America's #1 Franchise Directory, Trusted for Over 15 Years

The Federal Trade Commission Strives to Helps People Evaluate Bizopps with Its Business Opportunity Rule

Open for Business License Plate

When starting a new venture, people understandably want to know what they’re getting into.


Some gravitate toward franchises because of the amount of regulation within the industry. The presence of the Franchise Disclosure Document (FDD)—a government-required document detailing a franchise’s operation—is a major part of this. In addition, some states require franchises register with them in order to operate within their jurisdiction.


Still, many opportunities to own a business fall under the category of business opportunities (sometimes referred to as “bizopps”)—a less regulated space. To aid in helping interested parties avoid undesirable investments, the Federal Trade Commission (FTC) created the Business Opportunity Rule. Under the rule, sellers have to give you—the buyer—a disclosure document overviewing your potential investment before any binding agreement is made.


Although not as thorough as the FDD—FDDs can be hundreds of pages in length while business opportunity disclosure documents can be as short as one page—the information from the document can be used to fact-check what the seller tells you about the opportunity and what you’ve discovered from your own due diligence (research).


Enacted in March 2012, the business opportunity disclosure document has to:

  • Identify the seller
  • Divulge info about certain lawsuits or other legal actions involving the seller or its key personnel
  • Explain if the seller has a cancellation or refund policy (if so, the terms of that policy)
  • Give a list of at least 10 references
  • Clarify whether the seller is making an earnings claim (i.e. “Earn up to $100,000 a year!”)


If the business opportunity seller does make an earnings claim, it’s then necessary that the seller produce an earnings claim statement. The statement must include:

  • The name of the person making the claim and the date
  • The specifics of the claim
  • The period of time in which those earnings were achieved with a start and end date
  • The number of people who got those results or better, and it’s percentage of the system
  • Any information about those people that may differ from the buyer (e.g. the part of the country where they live)
  • A statement that the buyer can get written proof of the seller's earning claims if the buyer requests it


The Business Opportunity Rule also makes clear certain practices that are against the law, for example:

  • Sellers can't claim they're offering you a job when they're really promoting a business opportunity
  • It's illegal for business opportunity sellers to say anything that contradicts what's in their disclosure document or earnings statement
  • Sellers cannot misrepresent the investment (e.g. say you will have an exclusive territory when you won’t)


Businessman on TabletThe business opportunity disclosure document is required to be produced in any language that a business opportunity is promoted in, and must be updated every quarter year. In addition, much like a FDD, the business opportunity disclosure document must be signed, dated and returned to the seller by the prospective buyer. In the case of the business opportunity disclosure document, the timeline is at least 7 days before a contract is signed and/or money is exchanged whereas the timeline is 14 days beforehand for a FDD.


Ultimately, for either a business opportunity or a franchise, it is up to the buyer to perform their own due diligence to make an informed decision. In addition to online search and speaking with others who work with the company, you can check out a company with your local consumer protection agencyyour state Attorney General, or the Better Business Bureau. Remember not only to look them up where you live, but where the company is based as well.


Additionally, strongly consider seeking professional advice. Ask a lawyer, accountant, or other business advisor to go over the paperwork with you before you sign.


A portion of this post originally appeared as the “Avoiding Scams” section of our Home-Based Franchise & Business Opportunity Report, which can be viewed here.

Business Opportunities...

Wag'n Tails Mobile Pet Grooming Wag’n Tails is launching 12-15 independent mobile grooming business owners every month! Be one of them! Read More Min. Cash Required:

U-Turn Change direction with U-Turn, the finest bulk candy machine on the market. We have earned our nickname "The... Read More Min. Cash Required:

YB 12 Coach YB 12 Coach is the perfect opportunity for professionals who are passionate about making a difference in the lives... Read More Min. Cash Required:

Affordable Restaurant Service and Equipment Franchise with the only national restaurant equipment repair brand in the country! Read More Min. Cash Required:

Express Laundry Centers™ Invest in a unique turnkey business for new coin and card-op laundries. 60-minute wash/dry/fold! Read More Min. Cash Required:

Allstate - AL, GA, NC, SC Allstate - AL, GA, NC, SC. Put your career in Good Hands® with Allstate. We have your opportunity! Read More Min. Cash Required:

comments powered by Disqus

Your Request List

You can add items by clicking the "Add to Request List" button or checkbox when you find something you're interested in.

You may add up to 15 items to your Request List

Your request list will follow you around the site.

When you are ready to complete your request for free information, click "Submit" in your Request List.

Why not get started by browsing our New Franchise Opportunities or Low Cost Franchise Directory?

You may only enter 15 items in your Request List.

To request information from your selected companies, just fill in the form and click "Submit".

OK, got it

Request Info From:


Your List is Empty

You can add items by checking the "Request FREE Info" boxes.

* indicates required field

Optional Information

Join our mailing list!

We share your information only with your selected franchises.