Laws and Regulations Lingo

Now for some franchise law...

Franchise industry regulation varies from state to state, and you should therefore do some extensive research into the laws that apply in your state. What is considered franchising by your state? What documentation does your state require of franchisors to help protect you?

1. Regulation of Franchising
Each of the 16 states that have separate franchise registration statutes have their own definitions of franchising, which also differ from the one the Federal Trade Commission (FTC) uses. The variance again demonstrates the need for you to do research and understand the laws governing your particular state.

Known as the "FTC Rule," the FTC requires franchisors to disclose certain facts to franchisees before closing a sale. There are some notable exceptions to this law. For example, some trade shows and franchises covered by informal advisory opinions issued by FTC staff are specifically exempt from the FTC Rule. Again, it is advised for you to obtain the expertise of a franchise attorney.

Please visit our Resource Center for FTC contact information and for franchise attorney listings.

Next: Franchise Lingo: Legal Documents