Understanding the Franchise Rule Study the FTC Requirements

If you are going to be in the business of operating and selling franchise opportunities, you must make yourself knowledgeable of 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 information about franchises.

Discover your state’s own franchise rules.

For most of the United States, the FTC’s Franchise Rule will be the governing requirement. However, several states have also enacted their own franchise statutes. You should check with your state’s Secretary of State or 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 valid Franchise Disclosure Document in most states. If you follow the example and explanations of the Uniform FDD, then your own FDD should comply with 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 as long as 100-200 pages, and include detailed financial and legal information about your company. You should work together with your company’s attorney and accountant to finalize the FDD.

Before deciding if you want to sell franchises, you should become acutely aware of all rules and regulations relating to this type of business. Every state has its own rules and oftentimes these rules mirror federal rules. It is your duty to become familiar with all rules or you could end up with major legal problems.

Source by David G Komatz