FTC FACTS for Consumers

FOR THE CONSUMER 1-877-FTC-HELP

ftc.gov FEDERAL TRADE COMMISSION

Franchise and Business 

Opportunities

W ant to be your own boss? A franchise or business opportunity may sound appealing, especially if you have limited resources or business experience. 

However, you could lose a significant amount of money if you don’t investigate a business 

carefully before you buy. The Federal Trade Commission’s Franchise and Business 

Opportunity Rule requires franchise and business opportunity sellers to give you specific 

information to help you make an informed decision.

Use the FTC Rule

A franchise or business opportunity seller must give you a detailed disclosure document at 

least 10 business days before you pay any money or legally commit yourself to a purchase. 

You can use these disclosures to compare a particular business with others you may be 

considering or simply for information. The disclosure document includes:

• names, addresses, and telephone numbers of at least 10 previous purchasers who live 

closest to you;

• a fully audited financial statement of the seller;

• background and experience of the business’s key executives;

• cost of starting and maintaining the business; and

• the responsibilities you and the seller will have to each other once you’ve invested in the 

opportunity.

FOR

RENT
Facts for Consumers 

If the seller doesn’t give you a disclosure 

document, ask why. Verify the explanation with 

an attorney, a business advisor or the FTC by 

calling its toll-free helpline at 1-877-FTC-HELP 

(877-382-4357). Even if the business is not legally 

required to provide a disclosure document, you 

still may want one for your own information.

Get All the Facts

Before you buy a business:

• Study the disclosure document and proposed 

contract carefully.

• Interview current owners in person. (They 

should be listed in the disclosure document.) 

Visiting them in person may help you 

identify any that are “shills” — people 

paid to give favorable reports. Don’t rely 

on a list of references selected by the 

company because it may contain shills. Ask 

owners and operators how the information 

in the disclosure document matches their 

experiences with the company.

• Investigate claims about your potential 

earnings. Some companies may claim 

that you’ll earn a certain income or that 

existing franchisees or business opportunity 

purchasers earn a certain amount. Companies 

making earnings representations must 

provide you with the written basis for their 

claims. Be suspicious of any company 

that does not show you in writing how it 

computed its earnings claims.

• Sellers also must tell you in writing the 

number and percentage of owners who 

have done as well as they claim you will. 

Keep in mind that broad sales claims about 

successful areas of business — “Be a part 

of our $4 billion industry,” for example 

— may have no bearing on your likelihood 

of success. Also, recognize that once you 

buy the business, you may be competing with 

franchise owners or independent business 

people with more experience than you.

• Shop around. Compare franchises with other 

business opportunities. Some companies may 

offer benefits not available from the first 

company you considered. The Franchise 

Opportunities Handbook, published annually 

by the U.S. Department of Commerce, 

describes more than 1,400 companies that 

offer franchises. Contact those that interest 

you. Request their disclosure documents and 

compare their offerings.

• Listen carefully to the sales presentation. 

Some sales tactics should signal caution. 

For example, if you are pressured to sign 

immediately “because prices will go up 

tomorrow,” or “another buyer wants this 

deal,” slow down. A seller with a good offer 

doesn’t use high-pressure tactics. Under the 

FTC rule, the seller must wait at least 10 

business days after giving you the required 

documents before accepting your money 

or signature on an agreement. Be wary if 

the salesperson makes the job sound too 

easy. The thought of “easy money” may be 

appealing, but success generally requires 

hard work.

• Get the seller’s promises in writing. Any oral 

promises you get from a salesperson should 

be written into the contract you sign. If the 

salesperson says one thing but the contract 

says nothing about it or says something 

different, it’s the contract that counts. If 

a seller balks at putting oral promises in 

writing, be alert to potential problems and 

consider doing business with another firm.

• Consider getting professional advice. Ask a 

lawyer, accountant, or business advisor to 

read the disclosure document and proposed 

contract. The money and time you spend on 

professional assistance and research — such 

as phone calls to current owners — could 

save you from a bad investment decision.

For More Information

The FTC works for the consumer to prevent 

fraudulent, deceptive, and unfair business 

practices in the marketplace and to provide 

information to help consumers spot, stop, and 

avoid them. To file a complaint or to get free 
Facts for Consumers

information on consumer issues, visit ftc.gov 

or call toll-free, 1-877-FTC-HELP (1-877-382-

4357); TTY: 1-866-653-4261. The FTC enters 

Internet, telemarketing, identity theft, and other 

fraud-related complaints into Consumer Sentinel, 

a secure, online database available to hundreds of 

civil and criminal law enforcement agencies in the 

U.S. and abroad.
Facts for Consumers

The Federal Trade Commission (FTC) is the 

nation’s consumer protection agency. Here are 

some tips from the FTC to help you be a more 

savvy consumer.

1. Know who you’re dealing with. Do business 

only with companies that clearly provide 

their name, street address, and phone 

number.

2. Protect your personal information. Share 

credit card or other personal information 

only when buying from a company you know 

and trust. 

3. Take your time. Resist the urge to “act 

now.” Most any offer that’s good today will 

be good tomorrow, too. 

4. Rate the risks. Every potentially high-profit 

investment is a high-risk investment. That 

means you could lose your investment — all 

of it. 

5. Read the small print. Get all promises 

in writing and read all paperwork before 

making any payments or signing any 

contracts. Pay special attention to the small 

print. 

6. “Free” means free. Throw out any offer that 

says you have to pay to get a gift or a “free” 

gift. If something is free or a gift, you don’t 

have to pay for it. Period. 

7. Report fraud. If you think you’ve been a 

victim of fraud, report it. It’s one way to get 

even with a scam artist who cheated you. By 

reporting your complaint to 

1-877-FTC-HELP or ftc.gov, you are 

providing important information to help law 

enforcement officials track down scam artists 

and stop them!

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov

March 2000

Federal Trade Commission

Bureau of Consumer Protection

Division of Consumer and Business Education