The Federal Trade Commission (“FTC”) regulates franchises under what is called the “Franchise Rule.” Under the Franchise Rule, franchisors must comply with pre-sale disclosure requirements that require franchisors to provide franchisees with specific information about:
- The franchisor;
- The franchised business; and
- The franchise agreement.
The required information must be included in a franchise disclosure document (“FDD”) provided to a prospective franchisee at least 14 calendar-days before the prospective franchisee either:
- Enters into a binding agreement with the franchisor (or any of its affiliates); or
- Makes any payments to the franchisor (or any of its affiliates).
A franchisor’s failure to comply with the Franchise Rule constitutes an unfair or deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.
HOW WE CAN HELP
Dennis M. Lanphier, Esq., CPA, LL.M., is an experienced business attorney and certified public accountant who represents both franchisors and franchisees. Our firm can provide guidance on the disclosure requirements required under the Franchise Rule, including preparation and/or review of the franchise disclosure document.