The Cardinal Rule in Franchise Sales
Additionally, some states have individual prohibitions for franchise advertisements. For example, a number of states prohibit franchise advertising that contains particular types of statements or inferences, such as:
- That a purchase of a franchise is a safe investment
- That failure, loss, or default is impossible or unlikely
- That earnings or profits are assured
There are a few cardinal rules to observe concerning franchise advertising.
Under federal and state franchise laws, no statement, claim, promise, or representation may be made to any prospective franchisee which is either unsupported by the franchisor’s disclosure document or inconsistent with the disclosure document.
If a franchisor’s advertising features a statement, representation, or promise that is unsupported by the disclosure document or which is contrary to its contents, the franchisor subjects itself to possible liability under most franchise laws. The franchisee may also be able to sue and recover substantial damages for any misrepresentations that are made by the franchisor.
Some states prohibit earnings claims being placed in advertisements at all. Moreover, in enforcing the above standards, some state administrators have taken the position that even the use of the words “success” or “profits” in virtually any context is prohibited.
Advertising Mediums in the franchise context
The term advertising in the franchise sales context, as opposed to consumer advertising, is defined extremely broadly under federal and state franchise laws, including most any medium like:
- Newspaper, television, and radio ads
- Brochures
- Slide shows for prospects
- Reproduced newspaper or magazine articles
- Form solicitation letters
- Recorded telephone messages
- Audio and video sales presentations
- Videotapes, DVDs, and CD-ROMs
- Mass emails
- Internet advertising activity
- Any other means of communication utilized to promote the offer or sale of a franchise
Not Limited to the Public
A unique consideration to take into account as a franchisor is the purpose of the advertisement, because the rules are different depending on the purpose. For example, information sent out to employees may not typically be viewed as an advertisement, but can be in the franchise sales context. Even a newsletter or email to an employee can be considered an advertisement if the purpose of the communication is to influence them to purchase a franchise. It does not matter that the advertisement is not public in the traditional sense.
Registration Required
Certain states have passed laws regulating franchises specifically. Franchisors are typically familiar with these states as filing or registration states. Most states that regulate franchise sales impose some form of advertising requirement. Certain other states also regulate advertising generally or through business opportunity laws. There are approximately 20 states that require some filing for franchise advertisements. Fortunately, online advertising is typically excluded from registration so long as the advertisement is not directed specifically to a resident of their state and the franchisor complies with certain general registration or disclosure requirements. We encourage franchisors to work closely with a trusted franchise attorney who can provide personalized advice with risk tolerance in mind, review advertisements, draft disclaimers, and file any required registrations.
Disclaimers Required
Disclaimers are an indispensable part of franchise sales advertising because franchises can only be offered or sold through disclosure of the franchisor’s then-current franchise disclosure document (the “FDD”). The content of the disclaimer may vary depending on the content and context of the advertisement, along with the intended audience.
Sample Disclaimers
Franchise General Advertisement Disclaimers
This advertisement is not an offering. An offering can only be made by a Franchise Disclosure Document (FDD). The following states regulate the offer and sale of franchises: CA, HI, IL, IN, MD, MI, MN, NY, ND, OR, RI, SD, VA, WA and WI. If you are a resident of one of these states or intend to operate a franchise in any of these states, [Franchisor] will not offer or sell you a franchise unless and until we have complied with any applicable pre-sale registration and/or disclosure requirements in your state.
Consider also adding the franchisors legal name, mailing address, and phone number (required by some states). You may also want to spell out the state names for avoidance of doubt, but many clients like to reduce the length of their disclaimers when possible to do so.
Additional Disclaimers often Required
New York and California require specific disclaimers, and it may be best practice to include these disclaimers in all advertisements for sake of uniformity and to avoid any inadvertent violations.
New York:
In New York, an offering can only be made by prospectus filed first with the Department of Law of the State of New York. Such filing does not constitute approval by Department of Law.
California:
THIS FRANCHISE HAS BEEN REGISTERED UNDER THE FRANCHISE INVESTMENT LAW OF THE STATE OF CALIFORNIA. SUCH REGISTRATION DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER OF BUSINESS OVERSIGHT NOR A FINDING BY THE COMMISSIONER THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE, AND NOT MISLEADING.
Franchise Earnings Claims Disclaimers
Certain states prohibit earnings claims in advertisements. All states prohibit any earnings claim that is not included in Item 19 of the then-current FDD. Therefore, any advertisement or collateral with a financial performance representation should be carefully reviewed to ensure strict compliance. Further, the disclosures should be uniformly include in the FDD used across they country. In addition to all general and state specific disclaimers, an advertisement with a FPR should include a specific disclaimer, such as:
[GROSS REVENUE OR OTHER FINANCIAL] figures are based on unaudited financial information as submitted by [franchises or company owned outlets] operating from January 1, 2023, through December 31, 2023. As of December 31, 2023, there were [#] franchised outlets in operation and [#] outlets achieved these results. Some outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much. Written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request. See Item 19 of our [ISSUANCE DATE] FDD for further information.
Obtain Legal Advice
We strongly encourage franchisors to send their proposed advertisement collateral to a franchise attorney for review. This is true regardless of any applicable state registration requirements. Franchising is a niche are of the law and advertising is both an art and science. Working with a franchise attorney can pay dividends in maintaining compliance and avoiding headaches down the road. General information on the internet is helpful, but it is no substitute for legal advice. Complying with the legal requirements for franchise advertisements typically requires a case-by-case analysis.
Franchise Advertising Requirements
Franchise advertising is regulated differently from ordinary consumer marketing. Websites, social media posts, brochures, broker listings, emails, videos, webinars, testimonials, financial claims, and even private communications may become regulated franchise advertisements when they are used to promote the offer or sale of a franchise.
Use our Franchise Advertisement Disclaimer Builder
Answer questions about the advertisement’s intended use, audience, geographic targeting, financial claims, franchisor identity, and distribution method to generate a preliminary disclaimer and identify issues that may require attorney review or state filing.
Franchise advertising is part of the regulated sales process
A franchise advertisement is not limited to a traditional newspaper, television, radio, or magazine advertisement. The term may include nearly any communication intended to generate interest in the purchase of a franchise, including a webpage, social media post, online directory listing, email campaign, brochure, webinar, recorded presentation, broker profile, franchise expo material, testimonial, or direct solicitation.
The communication does not always need to be directed to the public. A presentation sent to employees, customers, vendors, existing licensees, or other business contacts may still function as a franchise advertisement if its purpose is to encourage the recipient to consider purchasing a franchise.
Franchise advertising requirements can arise under federal disclosure principles, state franchise registration laws, state advertising filing rules, business opportunity statutes, consumer protection laws, and the restrictions governing financial performance representations. The applicable analysis may change based on where the franchisor is registered, where the recipient lives, where the proposed franchise will operate, and how narrowly an online advertisement is targeted.
A communication may be advertising regardless of what it is called or whether it looks like a traditional advertisement.
Sales copy can create problems when it promises benefits, earnings, costs, territories, support, or timing not supported by the current FDD.
Some jurisdictions require submission or filing of certain franchise advertisements before they are published or distributed.
Franchisors should use a documented review process before advertisements are released by employees, brokers, agencies, or other sellers.
What may be considered a franchise advertisement?
Franchise advertising can include public, private, digital, printed, recorded, and live communications used to promote a franchise opportunity.
Websites and landing pages
Franchise opportunity pages, lead forms, investment pages, location pages, FAQs, blog posts, downloadable guides, and development websites.
Social media
Organic posts, sponsored posts, direct messages, short-form videos, stories, livestreams, comments, reposts, and employee or executive posts.
Email and text campaigns
Mass emails, automated sequences, newsletters, prospect follow-ups, referral messages, SMS campaigns, and form solicitation letters.
Broker and directory profiles
Franchise portal listings, broker profiles, marketplace descriptions, referral-network materials, opportunity summaries, and brand listings.
Videos and presentations
Recorded sales presentations, webinars, slide decks, discovery-day materials, podcasts, interviews, and franchise expo presentations.
Printed materials
Brochures, postcards, magazine advertisements, newspaper advertisements, trade-show materials, flyers, handouts, and direct-mail pieces.
Testimonials and success stories
Franchisee quotes, case studies, interviews, awards, growth stories, lifestyle claims, and accounts of revenue or operational success.
Internal communications
Communications to employees, managers, customers, vendors, operators, or other insiders when intended to encourage a franchise purchase.
Artificial intelligence content
AI-generated advertisements, social posts, scripts, emails, summaries, visuals, and chatbot responses remain the franchisor’s responsibility.
Three questions should guide every advertising review
A disclaimer is only one part of compliance. The advertisement itself, the intended audience, and the franchisor’s current legal status must be evaluated together.
What does the advertisement communicate?
Review all express and implied claims about revenue, profit, demand, investment, support, exclusivity, growth, success, timing, available territories, franchisee experience, and expected results.
Who will receive or see it?
Identify the intended audience, geographic targeting, residency of likely prospects, proposed franchise locations, platform settings, mailing lists, broker distribution, and whether the content is publicly accessible.
Where is the franchisor authorized to offer?
Confirm that the FDD is current and determine whether the franchisor is registered, effective, exempt, notice-filed, or otherwise permitted to make the relevant offer in each affected jurisdiction.
Claims that deserve careful legal review
Franchise marketing often becomes risky when persuasive sales language communicates more than the franchisor intended or more than the current FDD supports.
Revenue and profit language
Statements about sales, earnings, margins, cash flow, owner income, break-even timing, return on investment, or financial potential may be financial performance representations.
Cost claims
Advertising a low investment, reduced startup cost, financing amount, or abbreviated fee may be misleading if it does not reflect the complete Item 7 investment or applicable conditions.
Success and lifestyle claims
Claims involving success, wealth, freedom, passive income, financial independence, family time, or replacement of employment income may imply financial performance.
Territory claims
Statements such as “exclusive territory,” “protected market,” “available area,” or “no competition” should match Item 12 and the exact protection offered in the Franchise Agreement.
Support promises
Advertising should not promise training, leads, staffing assistance, customers, site selection, financing, opening support, or continuing services beyond what the franchisor intends and discloses.
Availability and scarcity
Statements that only one territory remains, an offer expires soon, or a market is reserved may create concerns if the representation is inaccurate or designed to pressure the prospect.
Franchisee testimonials
A franchisee’s statement may create an earnings claim or imply typical results even when the franchisor did not write the statement.
Company-owned results
Statements about a founder’s or company location’s performance may be misleading if the operation differs materially from the franchise model being offered.
Government approval language
State registration should not be described as approval, endorsement, recommendation, certification, or validation of the franchise opportunity.
Industry rankings and awards
Rankings should be current, accurately described, properly attributed, and not used to imply government approval or guaranteed franchisee success.
Third-party content
Franchisors should review content published by brokers, agencies, influencers, lead generators, consultants, and franchise sellers acting on behalf of the brand.
Outdated advertisements
Advertisements may become inaccurate when the FDD, fees, investment, territories, system size, Item 19, financial statements, or registration status changes.
Earnings claims require exceptional care
A financial performance representation can be express or implied. It may concern sales, revenue, expenses, profits, margins, customer volume, labor, return on investment, break-even timing, or another measure from which a prospect could infer potential financial results.
Advertising must remain consistent with Item 19
A franchisor that makes a financial performance representation should ensure that the claim is authorized by, and consistent with, the franchisor’s current Item 19. The advertisement should not selectively present favorable numbers while omitting material qualifications, limitations, assumptions, time periods, or differences between the disclosed outlets and the franchise being offered.
- Confirm the exact representation appears in Item 19
- Use the same data set and measurement period
- Preserve material assumptions and qualifications
- Identify whether figures are gross or net
- Distinguish company-owned and franchised outlets
- Confirm the current FDD is in lawful use
- Maintain written substantiation for the representation
- Review state restrictions before publishing
Some advertisements must be filed before use
State requirements vary significantly. A franchisor should not assume that a nationwide disclaimer or general internet exception resolves every state advertising issue.
Registration-state requirements
Several franchise registration states regulate advertising as part of their franchise sales laws. Depending on the jurisdiction, certain advertisements may need to be filed, submitted, or retained, and the franchisor may need an effective registration before directing the advertisement to residents or proposed franchise locations in the state.
- Determine whether the FDD registration is effective
- Review the state’s definition of advertisement
- Identify any pre-use filing or waiting requirement
- Use required state legends or disclosures
- Confirm whether earnings claims are restricted
Internet and nationwide advertising
Some state laws or administrative positions provide limited treatment for general internet advertising when the content is not specifically directed to residents of the state and includes appropriate limitations. However, geotargeted advertisements, state-specific webpages, localized keywords, direct messages, or lead lists may be treated differently.
- Review geographic targeting settings
- Consider state names used in headlines or metadata
- Evaluate location-specific landing pages
- Review local franchise broker distribution
- Restrict follow-up until the franchisor may lawfully offer
Business opportunity laws
A state that does not require franchise registration may still regulate the offering under a business opportunity statute. Trademark status, required payments, marketing assistance, representations, exemptions, and filing requirements may affect whether those laws apply.
- Confirm whether a franchise exemption is available
- Evaluate trademark-dependent exemptions
- Determine whether a notice or filing is required
- Review required legends and sales restrictions
State-specific disclaimer language
Some states prescribe or expect specific legends concerning registration, filing, approval, the manner in which an offer may be made, or the franchisor’s inability to complete a sale until applicable requirements are satisfied.
- Use the required language accurately
- Avoid outdated agency names or terminology
- Do not suggest governmental endorsement
- Make disclosures clear and conspicuous
Compliance considerations vary by channel
The platform does not determine whether a communication is regulated. The advertisement’s content, purpose, audience, targeting, and relationship to the sales process remain central.
| Advertising channel | Common compliance concerns | Recommended controls |
|---|---|---|
| Franchise website | Outdated fees, unavailable territories, unsupported claims, missing disclaimers, state-specific landing pages, and lead forms accessible nationwide. | Quarterly content review, centralized updates, current disclaimers, registration-status controls, and version archiving. |
| Paid search advertising | State targeting, investment claims, limited character space, keywords implying income, and links to noncompliant landing pages. | Review headlines, descriptions, keywords, geographic settings, extensions, and destination pages together. |
| Social media | Informal executive posts, comments, franchisee reposts, testimonials, financial statements, short-lived stories, and direct messages. | Written posting rules, trained personnel, preapproval of campaign content, monitoring, screenshots, and escalation procedures. |
| Broker portals | Third-party summaries, outdated investment ranges, unsupported earnings statements, incorrect unit counts, and generic opportunity descriptions. | Provide approved copy, require preapproval of changes, conduct regular audits, and document correction requests. |
| Email automation | Sequences continuing into unregistered states, old claims, incomplete disclaimers, financial statements, and aggressive sales language. | Segment recipients, use approved templates, update sequences with each FDD, and pause campaigns when registrations lapse. |
| Webinars and videos | Off-script statements, financial questions, founder anecdotes, screenshots of unit performance, and recordings remaining online after facts change. | Use reviewed scripts, train speakers, control live questions, retain recordings, and remove outdated content promptly. |
| AI chatbots | Generated responses about earnings, costs, timelines, available territories, financing, or contractual rights that are not supported by the FDD. | Restrict source material, prohibit financial speculation, log conversations, test responses, and route legal or financial questions to trained personnel. |
| Influencer content | Unapproved claims, undisclosed relationships, lifestyle imagery, financial implications, or statements made outside approved materials. | Written agreements, required disclosures, approved scripts, monitoring, takedown rights, and retention of final published content. |
A practical franchise advertising review process
A repeatable approval system can help franchisors reduce inconsistent messaging, outdated claims, unauthorized earnings representations, and state filing problems.
Identify the purpose and intended audience
Determine whether the communication promotes a franchise sale, who will receive it, where those recipients are located, and where the proposed franchises may operate.
Compare every factual claim to the current FDD
Verify fees, investment ranges, outlet counts, training, territories, support, system history, litigation, financing, and other statements against the current disclosure document.
Screen for express and implied financial claims
Review numbers, testimonials, adjectives, lifestyle claims, success stories, visual imagery, customer counts, operating metrics, and other language from which financial results could be inferred.
Confirm state registration and filing status
Determine whether the franchisor may lawfully direct the advertisement to each affected jurisdiction and whether any advertisement filing, notice, exemption, legend, or approval process applies.
Add appropriate disclaimers and disclosures
Tailor the disclaimer to the advertisement’s medium, claims, intended audience, legal name, contact information, financial content, and state distribution rather than relying on a generic universal statement.
Submit required state filings before publication
When a jurisdiction requires filing or review, preserve the submission, filing fee, agency correspondence, effective date, and final version authorized for use.
Distribute only the approved final version
Provide employees, brokers, agencies, consultants, and other franchise sellers with the approved advertisement and prohibit unilateral changes or removal of required disclosures.
Retain and periodically reevaluate the advertisement
Preserve the final version, approval date, distribution details, state filings, substantiation, and responsible reviewer. Reevaluate the advertisement when the FDD or relevant facts change.
Build a preliminary franchise advertising disclaimer
Our interactive tool helps franchisors organize the information needed to develop a franchise advertising disclaimer. It asks about the advertisement’s medium, intended use, geographic targeting, earnings language, legal entity, address, and other facts that may affect the disclaimer or filing analysis.
Start the Disclaimer BuilderFranchise advertising compliance questions
What is considered a franchise advertisement?
A franchise advertisement may include any communication used to promote or encourage the offer or sale of a franchise. This may include websites, social media, emails, videos, brochures, broker listings, webinars, podcasts, testimonials, direct messages, presentations, and other public or private communications.
Does every franchise advertisement need a disclaimer?
Appropriate disclaimer language is generally a strong compliance practice, but the required language depends on the content, medium, audience, states involved, registration status, and whether the advertisement includes financial performance information. A disclaimer does not cure an otherwise false, misleading, prohibited, or improperly distributed advertisement.
Can a franchisor advertise before its FDD is complete?
Advertising before the franchisor is legally prepared to make franchise offers can create significant risk. The analysis depends on what the communication says, where it is distributed, whether it constitutes an offer, and which federal or state laws apply. Franchisors should obtain legal guidance before beginning prelaunch franchise marketing.
Can a franchisor advertise in a state where it is not registered?
The answer depends on the state, the advertisement, how it is targeted, and whether an exemption or internet-advertising treatment applies. Directing advertisements or follow-up communications to residents or proposed franchise locations in an unregistered state may create an unlawful offer.
Do franchise advertisements need to be filed with states?
Certain states regulate or require the filing of some franchise advertisements. Filing requirements, timing, exemptions, and agency procedures vary. The franchisor should determine the applicable requirements before publishing the advertisement.
Can a franchise advertisement include revenue or profit information?
Financial information requires careful analysis. A representation about actual or potential sales, revenue, expenses, profit, margins, customer volume, break-even timing, or return on investment may be a financial performance representation. The claim generally must be authorized by and consistent with the current Item 19, supported by written substantiation, and permitted under applicable state law.
Can a franchisor say that the business is profitable or successful?
Words such as profitable, successful, lucrative, high-margin, passive, recession resistant, or financially rewarding can imply financial performance depending on the context. Franchisors should review the overall message rather than assuming a claim is safe because it does not include a specific number.
Can franchisees provide testimonials in advertisements?
Franchisee testimonials can be used only with care. A testimonial may create an express or implied financial performance representation, suggest that results are typical, omit material context, or become misleading when edited. The franchisor should review and substantiate the complete presentation.
Can a broker create advertising for a franchisor?
A broker may prepare or distribute content, but the franchisor should maintain control over how its franchise opportunity is described. Broker-created profiles, portal listings, emails, scripts, and presentations should be reviewed for accuracy, FDD consistency, state compliance, and unauthorized financial representations.
Is a social media post a franchise advertisement?
It can be. A post promoting franchise ownership, available territories, investment, franchisee success, or another aspect of the opportunity may constitute advertising even when posted informally by an executive, employee, broker, or franchisee.
Can the franchisor use a disclaimer in the website footer?
A footer disclaimer may be useful, but its adequacy depends on visibility, placement, clarity, the claims being made, and applicable state requirements. A disclaimer buried in the footer may not adequately qualify a prominent claim appearing elsewhere on the page.
Does a disclaimer protect an inaccurate advertisement?
No. A disclaimer generally cannot cure a false, misleading, unsupported, prohibited, or materially incomplete statement. The advertisement’s primary message must be accurate, supportable, consistent with the FDD, and lawful for its intended audience.
Can a franchisor advertise an exclusive territory?
The advertisement should accurately reflect Item 12 and the Franchise Agreement. If the territory is subject to reserved rights, online sales, national accounts, alternative channels, performance conditions, or other exceptions, describing it simply as exclusive may be misleading.
Can AI generate franchise advertising copy?
AI can assist with preliminary drafting, but generated content should not be published without human and legal review. AI may invent claims, use outdated franchise information, imply financial performance, overlook state restrictions, or create copy inconsistent with the franchisor’s current FDD.
How long should franchise advertisements be retained?
The appropriate retention period depends on applicable law and the franchisor’s recordkeeping policy. Franchisors should retain final advertisements, versions, approvals, substantiation, filing records, dates of use, distribution details, and related agency correspondence for a period established with franchise counsel.
Who should approve franchise advertisements?
Franchisors should designate trained internal personnel and franchise counsel to review advertisements based on risk. Higher-risk materials include financial claims, testimonials, state-targeted campaigns, broker-created content, new advertising channels, and materials that materially differ from previously approved copy.
How often should advertising materials be reviewed?
Advertising should be reviewed whenever the FDD, Item 19, fees, investment, territories, services, unit counts, registration status, or other relevant facts change. Franchisors should also conduct periodic reviews to remove outdated website pages, listings, videos, emails, and social media content.
Does the disclaimer builder replace legal review?
No. The disclaimer builder is an educational tool designed to help users organize relevant facts and identify potential issues. It cannot determine all applicable state filing requirements, evaluate whether an advertisement is misleading, confirm consistency with the current FDD, or provide transaction-specific legal advice.
Franchise sales and compliance resources
Advertising Disclaimer Builder
Create a preliminary franchise advertising disclaimer and identify claims or state issues requiring further review.
Build a disclaimer →Item 19 Guide
Learn how financial performance representations are developed, substantiated, disclosed, and used during franchise sales.
Explore Item 19 →Federal Franchise Law
Review the federal disclosure framework, FDD requirements, waiting periods, and franchise sales obligations.
Review federal law →State Franchise Laws
Explore state registration, notice filing, exemption, business opportunity, and relationship-law considerations.
Browse state resources →Franchise Compliance Tools
Access calculators and tools for registration fees, timelines, waiting periods, readiness, budgeting, and state requirements.
Access free tools →Disclosure Waiting Periods
Review the federal 14-day disclosure period, completed-agreement timing, receipt records, and related transaction controls.
Review waiting periods →Franchise Your Business
Learn about FDD preparation, franchise agreements, operations, state filings, sales compliance, and franchise system development.
Explore franchise development →Franchise Law Glossary
Review plain-language explanations of franchise disclosure, fees, territories, registration, sales, and relationship terms.
Browse the glossary →Review the advertisement before it reaches the prospect
Waldrop & Colvin advises franchisors on franchise advertising, Item 19, state filings, broker and seller compliance, FDD consistency, sales procedures, and the development of repeatable advertising review systems.
