Which U.S. agency is linked to the Franchise Rule for franchise disclosures?

The Federal Trade Commission is the U.S. agency linked to the Franchise Rule for franchise disclosures.

The FTC’s Franchise Rule requires franchisors to give prospective buyers a Franchise Disclosure Document, commonly called an FDD. The document covers 23 prescribed categories, including the franchisor’s history, litigation, fees, estimated investment, obligations, and information about current and former franchisees.

The rule is designed to give potential franchise owners important information before they commit money or sign a franchise agreement. It does not guarantee that a franchise will succeed, nor does the FTC approve or endorse individual franchise systems. Buyers are expected to review the disclosures carefully and obtain professional advice when appropriate.

A common mix-up is confusing the FTC’s role with that of the Securities and Exchange Commission. The SEC regulates securities markets and investment offerings, while the FTC administers the federal franchise-disclosure rule. State agencies may impose additional franchise registration or disclosure requirements.