Federal and State Franchise Regulations

To ensure a full disclosure of all information relating to a franchise company prior to a franchisee taking on the business, franchise regulations have been put in place by the Federal Trade Commission

(FTC). While the disclosure process is lengthy and should always include an experienced franchise attorney, there are basic guidelines to the regulations that a small business owner should be aware of when considering franchising options.

In addition to the FTC rules, though, many states have implemented their own individual franchise rules and minimum disclosure requirements. Their policies all incorporate the FTC regulations as explained below but add additional requirements — and especially registration forms — in order to franchise. When considering franchising, remember to contact your state offices to determine if they have separate regulations or forms you will need to be aware of.

Overview of the FTC Disclosure Rule
The basic disclosure rule requires a would-be franchisor to provide potential investors with a disclosure document, either at the first face-to-face meeting or within a minimum of 10 days prior to when any agreements are signed or money exchanged with regard to the franchise investment.