This item covers public figures who lend their name or image to the franchise, control or manage the franchisor, or invest in the franchisor.
A public figure means a person whose name or physical appearance is generally known to the public in the geographic area where the franchise will be located. Typical public figures include sports stars, actors, musicians, and similar celebrities.
The only problem with having a public figure as part of your brand, either as an investor or as the spokesperson, is that the franchisee thinks they’re buying into what will be more successful because this public figure is successful. The franchisee then ends up being disappointed because they don’t have access to celebrity. So, using a public figure as part of your growth strategy carries a risk that may outweigh the benefits.
That being said, if you have a public figure promoting the brand or part of the management team, you have to disclose it. If you have anybody famous who’s remotely involved and even remotely famous, let us know so we can determine if we need to put them into Item 18.
Sample Item 18
ITEM 18: PUBLIC FIGURES
Belmont has paid Ralph Doister $50,000 for the right to use his name in promoting the sale of our franchise. This right expires on December 31, 2008. Belmont has produced newspaper ads, a brochure, and a video which feature Mr. Doister. Mr. Doister does not manage or own an interest in Belmont.
This is a sample section from a fictional FDD for Belmont Muffler Shops that was prepared by the Federal Trade Commission as a compliance guide for franchisors preparing their FDD. These are used to provide an idea of what these items may look like in an FDD, but keep in mind, your FDD will most likely vary significantly from these examples.