Understanding the franchise rule Study the requirements of the FTC

If you are going to be in the business of operating and selling franchise opportunities, you should familiarize yourself with the requirements of the Federal Trade Commission (FTC). The FTC oversees and regulates franchise sales in the United States. You can visit the FTC website and search for franchise information.

Find out your state’s own franchise rules.

For most of the United States, the FTC franchise rule will be the governing requirement. However, several states have also enacted their own franchise statutes. You should check with your state Secretary of State or the Attorney General’s offices to find out if there are specific state laws that govern franchise offerings in your state.

Review the Uniform Franchise Disclosure Document.

The Uniform Franchise Disclosure Document is a sample that is designed to provide the basis for a Franchise Disclosure Document valid in most states. If you follow the Uniform FDD example and explanations, then your own FDD must meet federal expectations.

Consult with a franchise attorney and / or accountant to prepare your FDD.

The FDD is expected to be a comprehensive document. An FDD can be 100-200 pages long and include detailed financial and legal information about your business. You must work with your company’s attorney and accountant to finalize the FDD.

Before deciding if you want to sell franchises, you should know all the rules and regulations related to this type of business. Each state has its own rules, and these rules often mirror federal rules. It is your duty to familiarize yourself with all the rules or you could end up with major legal problems.

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