a franchisee must know before entering into an agreement with a franchiser. Information disclosure statements must be registered with the Fair Trade Commission to prevent any negative effects caused by an information imbalance between a franchiser and a prospective franchisee or a franchisee in a franchise business transaction, and to protect the rights and interests of the franchisee and prospective franchisee, who are at a relative disadvantage.
Preparation Principle and Contents of Information Disclosure Statement
Preparation principles of information disclosure statement (Article 4(2) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」)
- The content of an information disclosure statement shall be definite and specific.
- An information disclosure statement shall be prepared in a separate document for each business cover page so that a prospective franchisee can readily understand the content thereof.
- An information disclosure statement shall consist of a cover page, table of contents and the disclosed information.
Contents of information disclosure statement
- The contents included in an information disclosure statement shall be as follows: (Subparagraph 10 of Article 2 of the 「Fair Transactions in Franchise Business Act」, Article 4(1) and the Attached Table 1 of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」).
Cover page of information disclosure statement
The general status of a franchiser
The current status of the franchise business of a franchiser (including matters concerning sales of its franchisees)
Violations of law, etc. by franchiser and executive officers thereof
Charges of franchisee
Conditions of and limitations on business activities
Detailed procedures for the commencement of franchise business and the duration required for the commencement of business
Support for management, business activity, etc. of a franchiser (if none, indicate such fact)
Explanation on education and training (if there is a plan therefor)
Status (including the operation period and sales of the directly managed store) of the store directly managed by the franchiser (directly managed stores upon the responsibility and planning of the franchiser)
※ For a detailed explanation on the matters stated above, please refer to the Attached Table 1 of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」.
- Also, a franchiser may specify matters not mentioned above in an information disclosure statement, which is required for the operation of a franchise business (Article 4(3) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act)」.
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Are the contents of an information disclosure statement reliable?
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Q. I received an information disclosure statement. Can I trust that its contents are true? How can I check whether they are true or not? A. If a franchiser omits information by mistake or submits false information intentionally, the contents of an information disclosure statement can be different from the truth. Even if the government checks the information included in an information disclosure statement in the process of registration, the government will not determine whether it is true or not. If you believe the contents of an information disclosure statement are not reliable or you want to ascertain them, please visit a franchise store (branch office, direct retail store, etc. close to the prospective franchise store) in person and ask the franchisee whether the franchiser is living up to its commitments. If this is not sufficient, please consider consulting franchise traders. You can not only check the contents of an information disclosure statement but also various other issues, such as the reliability of the franchiser, locational conditions relevant to the potential store, the business outlook, etc.
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