Move Over Letterman: Top Ten List of Mistakes by Franchise Filers

8. Applications being submitted in a piecemeal fashion. Creates problems similar to list jumping.

7. Sloppy or inaccurate red lining of changes to refiled documents. Some of the applications are so 'sloppy,' added Cantone, that he suspects that the omissions might be deliberate.

6. Violations of UFOC Rule 170 ' the negative disclosure requirement. 'Some franchisors may simply omit disclosures in the UFOC if the requirement doesn't apply to their offering, but examiners can't tell whether the disclosure doesn't apply to the offering or the applicant simply forgot to make the disclosure,' Cantone said.

5. Grossly deficient applications. 'We have an obligation to work with whatever we get ' even if it's on crayon, which has happened,' he said.

4. Creative attempts to circumvent the definition of 'franchise.' 'We've seen a lot of these cases in the past two years,' Cantone said.

3. Degeneration of plain language. 'We are seeing more documents that are written in 'legalese'. In some cases, the UFOC Guidelines require a brief explanation, but franchisor attorneys may draft lengthy 'regurgitations' of provisions right out of the franchise agreement and insert them into the disclosure document,' he observed. 'This may be comforting to lawyers but it isn't helpful to people who have to read and understand a UFOC, and it's not what the UFOC Guidelines require.'

2. Claims from the filer that 'no other state examiner has made that comment ” 'We roll our eyes when we hear this reply,' said Cantone, who pointed out that his job is to assure that the applications meet his state's standards, not to copy what another examiner has done. Second, Cantone noted that 'examiners do compare notes with each other, and it's gotten easier with e-mail. If we find that another examiner did make the same comment, then you've really got a problem.'

1. Hurry up and wait. This occurs when an attorney files a document and then calls the examiner daily to find out about the application's progress. Then when the examiner responds with questions, it takes the attorney five months to respond. But then when the attorney does resubmit, he starts the daily calls again.

Dale Cantone, deputy securities commissioner in the Securities Division of the Maryland Attorney General's Office, is the supervisor of the state's reviewers of franchise registration applications. At the recent International Franchise Association Legal Symposium, Cantone offered the following as his 'Top Ten' list of mistakes that he sees from filers of franchise applications.

10. Failure to read Uniform Franchise Offering Circular (UFOC) guidelines and instructions.

9. List jumping. Many states review applications in the order in which they are received, so by filing the cover letter and registration fee but not the UFOC an applicant may be trying to leapfrog another applicant. But getting an incomplete application just wastes an examiner's time and results in additional correspondence, said Cantone.

8. Applications being submitted in a piecemeal fashion. Creates problems similar to list jumping.

7. Sloppy or inaccurate red lining of changes to refiled documents. Some of the applications are so 'sloppy,' added Cantone, that he suspects that the omissions might be deliberate.

6. Violations of UFOC Rule 170 ' the negative disclosure requirement. 'Some franchisors may simply omit disclosures in the UFOC if the requirement doesn't apply to their offering, but examiners can't tell whether the disclosure doesn't apply to the offering or the applicant simply forgot to make the disclosure,' Cantone said.

5. Grossly deficient applications. 'We have an obligation to work with whatever we get ' even if it's on crayon, which has happened,' he said.

4. Creative attempts to circumvent the definition of 'franchise.' 'We've seen a lot of these cases in the past two years,' Cantone said.

3. Degeneration of plain language. 'We are seeing more documents that are written in 'legalese'. In some cases, the UFOC Guidelines require a brief explanation, but franchisor attorneys may draft lengthy 'regurgitations' of provisions right out of the franchise agreement and insert them into the disclosure document,' he observed. 'This may be comforting to lawyers but it isn't helpful to people who have to read and understand a UFOC, and it's not what the UFOC Guidelines require.'

2. Claims from the filer that 'no other state examiner has made that comment ” 'We roll our eyes when we hear this reply,' said Cantone, who pointed out that his job is to assure that the applications meet his state's standards, not to copy what another examiner has done. Second, Cantone noted that 'examiners do compare notes with each other, and it's gotten easier with e-mail. If we find that another examiner did make the same comment, then you've really got a problem.'

1. Hurry up and wait. This occurs when an attorney files a document and then calls the examiner daily to find out about the application's progress. Then when the examiner responds with questions, it takes the attorney five months to respond. But then when the attorney does resubmit, he starts the daily calls again.