RWO Franchise Law Blog: Three Things to Beware of When Advertising Your Franchise

You are a franchisor and you have gone to the trouble and expense of having your Franchise Disclosure Document (“FDD”) prepared and registered in all of the franchise registration states where you will be selling franchises.  At long last, you are ready to begin advertising your franchise to the public.

Be careful! 

There are a number of legal issues that impact your franchise advertising.  There are many general legal principles that may apply.  For instance, if you make any misrepresentations or fraudulent statements in your advertisements, you may be violating multiple laws.  But beyond those general laws applicable to all advertising, there are also specific legal requirements related to franchise advertisements, including the following.

First, seven of the franchise registration states require that you file your advertising materials with the same state agencies where you filed your FDD before you begin using those advertisements in those states.  A failure to do so is a violation of those states’ laws.
 
Second, your advertisements should not make any representation about the past financial performance of any franchised or company-owned outlets, or projections regarding the potential future financial performance of the prospective franchisee, except where (i) that same financial performance information is given in your FDD, and (ii) certain specific disclosures appear in your advertisement.  An advertisement listing your franchisees’ profits is clearly not permitted unless that information is also included in your FDD.  But even a more general statement such as “franchisees can turn a profit in one year” will likely be deemed a prohibited financial performance representation.  Including an improper financial performance representation is a violation of Federal law and many states’ laws.

Third, your advertisements should not contradict your FDD in any respect.  A conflict means that you are making a misrepresentation in either your advertisement or your FDD.

If you franchise, you need to make sure you comply with these advertising laws.  You should work with an attorney who can review your advertising materials, confirm that they do comply with such laws, and file them with the necessary states.  The franchise, distribution, and licensing law practice group at Robinson Waters & O’Dorisio has extensive experience working with franchise systems and can provide assistance in relation to all aspects of franchising, including franchise advertising.

This RWO Franchise Law Blog entry has been written by Robert Bliss of Robinson Waters & O’Dorisio.