Understanding Franchise Compliance Matters

Operating a national franchise program requires a significant amount of investment and attention to legal obligations and duties. The franchise attorneys of Huck Bouma provide extensive training and education to franchisors, subfranchisors and their franchise sellers nationwide on franchise law compliance.

Commitment to providing franchisors and subfranchisors with the education and tools they need to protect their investment and prevent violations of federal and state franchise laws and regulations is what the Franchise Law Group of Huck Bouma is known for.

Legal Training To Avoid Franchise Compliance Concerns

The franchisor and subfranchisor clients of the Franchise Law Practice Group of Huck Bouma frequently require assistance with training their management, franchise sellers, subfranchisors/master franchisees, area developers, franchise brokers, and other individuals involved in the franchise sales process and who could potentially create liability for franchisors if they don’t have an understanding of the federal and state franchise laws that apply to selling franchises. These tools are necessary to help avoid liability and to have a strong franchise program.

The civil and criminal penalties associated with a violation can be serious, including unenforceability of franchise agreements, suspension of franchise registrations, disclosure of violations in the Franchise Disclosure Document, fines, or even imprisonment. Training can provide you with the information you need to successfully operate a franchise and covers many aspects, including:

• Amended FTC Franchise Rule
• State franchise laws
• Franchise law violations
• Avoiding fraud and misrepresentation
• Pre-sale discussions and negotiations
• Financial performance representations
• Regulations on franchise advertising
• Franchise relationship laws
• Registration and disclosure

The franchise law attorneys at Huck Bouma provide interactive training sessions and manuals on preventing franchise law violations. By preventing franchise law violations, you can avoid jeopardizing your franchise registrations, protect the enforceability of your franchise agreements, and limit legal claims by franchisees or actions by franchise regulators.

Annual FDD Updates And State Registration Deadlines

Clarity about FDD update deadlines or franchise registration expiration dates is essential because renewal requirements can vary significantly between state systems. The Federal Trade Commission’s Franchise Rule requires updating Franchise Disclosure Documents within 120 days after the close of the fiscal year. This provides prospective buyers with accurate, timely information reflecting the franchisor’s most recent financials and operational changes.

As registration or business opportunity states, California, Florida, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, South Dakota, Utah, Virginia, Washington, and Wisconsin require annual renewals, and missing a renewal deadline immediately prevents a franchisor from offering or selling franchises in the state. Many franchisors refer to this lapse as “going dark” because sales activity must stop until the registration is reinstated. Coordinating federal and state timelines is essential for renewal filings before the federal 120‑day update period ends and throughout the registration year.

Material changes also trigger mandatory updates. The FTC requires franchisors to amend their FDD whenever significant developments occur, including fee adjustments, new litigation, changes in executive leadership, or shifts in system structure. The disclosure provided to prospects must include these amendments to facilitate accuracy and transparency throughout the sales process.

Our franchise attorney assists franchisors by reviewing fiscal calendars, educating clients on identifying potential material changes, preparing timely federal and state filings, maintaining good relationships with state franchise examiners, and promptly responding to state comment letters. This coordinated approach helps franchisors avoid missed deadlines and maintain uninterrupted franchise development efforts.

Lawful Financial Performance Representations (Item 19)

It is common for franchisors to need clarity on Item 19 compliance because financial performance representations remain one of the most regulated and nuanced areas of franchise law. The FTC prohibits any written or verbal earnings claims unless those figures appear in Item 19 of the current, registered FDD. Sales teams, brokers and internal staff must avoid sharing projections, averages or revenue estimates that fall outside the disclosure.

Recent Item 19 commentary by the North American Securities Administrators Association (NASAA) requires franchisors to include both mean and median revenue figures when presenting Item 19 data. This change addresses concerns that mean values can distort performance expectations in systems with wide revenue variation. Providing both metrics offers a more balanced view of system performance and reduces the risk of misleading prospective franchisees.

Franchise Advertising And Website Compliance

Franchisors often ask how advertising laws apply to websites, social media and digital marketing campaigns. In strict registration states, promotional materials can function as unregistered franchise offers if they reference investment ranges, earnings potential or franchise availability. 

Huck Bouma reviews marketing content, verifies required disclaimers and helps ensure compliance with state advertising filing rules before publication.

Franchisors Can Unintentionally Violate The Law

Franchisors and Franchise sellers can unintentionally violate the franchise law in many ways such as:

• Not complying fully with disclosure requirements
• Making unauthorized financial performance representations
• Providing inconsistent information to buyers
• Website content or advertising information being inconsistent with what is in the Franchise Disclosure Documents or franchise agreement
• Failing to comply with delivery requirements and waiting periods

The potential errors are numerous and can be difficult to avoid without proper training.

Addressing Non-Compliance Claims With The Government

If someone has reported your franchise company for misconduct or non-compliance with the law, federal and/or state franchise regulators may investigate that claim. If you have received a government inquiry, contact Huck Bouma franchise attorneys immediately. An experienced franchise attorney can investigate the facts related to the alleged misconduct or non-compliance and prepare a response to the government on your behalf.

Keep Your Franchise Disclosure Document Clean

Any adverse consequences against your franchise must be disclosed in your Franchise Disclosure Document for at least 10 years. Do not let a government inquiry or legal actions by franchisees impede the growth of your company. Contact Huck Bouma to ensure your franchise remains in compliance with the law.