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The broker and franchisor have different duties
The federal definition of franchise seller can include employees, agents, subfranchisors and outside brokers involved in sales. Seller-conduct restrictions reach those people; responsibility for furnishing the FDD rests with the franchisor. A referral contract saying the broker handles compliance does not transfer every duty.
This includes substantive claims in an introduction. What the speaker actually says matters more than calling the candidate an investor or describing the contact as a referral.
A broker’s private spreadsheet can create the same problem as your deck
In a fictional cleaning offer, a broker says a hired local manager can produce a predictable margin. That is a statement about the proposed business’s financial result, not simply an exchange of contact details. Check its Item 19 treatment and written support before it is repeated. Item 19 is the FDD section addressing financial performance representations.
Sellers must not contradict required disclosures or misrepresent a reference as independent. Performance claims need the applicable reasonable basis, written supporting evidence and disclosure treatment, whether made in a webinar, portal, spreadsheet or private conversation.
Control the message and the formal delivery
Give the broker materials that match the actual disclosure, make clear who may answer financial-result questions and retain the communications actually used. Separately, make sure the correct FDD is furnished to the prospect under the applicable timetable. One task does not demonstrate that the other happened.
Scope
- This is the federal distinction. State broker licensing, registration, advertising and authority to sell require separate checks; the fictional example establishes no violation.
Next step
Check the broker’s actual sales message and confirm who will furnish the current FDD before recruitment proceeds.
Sources & review notes
Federal Trade Commission
Passage, dates and research notes
primary · section-436.1
whatever it may be called
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Federal Trade Commission
Passage, dates and research notes
primary · section-436.9
reasonable basis and written substantiation
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Federal Trade Commission
Passage, dates and research notes
primary · section-436.2
at least 14 calendar-days
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Detailed rule records (1)
The federal definition of franchise seller includes relevant third-party brokers and other people involved in franchise sales. Section 436.9 prohibits sellers from specified inconsistent, misleading and unsubstantiated representations; franchisor disclosure duties remain distinct.
16 CFR §436.1: Federal franchise definition 16 CFR §436.9: Franchise-sales prohibitions 16 CFR §436.2: Federal disclosure timingRelated case records
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