The Federal Trade Commission’s Franchise Rule has been updated to require franchisors to disclose more information to prospective franchise buyers. The Franchise Rule is a set of laws about selling franchises, which is supposed to protect buyers from being taken advantage of.

This change has finally taken place after twelve years of debate. However, some people are criticizing the Federal Trade Commission’s laws for still not providing enough protection for potential business owners. Scams and withholding data in order to close a deal are, unfortunately, a common practice in the franchise industry.

Some of the facts that the Federal Trade Commission’s new Franchise Rule requires to be disclosed includes projected earnings, contact information of independent franchisee groups, contact information of franchisees who have left the company within the past year, information about confidentiality clauses in place to keep past franchisees quiet, and the rate of franchise turnover.

The Controversy
The rule that franchisors seem most upset about is projecting future earnings for the franchise. They claim this is too complicated and sometimes even impossible, as in the case of a new franchise that doesn’t have an established history yet. Franchise buyers will have grounds for legal action if those figures are grossly misrepresented.

Even though some complain that these new laws don’t go far enough, they’re certainly an improvement over what was in place before. More disclosure is generally a good thing, especially when it shines a light on shady business practices that hurt the “little guy.”