Franchise Law
Understanding Franchise Laws
Franchise laws consist of a blend of federal and state regulations that oversee the registration, offering, and sale of franchises, as well as the legal relationship between franchisors and franchisees. The “Federal Franchise Rule” serves as the primary federal law governing all franchise transactions across the United States, encompassing all fifty states. This rule is enforced by the Federal Trade Commission (FTC), which emphasizes the importance of a franchisor's obligation to provide a franchise disclosure document before any franchise offer or sale.
The Federal Franchise Rule establishes the minimum standards for franchisor disclosure requirements, while allowing each state the flexibility to enhance the federal framework with its own specific franchise laws and requirements. Beyond the Federal Franchise Rule, franchise laws also encompass state-specific regulations concerning disclosure obligations, the franchisor-franchisee relationship, and the review and registration of franchise disclosure documents.
States that mandate the registration of a Franchise Disclosure Document (FDD) with a local state administrator are referred to as “franchise registration states.” Those requiring a notice or exemption request without necessitating the registration of an FDD are known as “franchise filing states.” Conversely, “non-registration states” require neither registration nor filing.
Franchise Law Overview
Franchise laws encompass both federal and state legislation. The Federal Franchise Rule is the primary federal regulation governing the offer and sale of franchises throughout the United States. This rule is issued by the Federal Trade Commission.
Federal Trade Commission
The Federal Trade Commission is the federal agency responsible for enforcing the Federal Franchise Rule and maintaining compliance with federal franchising law.
State Franchise Laws
Franchise laws also include specific rules and regulations that individual states may enact. If a state has not established its own franchise laws, only the Federal Franchise Rule will apply in that state. Many states have implemented their own franchise laws, rules, and regulations.
