What is Responsible Franchising?

IFA seeks to promote Responsible Franchising practices by all stakeholders – beginning in the franchise sales process to strengthen franchise relationships from the start and prevent the franchise business model from misuse.

IFA believes all franchisors, franchisees, and suppliers should practice Responsible Franchising principles to protect the integrity of the franchise model and serve all stakeholders.

IFA’s Core Principles of Responsible Franchising

  • Setting clear goals and expectations during the pre-sale period so that franchisors and franchisees are aligned as to obligations of their long-term relationship, as outlined in the franchise agreement
  • Connecting prospective franchisees with the right opportunity through due diligence and validation of all parties in the franchise sales process
  • Ensuring that franchisors and franchisees commit to their respective operational obligations to protect both the brand and the franchisee’s equity in their business, supporting sustainable franchise ownership across every franchise location
  • Focusing collectively on driving unit economics and profitability for all parties to support sustainable growth and long-term success.
  • Embracing collaboration among the franchisor and franchisees through open communications with franchise advisory councils and independent franchisee associations when modifying standards to respond to changing market forces and consumer preferences

Responsible Franchising Policy Recommendations

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What is the background behind Responsible Franchising?

The sale of a franchise in the U.S. is governed by the Franchise Rule, a federal regulation enforced by the Federal Trade Commission (FTC) that requires a franchisor to provide disclosures to a prospective franchisee containing information about the franchisor, typically in the franchise disclosure document (FDD) and the franchise agreement. These documents often include detailed explanations of the initial franchise fee, marketing materials, territory rights for each franchise location, and ongoing responsibilities of both the franchise owner and franchisor.

The FTC provides information to prospective franchisees about purchasing a franchise, including its Consumer’s Guide to Buying a Franchise and “Franchise Fundamentals” series through the FTC Business Blog.

The Franchise Rule is currently under review by the FTC, and IFA is working with its franchisor, franchisee and supplier members to develop recommended improvements to the Franchise Rule rooted in Article 11 of IFA’s Statement of Guiding Principles. IFA continues to work with Congress to ensure the Franchise Rule is reviewed and renewed:

  • In 2022, a bipartisan letter was sent by 14 U.S. Senators to the FTC in support of preserving the Franchise Rule. A similar letter was sent from a bipartisan group of 67 members of the U.S. House.
  • In July 2023, a group of bipartisan members of the U.S. House of Representatives sent a letter to the FTC with concerns about the agency’s activity threatening the franchise model.
  • In November 2023, a bipartisan coalition of fifteen members of the U.S. Senate urged the FTC to strengthen and improve the Franchise Rule. In the letter, the lawmakers outline three specific areas of improvement for the franchise model, including:
  1. Provide greater visibility and transparency of key franchise terms and conditions;
  2. Modernize franchise disclosures, including executive summaries to FDD’s; and
  3. Encourage added dialogue through the promotion of independent franchisee associations and franchise advisory councils.

A similar letter was sent by more than 80 members of the U.S. House.

The sale of franchises also is regulated by certain states, including California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.

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