For the first time since 2007, the Federal Trade Commission is proposing sweeping changes to the rules that govern how franchises are sold in the United States. If finalized, these amendments would represent the most significant shift in franchise buyer protections in nearly two decades.

Source: Federal Trade Commission, Proposed Amendments to the Franchise Rule, FTC Docket No. FTC-2023-0026 (2023). Available at ftc.gov.

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Why the FTC Is Acting Now

The original Franchise Rule, enacted in 1979 and last updated in 2007, was designed to ensure that prospective franchisees receive material information before signing any agreement or paying any money. The 2007 update introduced the modern Franchise Disclosure Document (FDD) format — the 23-item disclosure document that franchisors must provide at least 14 calendar days before any agreement is signed.

But the franchise industry has changed dramatically since 2007. Private equity has flooded the sector. Digital platforms have created new franchise models. And franchisee advocacy groups have documented a growing pattern of earnings misrepresentation, encroachment, and one-sided contract terms that the existing rule does not adequately address.

The FTC's 2023 Advance Notice of Proposed Rulemaking (ANPR) opened a public comment period and signaled that the agency is seriously considering changes in several key areas.

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What the Proposed Changes Cover

1. Earnings Claims — Closing the Item 19 Loophole

Currently, franchisors are not required to make any earnings claims in their FDD. Item 19 — the Financial Performance Representation — is entirely optional. Only about 50% of franchisors include it, according to FRANdata.

The proposed changes would require franchisors to provide more standardized earnings data, making it harder to cherry-pick favorable numbers or present gross revenue figures without context about actual profitability.

What this means for buyers: If finalized, you would have a legal right to see earnings data presented in a standardized format — not just the numbers a franchisor chooses to highlight in a sales presentation.

2. Franchisor Obligations During the Term

The proposed amendments would clarify what franchisors are required to provide during the life of the franchise agreement — not just at the point of sale. This includes support commitments, territory protections, and supply chain obligations.

What this means for buyers: Franchisors who promise training, marketing support, or exclusive territories would face clearer legal accountability if they fail to deliver.

3. Renewal and Termination Protections

One of the most contentious areas in franchising is what happens at renewal. Many franchise agreements allow franchisors to substantially change terms at renewal — including increasing royalties, reducing territory, or requiring costly renovations — with little recourse for the franchisee.

The proposed rule would require clearer disclosure of renewal terms and any material changes that may be imposed.

4. Electronic Delivery and Record-Keeping

The 2007 rule was written before widespread digital commerce. The proposed amendments would update delivery and record-keeping requirements to reflect how FDDs are actually transmitted and stored today.

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Industry Pushback

The International Franchise Association (IFA), the industry's primary lobbying organization, has pushed back strongly against the proposed changes. In its public comments, the IFA argued that the existing rule is working and that additional requirements would burden franchisors without meaningfully benefiting buyers.

Critics of the IFA's position note that the organization's membership is primarily composed of franchisors — not franchisees — and that its opposition to buyer protections reflects that constituency.

We cover the IFA's lobbying campaign in detail in a separate post: The IFA Is Fighting the FTC's New Franchise Protections — Here's What That Tells You.

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The Timeline

As of 2024, the FTC has not yet issued a Notice of Proposed Rulemaking (NPRM) — the formal step that would precede a final rule. The rulemaking process typically takes two to four years from ANPR to final rule. Buyers entering the market today are operating under the 2007 rule.

That means the protections described above are proposed, not yet law. The current FDD system remains in place.

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What Smart Buyers Do Right Now

You do not need to wait for the FTC to act. The information you need to make a smart decision is already in the FDD — if you know where to look.

• Read Item 19 carefully. If it is not there, ask why. If it is there, look at median earnings, not averages.
• Study Item 20. Closure rates tell you more than any sales pitch.
• Hire a franchise attorney. Not a broker. An attorney who represents franchisees, not franchisors.
• Use AI tools. BIZLINX AI's FDD Score™ analyzes your FDD and flags risk factors before you sign.

The FTC is moving toward stronger protections. Until those protections are law, the best defense is your own due diligence.

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Sources: Federal Trade Commission, FTC Docket No. FTC-2023-0026; FRANdata Industry Report 2023; International Franchise Association public comment filings.