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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 110352
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Dear Attorney, Recently, I established a new brand for the

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Dear Attorney,

Recently, I established a new brand for the retail sale of self-serve frozen yogurt and opened a store in a shopping mall. This store got great sale from month 1. Before opening this new brand/store, I built and ran my 3 other yogurt stores which are under a national brand. Due to many unique learning and best practices in my operation, I think, my brand will do very well.

I plan to franchise my frozen yogurt brand to open 100 stores nationwide in next 3 years.

1. When I sell my first few franchises, am I obliged to disclose the sales of my first store?
2. If am not obliged by law, but I want to disclose the PL Statement with potential franchise operators (interested to buy my franchise), would my P&L Statement becomes a public document?
I am asking this question to avoid any unnecessary competition by disclosing sales. My new store’s sales are very high; someone may open a competitor store in the same shopping mall where I have my new store, if they come to know my sales.

1) Before you can sell franchises you are going to have to register with the state as a franchisor. As part of selling franchises you have to put together a franchise document with full disclosure of the franchise, which would include disclosure of a financial statement of the franchise, meaning you would have to include your financial details to show this is a viable and profitable franchise.

2) The franchise prospectus is a document filed with the secretary of state and you can see the CA Corporations Code relative to disclosure of financial information to the Corporations Division at CA Corporations Code 31110 et seq. You can seek to protect proprietary information, but that is not your financial information, it is trade secrets that are special for your franchise (such as formulas or specially developed business practices).

As an aside, when you or any of your franchisees open any location, the lease should contain an anti-competition clause to prevent the landlord from renting to any similar businesses, this is the only way to protect your business interests in a location.

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