The FTC 14-Day Rule: What Franchise Buyers Should Know Before Signing
Buying a franchise is a major decision, and federal law builds in time to think it over. Under the FTC Franchise Rule, you get at least 14 calendar days with the franchisor's disclosure document before you can be asked to sign or pay.
What the FTC 14-day rule says
The FTC Franchise Rule (16 C.F.R. Part 436) requires a franchisor to give you its Franchise Disclosure Document (FDD) at least 14 calendar days before you sign a binding agreement or pay any money to the franchisor or its affiliate.
The 7-day rule for contract changes
If the franchisor makes material changes on its own to its standard franchise agreement, it must give you the final agreement at least 7 calendar days before you sign. Changes you ask for during negotiation don't restart this clock.
Earnings claims belong in Item 19
Any statement about sales, income or profit must appear in Item 19 of the FDD and have a reasonable basis. If a salesperson shares earnings numbers that aren't in Item 19, ask why and get it in writing.
How the Item 23 receipt works
The last page of the FDD is a receipt. When you sign it, you confirm the date you received the document. That date starts the 14-day clock, so keep a copy.
State rules may add more protection
Several states require franchisors to register their FDD or add their own disclosure rules. Check your state's requirements, or ask your franchise attorney.
How to use your 14 days
- Read every Item, especially 3, 7, 19, 20 and 21.
- Call current and former franchisees from Item 20.
- Build your own budget from Item 7 and add working capital.
- Have a franchise attorney review the FDD and agreement.
- Visit open locations at different times of day.
- Write down your questions and get the answers in writing.
Red flags
- Pressure to sign or pay before 14 days have passed
- Earnings claims that aren't in Item 19
- A franchisor that discourages you from calling franchisees or hiring a lawyer
Frequently asked questions
Can I sign sooner if I'm ready?
The franchisor cannot have you sign a binding agreement or pay before the 14 days are up.
Does the FTC approve franchises?
No. The FTC does not review or approve any franchise offering.
Ready to talk with Qargo Coffee?
Qargo Coffee provides its FDD on the Franchise Rule's timeline and encourages candidates to use the full review period. Learn about owning a Qargo Coffee. Related reading: What Is an FDD?
This article is general information, not legal advice.