What is the FTC Franchise Rule?
The FTC Franchise Rule is a federal regulation which requires franchisors to prepare an extensive disclosure document and give a copy of this document to any prospective franchise purchaser. The disclosure document typically used to comply with the Rule is called a Franchise Disclosure Document (FDD), which replaced the prior Uniform Franchise Offering Circular, or UFOC, in 2008.
The Franchise Disclosure Document contains categories of information about the franchise's operations such as required fees, basic investment, bankruptcy and litigation history of the company, how long the franchise will be in effect, a financial statement of the franchisor, and earnings claims.
To learn more, the International Franchise Association has provided a helpful guide to understanding the most important items in a franchisor disclosure document.