Franchising in New Jersey comes with state and federal rules that give prospective franchisees the information they need to make informed decisions. Many people wonder if franchisors must share details about expected earnings. The answer depends on how the franchisor chooses to handle earnings disclosures under the law.
How earnings claims work
The Federal Trade Commission’s Franchise Rule does not require franchisors to provide earnings claims—also called financial performance representations. However, franchisors who choose to include them must list the information in Item 19 of the Franchise Disclosure Document (FDD). They must base these claims on factual, verifiable data and present them accurately.
New Jersey follows the same approach. The state does not mandate earnings projections, but franchisors who offer them must meet both federal standards and state rules. This ensures the figures rely on solid evidence and remain free from misleading information.
What franchisors must provide
Even when franchisors do not include earnings claims, they must still disclose other financial details in the FDD. These include initial fees, estimated startup costs, and ongoing royalty or advertising payments. These figures give potential franchisees a clearer picture of the required investment.
When franchisors choose to make an earnings claim, they must match the data to actual results or the results of a representative group of franchise locations. They must also explain any conditions or assumptions tied to the figures so prospective owners understand the context.
Why it matters for prospective owners
Accurate, well-supported earnings information allows potential franchisees to evaluate whether a business fits their goals. New Jersey law does not force franchisors to make these claims, but it requires that any provided claims remain truthful, evidence-based, and clearly explained.
By understanding how earnings claims work in New Jersey, future business owners can focus on opportunities that align with their expectations and objectives. Knowing exactly what franchisors must disclose helps buyers make more informed decisions.