Franchising in the US for foreign brands: the FDD, the FTC Franchise Rule and New York registration
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4 min read
In short
To sell franchises for US locations, a brand must give prospective franchisees a Franchise Disclosure Document (FDD) with 23 required items at least 14 calendar days before they sign or pay, under the FTC Franchise Rule. The FTC does not register or approve FDDs, but a group of states, including New York, require the franchisor to register before offering or selling franchises there. New York’s definition of an offer is broad, so registration often matters even for deals not located in New York.
Key points
The FTC Franchise Rule (16 CFR Part 436) applies to franchises located in the United States and its territories, whatever the franchisor’s nationality.
The FDD has 23 items, including fees, estimated initial investment, litigation, outlet data and audited financial statements.
Prospective franchisees must receive the FDD at least 14 calendar days before signing a binding agreement or making any payment.
No federal agency verifies the FDD. Registration states review it before you can sell there.
New York requires registration, annual renewal within 120 days of fiscal year end, and advertising filed at least seven days before use.
Inside the FDD
Under 16 CFR 436.5, the disclosure document contains 23 items, among them: the franchisor and its affiliates, business experience of management, litigation and bankruptcy history, initial and other fees, the estimated initial investment, restrictions on suppliers, territory, trademarks, renewal and termination terms, financial performance representations (Item 19), the list of outlets and franchisees (Item 20), financial statements (Item 21) and the contracts themselves (Item 22).
For a foreign brand, three items usually take the most work: Item 7 (the investment a US franchisee needs, which should be based on US costs, not home-market costs), Item 19 (whether and how to present performance data) and Item 21 (audited financial statements of the franchising entity).
The timing rules
The franchisor must provide the current FDD at least 14 calendar days before the prospect signs a binding agreement or pays anything. If the franchisor unilaterally and materially changes the standard agreement, the prospect must receive the final version at least seven calendar days before signing. Changes the franchisee asked for in negotiation do not restart this clock.
Exemptions
The rule includes exemptions for very small required payments, for very large investments, and for large, experienced franchisees. The FTC adjusts these dollar thresholds for inflation every four years, most recently in 2024, so check the current figures before relying on one. Exemptions under federal law do not automatically apply under state law.
States that require registration
More than a dozen states require franchisors to register or have the FDD reviewed before offering franchises, including California, Illinois, Maryland, Minnesota, New York, Virginia, Washington and Wisconsin. Others require only a notice filing. Requirements differ, and some states require a specific addendum to the FDD.
New York in more detail
New York’s franchise law (General Business Law Article 33) is administered by the Investor Protection Bureau of the Attorney General. Its scope is broad. Under GBL 681, an offer or sale is made in New York if the offer is made or accepted there, or if the franchisee is domiciled in New York and the business will operate there. An offer is made in New York if it originates from the state. For a foreign brand whose US team sits in Manhattan, offers to prospects in other states can therefore fall within New York’s law.
Practical requirements published by the Attorney General:
Filings and fees go through NASAA’s electronic filing system (FRED).
Renewals are due within 120 days after the franchisor’s fiscal year end. With an expired registration, no franchise offers or sales may be made within or from New York.
Material changes require a prompt amendment.
Advertising used to offer franchises must be submitted at least seven days before use.
Franchise brokers register separately.
Steps for a foreign brand
Prove the concept in the US first, ideally with company-owned units, so Item 7 and any Item 19 data reflect US conditions.
Form a US franchising entity and arrange audited financials.
Protect the trademark in the US.
Have franchise counsel prepare the FDD and state addenda.
Register in New York and other target registration states before any marketing to prospects.
Set up a compliant sales process that records FDD delivery dates.
How Devolus can help
Devolus supports franchise development for foreign food and retail brands: market readiness, unit economics for Item 7, and the operating system franchisees will run, alongside your franchise counsel. Start with the Readiness Check or write to us.
Frequently asked questions
Does the FTC approve franchise disclosure documents?
No. The FTC sets the disclosure rules but does not review or register FDDs. Registration states review them before franchises can be offered there.
How long before signing must a franchisee receive the FDD?
At least 14 calendar days before signing a binding agreement or paying any money, under 16 CFR 436.2.
Do I need to register in New York if my franchisees are in other states?
Possibly. New York treats an offer as made in the state if it originates from New York, so a franchise sales team based there may trigger the law. Confirm with franchise counsel.
Does the US franchise rule apply to master franchise deals for Europe?
The FTC rule covers only franchises to be located in the United States and its territories.
Sources
Readiness Check
Bringing your business to the US? Test your plan in 3 minutes: setup cost, running costs and runway.
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General information, not legal, tax or investment advice. Rules and fees change: check the official sources before acting.