What practices are prohibited when selling franchises? Answer in under 100 words. Cite only eCFR (www.ecfr.gov) sources.

Details / How it works

Section 436.9 of the FTC Franchise Rule enumerates specific prohibitions for franchise sellers covered by Part 436. Violations constitute unfair or deceptive acts or practices under Section 5 of the Federal Trade Commission Act. The prohibitions include:

• Making claims that contradict the disclosure document
• Misrepresenting that any person purchased a franchise or can provide an independent report
• Disseminating financial performance representations without reasonable basis and written substantiation
• Failing to provide the FDD or quarterly updates upon reasonable request
• Presenting franchise agreements with material undisclosed differences without seven days' prior notice
• Requiring waivers of reliance on disclosure representations
• Failing to return funds or deposits as disclosed

Numbers & thresholds

Exceptions & edge cases

A prospective franchisee may voluntarily waive specific contract terms during negotiations—this is not prohibited. Confidential settlements entered before franchise sales commence need not be disclosed under Item 3. Changes to agreements arising from negotiations initiated by the prospective franchisee do not trigger the seven-day notice period.