By Joe Caruso
The Problem: Minor Cheats Have Become the Norm
In today’s hyper-competitive franchise recruitment environment, the lines of legality and ethical conduct are increasingly blurred. Minor cheats, especially in the form of unlawful Item 19 FPRs (Earnings Claims), have moved from occasional infractions to systemic practices. Franchise sellers, including franchisors, brokers, and Franchise Sales Organizations (FSOs), often mimic what others are doing in the marketplace, both the good and the bad.
This normalization of unethical or non-compliant behavior is not only dangerous to potential franchisees but also undermines the integrity of the entire franchise industry. Without credible deterrents or well-publicized consequences, opportunistic behaviors flourish.
The “Broken Windows” Theory of Franchise Compliance
The “Broken Windows” theory in criminal justice suggests that policing minor crimes, such as vandalism and petty theft, can prevent more serious crimes. Applied to franchise sales, this approach argues for the FTC to actively and visibly enforce even small-scale franchise law violations. If minor infractions are ignored, the message to the market is clear: compliance is optional, and minor cheats are acceptable tactics to close a deal.
A consistent, visible, and well-communicated enforcement strategy from the FTC could serve as a powerful deterrent. Even modest penalties, if made public and contextualized with clear educational messaging, would help recalibrate what is acceptable conduct in franchise recruitment.
The FTC’s Role: Enforcement and Education
The Federal Trade Commission (FTC) is tasked with maintaining lawful franchise sales practices, but has often appeared silent or slow to respond unless there is egregious fraud. The industry needs something different: regular and visible enforcement of minor violations, with an emphasis on education and correction rather than just punishment.
Publicizing these actions would:
- Give franchisors and FSOs real-world examples of what not to do.
- Help prospective franchisees spot red flags in franchise sales presentations.
- Rebuild credibility around Item 19 FPRs (Earnings Claims).
To enable this, the FTC should upgrade its online franchise complaint portal to specifically invite and categorize reports of these common but impactful violations, such as unsubstantiated earnings claims, misuse of testimonials, or salespeople stating misleading financial outcomes. The FTC should actively encourage not only prospective franchise buyers, but also existing franchisees, former candidates, whistleblowers, employees, and even external observers to report unlawful franchise sales and marketing practices. These infractions are often visible in public-facing content and should not require insider access to be scrutinized. A more focused and user-friendly complaint process would provide the FTC with actionable data to prioritize enforcement and spot trends.
Equally important, the FTC should reinforce this message clearly and consistently: franchisors are ultimately responsible for all franchise sales and marketing activities related to their offering, not just those conducted by in-house employees, but also those carried out by franchise brokers, FSOs, external marketing agencies, and public relations firms. The use of third parties does not dilute responsibility; it increases the need for oversight. Franchisors have a duty to monitor, review, and correct misrepresentations wherever they occur.
All franchise sellers are responsible for pre-sale FTC Franchise Rule compliance, and franchisors should understand that they are almost always, if not always, at the head of the line in disputes, mediations, and legal battles ahead of their third-party sellers.
Too often, franchisors rely on third-party FSOs, PR firms, and marketing agencies that mean well but lack the legal grounding and compliance discipline to do this correctly. Without those guardrails, they often succumb to perverse incentives, optimizing for lead volume or ad engagement instead of legal accuracy and brand protection. That disconnect leads to misrepresentations, even if unintentional, and ultimately puts the franchisor at risk.
Franchise attorneys also have a vital role to play. They are not merely FDD drafters. They should act as compliance advisors and reality checkers. Through regular education, assertive guidance, and sometimes the strategic application of the “fear of God,” these attorneys must push their franchisor clients to confront sloppy or unlawful sales practices and elevate the standard of conduct before regulators do it for them.
The perspectives I have here are from years of C-level direct experience within franchisors and with franchisor clients. These minor cheats are not victimless. Good actor franchisors are being unfairly out-competed by non-compliant sellers and their irresponsible selling. It is important to consider that every franchise candidate wants to know “How much money can I make?” and sketchy franchise sellers are answering in dubious ways. And often, once that financial performance question is answered unlawfully, the candidate stops their pre-purchase franchise investigation. Cognitive dissonance anchors, and they buy. They have been violated by the franchise seller or sellers. This can lead to devastating franchisee financial failure, middling results, or blind luck success. But none of that excuses the act. Unlawful FPRs do not turn on whether they are valid or semi-valid; they turn on adherence to the FTC Franchise Rule.
In my professional franchising career, more than once I have heard fellow franchisor executives, including CEOs, make off-the-cuff verbal FPR claims. When I have addressed it with them afterward, they often respond, “Well, we have an Item 19 in our FDD, so I can talk about performance.” In reality, they are referencing specific locations, KPIs, or financial outcomes that are not included in the Item 19 FPR. They are either genuinely surprised to learn that is non-compliant, or they double-down.
These minor cheats in franchise sales result in tainted franchise sales, and franchisor leadership needs to be vigilant and steadfast in their monitoring of all franchising activities and practices.
This proactive approach would elevate compliance culture across the industry.
The IFA’s Role: Promoting Responsible Franchising
The International Franchise Association (IFA) has made significant strides with its Responsible Franchising initiatives. But these efforts must go further. It is not enough to promote best practices internally among IFA members. There must be public-facing efforts that clearly define and condemn irresponsible or unlawful franchise sales behavior.
Responsible Franchising must evolve into a dual campaign:
- Promoting high-integrity, honest practices.
- Explicitly calling out practices that violate legal or ethical standards.
In tandem with the FTC, the IFA must champion this foundational truth: franchisors bear the burden of ensuring all third-party actors representing their franchise opportunity operate within legal and ethical boundaries. Whether it is a broker, a digital agency, a webinar host, or a PR firm, franchisors must establish training, approval processes, and compliance reviews to maintain control over their sales message. Ignorance is not a defense, and passive approval is no protection.
The IFA should also work to elevate the expectations placed on franchise attorneys, not just as compliance box-checkers, but as strategic guardians of ethical sales conduct. Legal counsel must go beyond drafting Item 19 disclaimers. They should help their franchisor clients implement internal review processes, pressure-test real-world marketing language, and proactively reduce legal exposure by confronting gray-zone practices before they escalate.
Creating Real Deterrents Through Modest Enforcement
The reality is that fear of substantial FTC enforcement is not currently part of most franchise sales conversations. But it should be. A steady stream of even modest enforcement actions, with detailed descriptions and clear explanations, would have a powerful chilling effect on bad actors and shift the market toward higher standards.
The goal is not mass punishment, but market correction.
Enforcement examples could include:
- Misuse or embellishment of Item 19 FPRs (Earnings Claims) in verbal conversations.
- Improper use of franchise owner testimonials that imply guaranteed results.
- Promoting franchisee earnings without proper substantiation.
These are not headline-making crimes, but they are the franchise equivalent of “broken windows.” Ignoring them invites deterioration of the system.
The Visibility of Bad Behavior: Hiding in Plain Sight
The bad behaviors are rarely secret. They are often learned by watching what “successful” brands and brokers do publicly. In fact, violations of FTC regulations and sloppy, unlawful earnings claims are everywhere for anyone willing to look.
It is also prevalent in newer media like LinkedIn articles, Substack newsletters, and franchisor-sponsored content marketing, where compliance is often an afterthought, if considered at all.
To be clear: Item 19 FPRs (Earnings Claims) can and should be used, when they are properly disclosed in Item 19 of the Franchise Disclosure Document (FDD) and supported by clear, compliant disclaimers in advertising and marketing materials. In fact, it is critically important that franchisors who have strong unit economics and well-documented Item 19 disclosures, especially those providing full profit-and-loss statements (P&Ls), leverage those lawful disclosures to recruit qualified franchise candidates. These franchisors set a standard for responsible, honest growth and should not hesitate to use their real data to attract the right operators.
We at Franchise Info advocate for exactly that, great full P&L-based FPRs and KPIs, built on a solid and reasonable basis, backed with compliant disclaimers, so franchisors can proudly present their offering’s unit economics to attract highly qualified franchisees, especially current and future multi-unit/multi-brand owners (MUMBOs).
What is widespread now, however, are off-the-cuff success statements, cherry-picked anecdotes, and misleading portrayals with no legal backing or honesty.
These marketing materials are not hidden in private data rooms. They are on public display. And they are teaching the next generation of franchise sellers exactly how to skirt the rules and close the sale.
The FTC does not have to go digging. A basic scan of social media, video content, and franchise marketing funnels would surface enough violations to take meaningful and visible enforcement action.
Fix the Minor Cheats: The Status Quo Has Already Normalized Bad Behavior
We do not need an FTC crusade or mass investigation to clean up franchise sales. What we need is a visible, steady, and educational campaign that polices the minor cheats. The bad behaviors are rarely secret. They are modeled and spread through marketing content and sales teams that are poorly trained, loosely monitored, and overly incentivized to “just close.”
By modeling its enforcement on the Broken Windows theory, the FTC can restore faith in franchise recruitment, protect franchise buyers, and support a more sustainable and ethical franchising ecosystem.
The quote “Integrity is doing the right thing, even when no one is watching” is well known. But in the context of FPR minor cheats, it flips. Everyone is watching, franchise candidates, competitors, brokers, even the FTC, and the bad behavior has become commonplace. What is missing is not visibility; it is enforcement.
Franchisors would do well to adopt a more fitting version: “Integrity is doing the right thing in franchise sales compliance, even when there is little to no FTC enforcement.”
A culture of ethics, honesty, and proactive compliance is not just protection against risk; it is a competitive advantage.
This is a pro-franchising call for Responsible Franchising, one that advocates for highly informative Item 19 FPRs that ought to be compliantly and proudly used in franchise concept marketing to recruit the right franchise owners. When accurate financial data is lawfully disclosed and supported with proper guardrails, it not only protects the brand, it accelerates sustainable growth.
We’re not just another group of franchise advisors with pretty faces and a fixation on rulebooks.
We help franchisors recruit high-quality new franchise owners, secure multi-unit development agreements that actually get built, and implement franchise programs their competitors will envy. If you want better candidates, targeted & defined Ideal Franchise Candidate Profiles (IFCPs), a more attractive Franchise Value Proposition (FVP), and a sales system & workflow that delivers real growth without cutting corners, we can help.
About Franchise Info Advisory Partners
Franchise-Info Advisory Partners is led by Joe Caruso, Ned Lyerly, and Michael (Mike) Webster, PhD. They are three highly experienced franchise executives who have built, scaled, and supported some of the most respected brands in the industry. They combine practical operating experience with strong development leadership.
What sets them apart is that they are not just credible. They are easy to talk to.
Clients frequently say:
“They make the hard stuff feel easier.”
Whether you are navigating compliance, training your sales team, or preparing for expansion, Joe, Ned, and Mike will guide you through it without jargon or confusion.
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