Illegal Practices

Avoiding Illegal Practices

The Rule lists other clear “dos” and “don’ts.” For example:

  • Don’t include anything in your Disclosure Document or Earnings Claim Statement other than what the Rule specifically allows.
  • Don’t mislead people about what other buyers have earned, what they might earn, or how much help you’ll give them. Remember: Under the law, it is illegal to deceive people expressly or by implication. Even if what you say is literally truthful, it still could be deceptive in context. For example, a claim can be misleading if relevant information is left out or if the claim implies something that’s not true.
  • Don’t tell people they’ll have exclusive territories if that’s not the case. Be truthful in explaining the likelihood of finding locations, outlets, or customers.
  • If you hold someone out as a successful buyer of your business opportunity, you have to clearly disclose if you’ve paid them or have some other relationship to them.
  • Don’t tell people you’re offering them a job if what you’re really doing is selling them a business.

Record Keeping

The Rule also requires you to keep certain records and make them available to the FTC for three years. Examples of what you need to keep: each buyer’s signed disclosure receipt, all executed written contracts, and substantiation supporting your earnings claims. Read the Rule for details on your record keeping obligations. The Rule generally exempts business opportunities that meet the definition of a “franchise,” but check the Rule to see if that applies to you.