Franchise Marketing & Compliance W/ FTC

Let’s dive into some legal language and navigate how to advertise your franchise in compliance with the Franchise Trade Commission (FTC). First things first, do you have an active franchise disclosure document (FDD)? If not, contact your attorney and start the process. If so, we can continue.

Franchising revolves around FDDs. If a brand does not have an active FDD registered or filed within the states projected to franchise, the brand is not eligible to sell a franchise within that state based on the FTC. You must register or file your FDD in each state and receive approval to begin franchising. After approval is received, additional measures must be taken for franchise-specific law enforcement states, including: California, Maryland, Minnesota, New York, North Dakota, Rhode Island and Washington. Regulating the advertising for franchise sales, the states listed above also impose mandatory filing requirements of proposed advertising and materials tied to franchise sales.

Why? Not only because franchise law says so, but because consumers are putting their lives on the line to build small business America. The FTC states, “these rules and guidelines protect businesses, consumers and help maintain the credibility of the Internet as an advertising medium.”

Franchise Marketing & Compliance W/ FTC

Highlighting the takeaways from FTC for a successful guide to franchise marketing:

• “Advertising must tell the truth and not mislead consumers.”
• “Claims must be substantiated.” – backed by an FDD
• “Mislead consumers and affect consumers’ behavior or decisions about the product or service.”
• “The FTC Act prohibits unfair or deceptive advertising in any medium.”
• “Sellers are responsible for claims they make about their products and services.”
• “Third parties – such as advertising agencies or website designers and catalog marketers – also may be liable for making or disseminating deceptive representations if they participate in the preparation or distribution of the advertising, or know about the deceptive claims.”
• Advertising agencies or website designers are responsible for reviewing the information used to substantiate ad claims.
• “In determining whether an ad agency should be held liable, the FTC looks at the extent of the agency’s participation in the preparation of the challenged ad, and whether the agency knew or should have known that the ad included false or deceptive claims.
• “Disclaimers and disclosures must be clear and conspicuous.” Overall, franchise law is tricky, but we have summarized the following, have an FDD, register accordingly and back your claims. Franchise marketing is regulated by the FTC to avoid claims and protect all parties. Contact your lawyer and ensure you are compliant.