Government regulation of Franchising

In the U.S., all franchisors must comply with the Federal Trade Commission (FTC) Franchise Rule, which requires franchisors to prepare a disclosure document called the Uniform Franchise Offering Circular (UFOC) / Franchise Disclosure Document (FDD) and give a copy of this document prospective franchisee before the purchase of a franchise.

The UFOC / FDD document consists of 23 different categories, which contain basic information such as investment, franchise fees, a financial statement of the franchisor and earnings claims (if the company communicates that information), how long the franchise will be in force, bankruptcy and litigation history (including civil judgments and criminal records) and information on directors of the franchisor (such as past experience).

There are fourteen states "registration" to require franchise companies to submit their tenders or franchise registered with a state agency. These states are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. These states (and Oregon) also have regulations similar to FTC regulation of communication.

Several other states regulate the offer and sale of "business opportunities" business opportunities by state laws. Arkansas, California, Illinois, Iowa, Minnesota and a few other states do not regulate the termination of contract renewals. In California, Illinois, Indiana and Maryland, the proposed ads must be pre-approved before publication.

As you may well be aware, the Government regulates all businesses, not only franchise. Regardless of what business you are going, you will find out which licenses and / or permits are required prior to opening this business. These licenses / permits include a business license for authorization from the Department of your city business, a licensed fire (if the company uses flammable materials), air and water pollution control permits, if you burn any materials, expel something in the sewers or waterways, or use products that emit gases, the title of State for certain professions, such as mechanics, real estate agents, barbers and cosmetologists and educations, a sign permit from your city or county; under the sales tax from your State Department and Health Department permits .......