A women shaking hands after making a deal


In Brief:

  • Just how important is the franchise industry to the American economy?
  • The answer may be even more astonishing than you realize.
  • The FTC aids in the franchisor/franchisee relationship.
  • What is the Universal Franchisee Bill of Rights?

Quick. On a scale of 1-10, how important do you think the franchise industry is to the American economy?

If your answer is anything lower than ten, glance up from your phone or desktop and look around. Of the store-front businesses, brick and mortar shops, mall kiosks, it’s likely that many are owned and operated by franchisees.

According to Forbes, in 2018 there were over 7.6 million employees working at over 730,000 franchise outlets. Franchises accounted for roughly $404 billion in GDP!

When discussing franchises, it is important to note what constitutes one. The common misconception is that franchising only applies to retail businesses and the food industry. There are franchise opportunities in every sector and at varying prices!

AskMrFranchise offers business opportunities in a multitude of industries including child services, fitness, and real estate. As we mention in our helpful article To Franchise or Not to Franchise, the franchisee enters an agreement to sell a product or provide a service under the franchise’s name.

The agreement may include an initial fee, startup costs, fees for real estate and training programs, but the monetary benefits to franchising often far surpass what is possible by starting your own small business. You can learn more about the fees involved in buying a franchise here and all the great benefits of franchising here.

Due to the mammoth size of the franchise industry, the government imposes certain regulatory conditions on the industry in an effort to maintain fair business practices and manifest an environment where you can best succeed.

How the Government Maintains a Fair Industry for All

Gavel and scale in a court room

The Federal Trade Commission’s Franchise Rule

According to the FTC website: The Franchise Rule gives prospective purchasers of franchises the material information they need in order to weigh the risks and benefits of such an investment. The Rule requires franchisors to provide all potential franchisees with a disclosure document (FDD) containing 23 specific items of information about the offered franchise, its officers, and other franchisees.

State Government Laws Vary but the Fees are Minimal

Currently, 30 states have franchise regulations in place.

Like every industry, each state decides its own classification when it comes to their FDD. For instance, there are various franchise registration laws, but don’t sweat it-the fees are minimal!

Franchise registration states require an annual FDD registration whereas franchise filling states may only include a one-time FDD registration. For instance, Florida requires an annual registration fee of only $100 and Connecticut requires a one-time (one-time!) registration fee of $400. Non-registration states do not require a FDD registration at any time. Thinking of franchising in New Jersey? Your cost of filing your FDD will run you a whopping price of… FREE!

Franchise disclosure laws mandate that anyone offering franchises for sale in a given state must disclose information about the franchise. This includes operating costs, recurring expenses, and substantiated reports of profit earned that would be instrumental in the making of an informed decision to purchase a franchise.

The Universal Franchisee Bill of Rights

A fountain pen on legal paper

While state governments have worked to guarantee the rights of both the franchisor and franchisee, franchisees have aimed to take things a step further. The Coalition of Franchisee Associations (CFA) has implemented a Universal Franchisee Bill of Rights.

The Universal Bill of Rights outlines the various ways that franchisees and franchisors can forge an even closer bond. The doctrine is divided into 13 rights that break down the suggestions franchisees would like to see implemented in order to ensure the franchise industry experiences even more incredible growth.

Let’s be honest. The odds of running into an unfair franchisor is highly unlikely. As we stated above, the franchise industry contributes a large chunk to the American economy. Franchises make up some of the most recognizable brands in the world. Remember! When you make money, the franchisor makes money. They want to put you in the best position to succeed and many do.

Find the Franchise that Works for you Today

So the next time you go to the gym, eat at your favorite sandwich shop, or take your car for a tune-up, now you know how vital the franchise system is to our nation. If you are interested in purchasing a franchise, take a look at this handy article!

By Tyler Dikun and Jim Notaris

Tyler and Jim bio

Callens Capital