Legal Definitions - FTC franchise rule

The FTC Franchise Rule is a law that requires franchisors (companies that offer franchises) to give potential franchisees (people who want to buy a franchise) important information about the franchise before they sign a contract or pay any money. This information includes details about the franchisor, fees, investment required, restrictions, and more.

• If a company wants to sell a franchise in the US, they must follow the FTC Franchise Rule and provide the potential franchisee with a disclosure document at least 14 days before they sign a contract or pay any money.
• If a franchisor changes the terms of the franchise agreement, they must give the potential franchisee a copy of the revised agreement at least 7 days before they sign it.
• The disclosure document must include information about the franchisor's business experience, fees, investment required, restrictions, and more.
• There are some exemptions to the FTC Franchise Rule, such as for franchises that cost less than $615 or for sales to large entities with a net worth of at least $6,165,500.

These examples illustrate how the FTC Franchise Rule works and what information franchisors must provide to potential franchisees. The rule helps protect potential franchisees from making uninformed decisions and ensures that they have all the necessary information to make a sound investment.