FREE CFC Ethical Practices & Legal Compliance in Franchising Questions and Answers

Question 1

What is the primary purpose of the Franchise Disclosure Document (FDD)?

Accepted Answer

To provide key disclosures to prospective franchisees.

Answer

To market franchise opportunities to customers.

Answer

To summarize employment policies.

Answer

To outline the franchise's marketing plan.

Question 2

Which U.S. agency oversees the enforcement of federal franchise regulations?

Accepted Answer

FTC (Federal Trade Commission)

Answer

IRS

Answer

OSHA

Answer

EPA

Question 3

What is considered an unethical practice in franchise sales?

Accepted Answer

Making unsubstantiated earnings claims.

Answer

Providing audited financials in the FDD.

Answer

Disclosing litigation history.

Answer

Offering franchisee training materials.

Question 4

Why is it important to disclose all fees in the FDD?

Accepted Answer

It ensures financial transparency and legal compliance.

Answer

It makes the franchise seem more affordable.

Answer

It satisfies local zoning requirements.

Answer

It helps avoid technology fees.

Question 5

What is one ethical responsibility of a Certified Franchise Consultant?

Accepted Answer

Match candidates with opportunities that meet their needs and goals.

Answer

Only work with franchises that offer the highest commission.

Answer

Sell as many franchises as possible, regardless of fit.

Answer

Encourage clients to sign quickly before researching.