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Evidence review

Franchise Fraud in the US: What Complaint and Enforcement Records Show

An evidence review of FTC complaint data, federal and state enforcement records, and the rules that separate a regulated franchise from a business opportunity scheme.
Updated Next update: when the FTC posts the 2025 Consumer Sentinel Data Book (not posted as of 2026-10-06)By the Editorial TeamData: CC BY 4.0
A laptop on a kitchen table in late evening light showing a blurred, brightly colored web page layout with no readable text, a mug and a notepad beside it, no p
Verdict

Franchise fraud is reported far less often than other business scams. Consumer Sentinel logged 3,858 Franchises & Distributorships reports in 2024, up from 2,673 in 2022, but the category has no loss data and GAO found only 42% of sampled complaints concerned franchising. Federal cases mostly target business opportunity schemes: 62 of 113 tagged FTC matters, against 2 franchise matters.

3,858Franchises & Distributorships reports to Consumer Sentinel, US, 2024 (up from 2,673 in 2022)FTC Consumer Sentinel Data Book 2024
42%Share of a GAO sample of franchise-category complaints that concerned franchising, US, 2018 to 2022GAO-23-105338
62 of 113FTC matters tagged to franchises and business opportunities that target business opportunity schemes (2 target franchise sales), 1989 to 2026FTC case listing, our coding
$17MAmount to be returned to franchisees in the FTC's March 2026 Xponential settlement, the largest in a franchise case per the FTCFTC press release, 2026-03-18

The evidence in brief

  • Consumer Sentinel received 3,858 Franchises & Distributorships reports in 2024, 44.3% more than the 2,673 received in 2022 (FTC Data Book 2024, US).
  • Per 100,000 Sentinel reports, the franchise subcategory went from 16.8 in 2021 to 50.3 in 2022 and 59.6 in 2024, so the rise is not just growth in total reports (our calculation from FTC Data Books).
  • The subcategory has no loss data: the FTC counts it as an Other report type, and in every year from 2018 to 2024 the gap between all Business and Job Opportunities reports and the fraud-only count is within 8 reports of the franchise subcategory (FTC Data Books 2018 to 2024).
  • GAO found about 5,900 franchise-category complaints from 2018 to 2022, and only 52 of a random 125 (42%) were about franchising (GAO-23-105338, April 2023).
  • Of 113 FTC enforcement matters tagged Franchises, Business Opportunities, and Investments, 62 (54.9%) target business opportunity or money-making schemes and 2 (1.8%) target franchise sales (FTC case listing to 2026-10-06, our coding).
  • The FTC has announced 4 Franchise Rule enforcement actions since July 2008, 3 of them since October 2024, including a $17 million settlement in March 2026 that the FTC called the largest return to consumers in a franchise case.
  • State records point the same way: Washington issued 177 franchise-law orders and 24 business-opportunity-law orders from 2015 to 2024, and about 76.8% of the franchise orders mention registration failures (Washington DFI).

Franchise fraud evidence, graded by source

The public record on franchise fraud has three layers: consumer complaint counts, federal and state enforcement records, and the rules that define what a franchise is. Each layer answers a different question, and none of them measures how often franchise buyers are actually defrauded. The table grades each source on how directly it measures the topic (A: official count with a stated method; B: official data that needs our coding or carries known mixing; C: indicative only).

We read 17 Consumer Sentinel Data Books (FTC index), the GAO audit of FTC franchise oversight, every matter in the FTC’s tagged case listing, and two state enforcement lists that can be searched by statute. Court filings are covered separately in our franchise litigation monitor and are not repeated here.

Table 1Sources on franchise fraud in the US, graded by how directly they measure it
SourceWhat it countsPeriodGeographyGradeMain limitation
FTC Consumer Sentinel Data Books (17 editions)Reports filed by consumers and data contributors, by category and subcategory2006 to 2024United StatesBUnverified reports; franchise subcategory has no loss data and mixes distributorships and post-sale disputes
GAO-23-105338Audit of FTC franchise oversight, complaint sample, FTC and state enforcement counts2008 to 2022United States and 5 statesASingle sample of 125 complaints; five states chosen by GAO
FTC Cases and Proceedings, industry tagFederal cases tagged Franchises, Business Opportunities, and Investments1989 to 2026United StatesBTag applied by FTC staff and incomplete; our type coding
FTC press releases, same tagAnnouncements of complaints, settlements, refunds and rules2025 to 2026United StatesBReleases, not matters; several releases per case
Washington DFI enforcement ordersOrders by statute: FIPA, Business Opportunity Fraud Act, securities2003 to 2026WashingtonBOne state; counts orders, not matters; statute coded from summaries before 2025
California DFPI Actions and OrdersFranchise-related enforcement actions by year of initial action2004 to 2026CaliforniaCSearch index with incomplete law tags; our grouping; lower bound
16 CFR parts 436 and 437 (eCFR)Legal definitions, exemptions, disclosure timingCurrent textUnited StatesARules, not outcomes
FTC and state consumer guidanceRed flags and verification steps2020 to 2026United States, Wisconsin, CaliforniaBGuidance, not measurement
Source: Franchise Consultants and Brokers grading of the sources listed under References, 2026-10-06. Download CSV

Complaint trends: what Consumer Sentinel counts

Complaints in the franchise subcategory have risen sharply since 2021, but the count is small and mixed. Consumer Sentinel logged 3,858 Franchises & Distributorships reports in 2024, against 2,673 in 2022 and 1,027 in 2021 (Data Book 2024; Data Book 2023). The series held between 283 and 1,027 a year from 2012 to 2021.

Total Sentinel reports also grew, so we divided by them. The franchise subcategory accounted for 16.8 reports per 100,000 in 2021, 50.3 in 2022 and 59.6 in 2024. The 2022 rate is 3.0 times the 2021 rate, so the jump is not explained by growth in total reports. The Data Books do not explain it, and we found no FTC statement that does. FTC staff cited the same rise in an Issue Spotlight on franchising.

Three limits apply. The subcategory combines franchises with distributorships. Reports are unverified and include disputes that arise after a sale, such as fees or policies. GAO reviewed a random sample of 125 complaints from this category for 2018 to 2022 and judged 52 (42%) to be related to franchising (GAO-23-105338). Before 2012 the FTC used a combined business opportunity, franchise and distributorship code, so the earlier counts in the table are not comparable. Editions also revise counts: the 2019 figure was first published as 1,066 and later revised to 757, so we use the latest edition for each year.

Figure 1Consumer Sentinel reports in the Franchises & Distributorships subcategory, US, 2012 to 2024
01,0002,0003,0004,0003,8582012201320142015201620172018201920202021202220232024Step change; cause not stated by FTC
Source: FTC Consumer Sentinel Network Data Books 2014 to 2024 (latest edition reporting each year). Download data (CSV)
Table 2Consumer Sentinel franchise-related reports and rate per 100,000 reports, US, 2006 to 2024
YearFranchises & Distributorships reportsEarlier combined code (bus. opps, franchises, distributorships)All Sentinel reportsFranchise reports per 100,000 Sentinel reportsData Book edition used
2,0062,9732,008
2,0074,6412,009
2,0085,1052,010
2,0095,6342,011
2,01034,3092012 (separate code); 2011 (combined code)
2,011157,7082013 (separate code); 2011 (combined code)
2,0124972,014
2,0132832,015
2,0143912,016
2,0154453,035,62514.72,017
2,0164513,046,91514.82,018
2,0173962,904,32913.62,019
2,0184653,115,55614.92,020
2,0197573,428,81822.12,021
2,0209275,020,17818.52,022
2,0211,0276,122,34116.82,023
2,0222,6735,317,75150.32,024
2,0233,2195,548,815582,024
2,0243,8586,471,70859.62,024
Source: FTC Consumer Sentinel Network Data Books 2014 to 2024 (latest edition reporting each year). 2006 to 2011 combined code from the 2008 to 2011 editions; rates computed by Franchise Consultants and Brokers. Download CSV

Losses: only the wider business and job category has dollar figures

Dollar losses exist only for the wider Business and Job Opportunities category, which is mostly job scams (80.7% of its 2024 reports). In 2024 that category had 126,217 fraud reports, 36% of them reported a loss, losses totalled $751 million and the median loss was $2,250 (Data Book 2024, US). Among the top 10 fraud categories in 2024, only Investment Related had a higher median loss ($9,196).

These figures do not describe franchise fraud. In 2024 the category held 104,946 job scam reports, 14,809 business and work-at-home reports, 6,283 pyramid and MLM reports and 355 invention promotion reports, against 3,858 franchise reports, which are excluded from the loss totals. Total reported losses rose from $47 million in 2017 to $751 million in 2024 in nominal dollars, a 16.0x increase. The Data Books do not split losses by subcategory, so the share tied to any one scheme type is unknown.

Figure 2Reported losses in Business and Job Opportunities fraud reports, US, 2017 to 2024 ($ millions)Franchise reports are not included in these totals
$0M$200M$400M$600M$800M$47M2017$116M2018$85M2019$168M2020$206M2021$367M2022$491M2023$751M2024
Source: FTC Consumer Sentinel Network Data Books 2017 to 2024, Top 10 Fraud Categories table (each year's own edition). Download data (CSV)
Table 3Business and Job Opportunities fraud reports and losses, and the reports left out of the fraud count, US, 2017 to 2024
YearBusiness and Job Opportunities fraud reportsReporting a loss (%)Total reported loss ($M)Median loss ($)All report types, same editionLeft out of fraud countFranchise subcategory, same edition
2,01718,70234471,063
2,01824,620421161,30425,068448450
2,01927,56939851,00028,6291,0601,066
2,02058,263381681,95059,131868876
2,021103,003252061,991104,0191,0161,017
2,02292,723323672,00095,3992,6762,678
2,023107,134324912,137110,3643,2303,232
2,024126,217367512,250130,0753,8583,858
Source: FTC Consumer Sentinel Network Data Books 2017 to 2024 (p.9 Top 10 Fraud Categories; Appendices B2 and B3). Gap column computed by Franchise Consultants and Brokers. Download CSV

Federal franchise fraud enforcement: mostly business opportunity schemes

Federal enforcement in this area targets business opportunity and money-making schemes far more often than franchisors. The FTC’s case listing for Franchises, Business Opportunities, and Investments held 132 items on 2026-10-06; 10 are statements or letters, leaving 113 enforcement matters once respondent pages that share a matter number are combined (FTC case listing). We coded 62 (54.9%) as business opportunity or money-making schemes (work-at-home, vending, coaching, e-commerce), 13 as investment or invention promotion, 8 as MLM or pyramid, 28 as other consumer protection matters and 2 (1.8%) as franchise sales cases.

GAO counted 11 franchise-related investigations and 1 enforcement action from July 2008 through 2022 (GAO-23-105338). The pace has changed since: the FTC announced Franchise Rule actions against Qargo Coffee in October 2024 (FTC), against Xponential Fitness in March 2026 (FTC) and against Premier Franchising Group and its former sales organization in October 2026 (FTC). That makes 4 Franchise Rule actions announced since July 2008. Each of the last three was announced as a settlement or proposed order, and the conduct described is the FTC’s allegation.

The 2025 to 2026 press releases show the same mix: 14 of 25 concern business opportunity schemes, 4 an investment training scheme and 2 franchisors (FTC press releases). In fiscal 2025 the FTC brought 40 actions against fraudulent schemes of all kinds, naming business opportunities first in its list (FTC testimony release).

Figure 3FTC enforcement matters tagged Franchises, Business Opportunities, and Investments, by type, US, 1989 to 2026 (n = 113)
Business opportunity or money-making62Other consumer protection28Investment or invention promotion13MLM or pyramid8Franchise Rule or franchise sales2
Source: FTC Cases and Proceedings listing (industry filter), accessed 2026-10-06; type coding by Franchise Consultants and Brokers. Download data (CSV)
Table 4FTC enforcement matters in the tagged listing by type and period first dated, US, 1989 to 2026
Period first datedFranchise Rule or franchise salesBusiness opportunity or money-makingMLM or pyramidInvestment or invention promotionOther consumer protectionTotal matters
1989-200701523222
2008-2012018011433
2013-20170633517
2018-202211436630
2023-20261900111
All years26281328113
Source: FTC Cases and Proceedings listing, accessed 2026-10-06; coding by Franchise Consultants and Brokers (scripts/ftc_codes.py). Download CSV

State enforcement: mostly registration and disclosure cases

State regulators act on franchise sales far more often than the FTC, and the records show mostly registration and disclosure failures. GAO’s review of five states found 196 enforcement actions against franchisors from 2019 through 2021: 59 for failing to provide an FDD and 72 for FDDs with untrue or omitted material facts, together 131 or 66.8% (GAO-23-105338).

Washington’s Department of Financial Institutions publishes every order with the statute it cites. From 2015 to 2024 it issued 177 orders under the Franchise Investment Protection Act and 24 under the Business Opportunity Fraud Act, 7.4 franchise orders for each business opportunity order (Washington DFI). About 76.8% of the franchise order summaries mention selling without registration, and about 22.6% mention fraud, misrepresentation or material facts; the two groups overlap.

California DFPI’s public index shows at least 157 franchise-related enforcement actions first dated 2004 to 2026 (DFPI Actions and Orders). The yearly count averaged 15.4 in 2021 to 2025, against 5.5 in 2015 to 2020. A state order against a franchisor usually concerns an unregistered offer or a disclosure failure, which is a compliance breach rather than proof of a scam.

Figure 4Washington DFI orders under the franchise and business opportunity statutes, 2015 to 20262026 covers January 1 to October 6
Franchise Investment Protection ActBusiness Opportunity Fraud Act07.51522.530962015172016155201713720182332019252020162021132022222023242024282025112026 (to Oct 6)
Source: Washington State Department of Financial Institutions, Division of Securities enforcement actions; classification by Franchise Consultants and Brokers. Download data (CSV)
Figure 5California DFPI franchise-related enforcement actions by year of initial action, 2015 to 2026Lower-bound counts; 2026 covers January 1 to October 6
06.212.518.825420156201652017620185201972020252021182022102023102024142025132026 (to Oct 6)
Source: California DFPI Actions and Orders public index; grouping by Franchise Consultants and Brokers. Download data (CSV)
Table 5Franchise and business opportunity enforcement in Washington and California, 2015 to 2026
YearWashington: Franchise Investment Protection Act ordersWashington: Business Opportunity Fraud Act ordersWashington: other Securities Division ordersCalifornia DFPI: franchise-related actions
201596874
2016171726
2017155585
2018137636
2019233665
2020250717
20211607025
20221314618
20232205410
20242416810
20252815714
2026 (to Oct 6)1103813
Source: Washington DFI enforcement actions; California DFPI Actions and Orders. Counts by Franchise Consultants and Brokers; 2026 is partial. Download CSV
A franchise agreement gets the same scrutiny as any contract: read the disclosure document before you sign or pay.
A franchise agreement gets the same scrutiny as any contract: read the disclosure document before you sign or pay.

Franchise or business opportunity? The legal tests

An offer is a franchise under federal law when three elements are present: a trademark, significant control or assistance, and a required payment. The franchisor must hand over the Franchise Disclosure Document at least 14 calendar days before the buyer signs or pays (16 CFR 436.1(h); 436.2). A business opportunity is different: the seller solicits you into a new business, you pay, and the seller promises locations, outlets, accounts or customers, or to buy back what you produce. Its disclosure is one page, due 7 calendar days before signing or paying (16 CFR 437.1(c); 437.2).

The FTC adjusts three Franchise Rule exemption thresholds every four years. Since 2024-07-12 they are $735 for minimum payments (previously $615), $1,469,600 for large investments (previously $1,233,000) and $7,348,000 net worth for large franchisees (previously $6,165,000) (16 CFR 436.8; FTC release). The Business Opportunity Rule’s franchise exemption still refers to payments of less than $500 (16 CFR 437.8); we note the wording without offering a legal reading.

Rule changes: in January 2025 the FTC proposed extending the Business Opportunity Rule to money-making opportunities such as coaching (FTC release). The rule appears on the FTC’s August 2026 regulatory agenda (Federal Register), but its sections were last amended on 2016-12-22 (eCFR history). eCFR shows a 2026-02-12 version of the form appendices that still displays the 2011 form, and we found no 2026 Federal Register rule amending part 437.

Table 6What makes an offer a franchise, a business opportunity, or exempt under federal rules, US, current as of 2026-10-06
Offer typeWhat brings it under the ruleDisclosure and timingDollar testCitation
Franchise (16 CFR 436)Trademark association, significant control or assistance, and a required paymentFranchise Disclosure Document at least 14 calendar days before signing or payingExempt if required payments in the first six months total less than $73516 CFR 436.1(h), 436.2, 436.8(a)(1)
Large-investment franchise (exempt)Initial investment of at least $1,469,600, excluding unimproved land and franchisor financingNo federal FDD required; buyer signs an acknowledgment$1,469,60016 CFR 436.8(a)(5)(i)
Large-franchisee sale (exempt)Buyer in business at least five years with net worth of at least $7,348,000No federal FDD required$7,348,00016 CFR 436.8(a)(5)(ii)
Other Franchise Rule exemptionsFractional franchise, leased department, petroleum (PMPA), insider buyers, no written documentNo federal FDD requiredNone16 CFR 436.8(a)(2) to (7)
Business opportunity (16 CFR 437)Seller solicits a new business, a required payment, and a promise of locations, outlets, accounts or customers, or a buy-backOne-page disclosure at least 7 calendar days before signing or payingNo minimum payment; inventory at bona fide wholesale prices is not a required payment16 CFR 437.1(c), 437.1(p), 437.2
Franchise that is exempt from part 436Business Opportunity Rule applies if exempt for minimum payment (text cites less than $500) or for having no written documentBusiness opportunity disclosure$500 in the text of 437.816 CFR 437.8
Source: 16 CFR parts 436 and 437 (eCFR, current text); FTC release of 2024-07-12 on thresholds. Download CSV

Red flags from FTC and state regulator guidance

Every item below comes from FTC or state regulator guidance, not from our judgment.

  • No disclosure document, or one handed over less than 14 days before you sign or pay (16 CFR 436.2; Wisconsin DFI).
  • Earnings figures given separately from the FDD; Wisconsin DFI says to treat them as suspect, and the FTC guide notes that franchisors usually do not let sales representatives make such claims unless they are in the disclosures (Wisconsin DFI; FTC buying guide).
  • Promises of income guarantees, large returns or a proven system (FTC consumer advice).
  • Ads such as no risk, guaranteed, quick and easy, or work from home (Wisconsin DFI).
  • Pressure to buy now or lose the chance; honest offers should still be good tomorrow (FTC; Wisconsin DFI).
  • An offer that is not registered in a state that requires franchise registration (Wisconsin DFI; Washington DFI).
  • Promises to supply locations, accounts or customers, a feature of business opportunities (16 CFR 437.1(c); Wisconsin DFI).
  • Litigation or bankruptcy history in FDD Items 3 and 4, or such history left out of the disclosure (FTC buying guide; Wisconsin DFI).
  • Glowing testimonials that cannot be checked, and an upsell for more coaching or services after you join (FTC).
  • A pitch that misstates likely earnings or presents a business opportunity as a job; both are prohibited practices under the Business Opportunity Rule (16 CFR 437.6(d) and (m)).
  • Broker earnings claims; the FTC guide advises talking to current and former franchisees rather than relying on a broker alone (FTC buying guide).

How to verify a franchise offer before you pay

Four checks against official sources, drawn from the rules and guidance above.

  1. Get the FDD and note the receipt date; the federal minimum is 14 calendar days before signing or paying (16 CFR 436.2). For a business opportunity, the one-page disclosure is due 7 days before (16 CFR 437.2).
  2. Check state registration where it applies: California’s franchise search and FRANSES system (DFPI) and Minnesota’s CARDS database (Minnesota Commerce). Washington requires registration before an offer (Washington DFI), and Wisconsin DFI asks buyers to contact its Division of Securities (Wisconsin DFI).
  3. Search state enforcement lists for the franchisor and its officers (California; Washington) and read FDD Items 3 and 4 for litigation and bankruptcy (FTC buying guide).
  4. Call current and former franchisees from FDD Item 20, and read any earnings claims only in Item 19 (FTC buying guide). Our Item 19 study covers what those disclosures contain.

To report a problem, the FTC takes reports at ReportFraud.ftc.gov, and its guidance also points to the attorney general in your state and in the seller’s state (FTC). A 2024 FTC policy statement says contract clauses that stop franchisees from reporting to the government are unlawful (FTC release). For background on the buying process see buying a franchise and franchise costs.

Original analysis: how we calculated it

Franchise complaint rate per 100,000 Sentinel reports

Formula
S(year) / T(year) x 100,000, same Data Book edition for both
Inputs
S2015 to S2024, T2015 to T2024
Result
16.8 (2021), 50.3 (2022), 59.6 (2024); 2022 is 3.0x 2021
Limitations
Unverified reports; editions revise counts; contributor mix changes over time

Growth in franchise subcategory reports

Formula
(S2024 / S2022 - 1) x 100; S2024 / S2012
Inputs
S2012, S2022, S2024
Result
+44.3% from 2022 to 2024; 7.8x 2012
Limitations
Cause of the 2022 step change is not stated by the FTC

Franchise reports left out of fraud loss tables

Formula
A(year) - LR(year), compared with SB(year)
Inputs
A2018 to A2024, LR2018 to LR2024, SB2018 to SB2024
Result
Gap within 8 reports of the franchise subcategory in every year; 3,858 vs 3,858 in 2024
Limitations
Consumers can choose more than one subcategory

Cross-check against GAO

Formula
S2018 + S2019 + S2020 + S2021 + S2022 vs G01
Inputs
S2018 to S2022, G01
Result
5,849 vs about 5,900
Limitations
GAO queried the live database; we summed published tables

How many franchise-category reports concern franchising

Formula
52 / 125 with a Wilson 95% interval; applied to S2024 for illustration
Inputs
G03, G04, S2024
Result
41.6% (33.3% to 50.4%); about 1,605 of 2024's reports (1,285 to 1,944)
Limitations
Assumes the 2018 to 2022 sample share still applies; illustrative only

FTC enforcement mix

Formula
Matters by hand-coded type / all matters
Inputs
F03 to F08
Result
Business opportunity 54.9%; business opportunity, MLM and investment 73.5%; franchise sales 1.8%
Limitations
FTC tag is incomplete; coding is ours (scripts/ftc_codes.py)

Franchise Rule actions since July 2008

Formula
GAO count to 2022 + FTC releases since
Inputs
G06, X09, X01, X04
Result
4 actions (2022, 2024, 2026, 2026)
Limitations
Closed investigations are not public

Franchise vs business opportunity enforcement in Washington

Formula
W01 / W02; W04 / W01; W05 / W01
Inputs
W01, W02, W04, W05
Result
7.4 franchise orders per business opportunity order; 76.8% mention registration; 22.6% mention fraud or misrepresentation
Limitations
One state; keyword matching on order summaries

California franchise actions, recent vs earlier

Formula
mean(CA2021..CA2025) vs mean(CA2015..CA2020)
Inputs
CA2015 to CA2025
Result
15.4 vs 5.5 actions a year
Limitations
Lower-bound counts from a search index

What the evidence shows

  1. Consumer Sentinel received 3,858 Franchises & Distributorships reports in 2024, up 44.3% from 2,673 in 2022 (US). FTC Consumer Sentinel Data Book 2024
  2. The same subcategory logged 1,027 reports in 2021 and 497 in 2012, its first full year as a separate code (US). FTC Data Books 2014 and 2023
  3. Franchise reports per 100,000 Sentinel reports rose from 16.8 in 2021 to 50.3 in 2022, a 3.0x jump, and reached 59.6 in 2024 (US). Our calculation from FTC Data Books 2023 and 2024
  4. The franchise subcategory is counted as an Other report type, so the FTC publishes no loss figures for it (US, 2017 to 2024 editions). FTC Data Book 2024, Appendix B3
  5. Business and Job Opportunities fraud reports, which exclude franchise reports, carried $751 million in reported losses and a $2,250 median loss in 2024 (US). FTC Data Book 2024
  6. GAO counted about 5,900 franchise-category complaints to the FTC from 2018 to 2022, under 1% of about 20 million complaints (US). GAO-23-105338
  7. In a GAO random sample of 125 of those complaints, 52 (42%) were related to franchising (US, 2018 to 2022). GAO-23-105338
  8. From July 2008 through 2022 the FTC opened 11 franchise-related investigations and took 1 enforcement action (US). GAO-23-105338
  9. Of 113 FTC enforcement matters tagged Franchises, Business Opportunities, and Investments (1989 to 2026), 62 target business opportunity or money-making schemes and 2 target franchise sales (US). FTC Cases and Proceedings, our coding
  10. Of 25 FTC press releases with the same tag from January 2025 to October 6, 2026, 14 concern business opportunity schemes and 2 concern franchisors (US). FTC press releases, our coding
  11. On 2026-03-18 the FTC announced a settlement with Xponential Fitness that includes $17 million to be returned to franchisees, which the FTC called the largest amount in a franchise case (US). FTC press release
  12. Five states reviewed by GAO took 196 enforcement actions against franchisors from 2019 through 2021, including 59 for failing to provide an FDD (US states). GAO-23-105338
  13. Washington DFI issued 177 Franchise Investment Protection Act orders and 24 Business Opportunity Fraud Act orders from 2015 to 2024 (Washington). Washington DFI enforcement actions
  14. California DFPI records show at least 157 franchise-related enforcement actions first dated 2004 to 2026, averaging 15.4 a year in 2021 to 2025 against 5.5 in 2015 to 2020 (California). California DFPI Actions and Orders, our grouping
  15. The Franchise Rule exempts sales where required payments in the first six months total less than $735, a threshold in force since 2024-07-12 (US). 16 CFR 436.8

What's new

As of October 6, 2026
  • 2026-10-06: the FTC reports page still lists the 2024 Data Book as the latest edition; a 2025 Data Book URL returned not found, so no 2025 subcategory count exists yet.
  • 2026-10-05: the FTC announced that a martial arts franchisor and its former franchise sales organization will pay $1.85 million to settle FTC allegations of deceptive claims and Franchise Rule violations.
  • 2026-08-14: the FTC regulatory agenda lists the Business Opportunity Rule (16 CFR 437) and a proposed Earnings Claims rule (16 CFR 462); the sections of part 437 were last amended on 2016-12-22, and we found no 2026 Federal Register rule amending part 437.
  • 2026-03: FTC testimony reported 3 million fraud reports and $15.9 billion in reported fraud losses for 2025, without subcategory detail.
  • 2026-03-18: the FTC announced a settlement with Xponential Fitness for alleged Franchise Rule violations, including $17 million to be returned to franchisees.
  • 2025-01 to 2026-10: 25 FTC press releases carried the Franchises, Business Opportunities, and Investments tag: 14 business opportunity, 4 investment training, 2 franchise, 1 MLM, 3 other and 1 rulemaking.
  • 2025: Washington issued 28 franchise-law orders and California DFPI recorded 14 franchise-related actions.

Questions people ask

How do I know if a franchise is a scam?

Check four things against official sources. Federal law requires the FDD at least 14 calendar days before you sign or pay (16 CFR 436.2). In registration states, confirm the offer is registered: California and Minnesota publish searchable records, Washington requires registration before an offer, and Wisconsin DFI says an unregistered sale is illegal. FTC and state guidance flag income guarantees, pressure to buy now, and earnings figures given outside the FDD. Read FDD Items 3 and 4 for litigation and bankruptcy, and call former franchisees listed in Item 20.

What is a business opportunity scam?

Under 16 CFR 437.1(c), a business opportunity is an offer to start a new business for a required payment where the seller promises locations, outlets, accounts or customers, or to buy back what you produce. The seller must give a one-page disclosure 7 days before you sign or pay, and may not misrepresent earnings, costs, assistance or the chance of finding customers (16 CFR 437.6). Schemes of this kind make up {F[‘by_code’][‘B’]} of {F[‘matters’]} FTC enforcement matters tagged to franchises and business opportunities (1989 to 2026, our coding).

Where do I report franchise fraud?

Report to the FTC at ReportFraud.ftc.gov, and to the attorney general or securities regulator in your state and in the seller’s state, as FTC guidance advises. A 2024 FTC policy statement says contract clauses that stop franchisees from reporting to the government are unlawful. GAO found in 2023 that franchise owners in 8 of 9 discussion groups had never filed a complaint with the FTC.

Are franchise brokers regulated?

Partly. The FTC Franchise Rule counts third-party brokers as franchise sellers (16 CFR 436.1(j)). Washington DFI runs a franchise broker filing system, and California’s broker registration law is not yet operational according to DFPI. State-by-state detail is in our franchise broker registration tracker.

What is the FTC Franchise Rule?

It is 16 CFR part 436, a pre-sale disclosure rule. A franchisor must give the Franchise Disclosure Document at least 14 calendar days before a buyer signs or pays. Sales are exempt if required payments in the first six months total less than $735, if the investment is at least $1,469,600, or if the buyer has a net worth of at least $7,348,000 and five years in business (thresholds since 2024-07-12). FTC staff estimate about 4,000 franchise sellers are covered (2026).

Frequently asked questions

How common is franchise fraud in the US?

No source measures it directly. Consumer Sentinel received 3,858 Franchises & Distributorships reports in 2024, against 6.47 million total Sentinel reports, and GAO found only 42% of sampled complaints in this category concerned franchising (2018 to 2022).

How many franchise complaints does the FTC receive each year?

The Data Books show 2,673 in 2022, 3,219 in 2023 and 3,858 in 2024 for the Franchises & Distributorships subcategory, up from 1,027 in 2021. GAO counted about 5,900 from 2018 to 2022.

How much money do people lose to franchise fraud?

The FTC publishes no loss figure for franchise reports because they are counted as Other reports. The wider Business and Job Opportunities category, which excludes them, reported $751 million in losses and a $2,250 median loss in 2024.

Has the FTC brought cases against franchisors?

Yes, but rarely. GAO found 1 franchise-related FTC enforcement action from July 2008 through 2022 (filed February 2022). The FTC announced further Franchise Rule actions in October 2024, March 2026 and October 2026, making 4 since July 2008.

What is the largest FTC franchise settlement?

On 2026-03-18 the FTC announced a settlement with Xponential Fitness for alleged Franchise Rule violations that includes $17 million to be returned to franchisees, which the FTC called the largest amount ever to go back to consumers in a franchise case.

Is a business opportunity the same as a franchise?

No. A franchise involves a trademark, significant control or assistance, and a required payment (16 CFR 436.1(h)). A business opportunity involves a promise of locations, accounts or customers, or a buy-back (16 CFR 437.1(c)). Disclosure is due 14 days before signing for a franchise and 7 days for a business opportunity.

What does the $735 franchise exemption mean?

Since 2024-07-12, the Franchise Rule does not apply if total required payments to the franchisor from before opening to six months after are less than $735 (16 CFR 436.8(a)(1)). The threshold was $615 before that date and is adjusted for inflation every four years.

How many days before signing must I receive the FDD?

At least 14 calendar days before you sign a binding agreement or make any payment (16 CFR 436.2(a)). Changes the franchisor makes on its own to the agreement must reach you at least 7 calendar days before you sign (16 CFR 436.2(b)).

Do states take action against franchise fraud?

Yes, more often than the FTC. Five states reviewed by GAO took 196 actions against franchisors from 2019 through 2021. Washington issued 177 franchise-law orders from 2015 to 2024, and California DFPI records show at least 157 franchise-related actions since 2004.

Is there 2025 data on franchise complaints?

Not yet at subcategory level. As of 2026-10-06 the FTC had not posted a 2025 Data Book. FTC testimony in March 2026 reported 3 million fraud reports and $15.9 billion in losses for 2025 overall.

For journalists

Most quotable statistics

If you cite only a few, cite these

  • 3,858 Franchises & Distributorships reports in 2024, up from 2,673 in 2022, with no loss data (FTC Data Book 2024). source
  • 52 of 125 sampled franchise-category complaints concerned franchising, 2018 to 2022 (GAO-23-105338). source
  • 62 of 113 tagged FTC matters target business opportunity schemes; 2 target franchise sales (FTC listing, our coding). source
Press summary and suggested headlines

Reports to the FTC about franchises and distributorships rose 44.3% between 2022 and 2024, to 3,858, according to an evidence review of 17 Consumer Sentinel Data Books by Franchise Consultants and Brokers. Measured per 100,000 Sentinel reports, the rate roughly tripled in 2022 and has stayed high. The FTC records no dollar losses for this subcategory because it counts it as an Other report, and a GAO audit found that only 52 of 125 sampled complaints in the category were about franchising. Enforcement records tell a different story from the complaint counts: of 113 FTC matters tagged to franchises, business opportunities and investments, 62 target business opportunity and money-making schemes and 2 target franchise sales. The FTC has announced 4 Franchise Rule actions since July 2008, including a $17 million settlement in March 2026. State regulators act more often: Washington issued 177 franchise-law orders from 2015 to 2024, most about registration. The 2025 Data Book had not been posted as of October 6, 2026.

Suggested headlines

  • FTC franchise complaints up 44.3% in two years, but the agency tracks no losses for them
  • GAO: fewer than half of franchise complaints to the FTC are about franchising
  • Business opportunity schemes, not franchisors, make up 62 of 113 cases in the FTC's franchise and business opportunity list
  • Four Franchise Rule actions since 2008, three of them since October 2024
  • Washington issued 7.4 franchise-law orders for every business opportunity order from 2015 to 2024

Methodology

Sources and selection. We used only primary records: 17 FTC Consumer Sentinel Network Data Books (2008 to 2024 editions), GAO-23-105338, the FTC Cases and Proceedings listing filtered to the industry Franchises, Business Opportunities, and Investments (132 items on 2026-10-06), FTC press releases with the same tag, the Federal Register and eCFR, Washington DFI enforcement orders (2003 to 2026) and the California DFPI Actions and Orders index. Consumer and state guidance came only from the FTC and state regulators. Every source was opened on 2026-10-06; eCFR text was read through eCFR’s official API because its web pages block automated access.

Extraction. Data Books from 2017 on are Tableau PDFs that pdftotext garbles, so we rebuilt table lines from word coordinates with PyMuPDF; 2008 to 2016 editions were read with pdftotext. Where editions disagree about the same year (they revise counts as contributors add data), we used the most recent edition that reports the year, and we list the edition in the table. Loss figures come from each year’s own edition.

Coding. We coded each FTC matter by type from its title, summary and press-release headlines, combined respondent pages that share a matter number and date, and excluded letters and statements. Washington orders were classified by the statute named; for years before 2025 we matched the order summary text. California actions were taken from DFPI’s public search index (pages tagged Franchise Investment Law or containing the word franchise) and grouped by initial-action date and party list, so the counts are lower bounds. Only aggregate counts are published; specific actions are described only in the agency’s own terms.

Derived metrics. Rates per 100,000 reports, growth rates, the fraud-count gap, the GAO cross-check and the Wilson interval are in derived.csv with formulas and fact-sheet inputs; every script is in the scripts folder.

Limits. Complaint counts are unverified and depend on who reports; the franchise subcategory includes distributorships and post-sale disputes and has no loss data; FTC industry tags are incomplete; state enforcement reflects registration regimes that exist in only some states. None of these sources measures the share of franchise buyers who are defrauded. This review is not legal advice. Last updated 2026-10-06.

Sources and source quality

Tier 1: primary and government sources (52)

  1. Consumer Sentinel Network Reports (Data Book index; no 2025 edition listed), Federal Trade Commission (accessed 2026-10-06)
  2. Consumer Sentinel Network Data Book 2008, Federal Trade Commission (accessed 2026-10-06)
  3. Consumer Sentinel Network Data Book 2009, Federal Trade Commission (accessed 2026-10-06)
  4. Consumer Sentinel Network Data Book 2010, Federal Trade Commission (accessed 2026-10-06)
  5. Consumer Sentinel Network Data Book 2011, Federal Trade Commission (accessed 2026-10-06)
  6. Consumer Sentinel Network Data Book 2012, Federal Trade Commission (accessed 2026-10-06)
  7. Consumer Sentinel Network Data Book 2013, Federal Trade Commission (accessed 2026-10-06)
  8. Consumer Sentinel Network Data Book 2014, Federal Trade Commission (accessed 2026-10-06)
  9. Consumer Sentinel Network Data Book 2015, Federal Trade Commission (accessed 2026-10-06)
  10. Consumer Sentinel Network Data Book 2016, Federal Trade Commission (accessed 2026-10-06)
  11. Consumer Sentinel Network Data Book 2017, Federal Trade Commission (accessed 2026-10-06)
  12. Consumer Sentinel Network Data Book 2018, Federal Trade Commission (accessed 2026-10-06)
  13. Consumer Sentinel Network Data Book 2019, Federal Trade Commission (accessed 2026-10-06)
  14. Consumer Sentinel Network Data Book 2020, Federal Trade Commission (accessed 2026-10-06)
  15. Consumer Sentinel Network Data Book 2021, Federal Trade Commission (accessed 2026-10-06)
  16. Consumer Sentinel Network Data Book 2022, Federal Trade Commission (accessed 2026-10-06)
  17. Consumer Sentinel Network Data Book 2023, Federal Trade Commission (accessed 2026-10-06)
  18. Consumer Sentinel Network Data Book 2024, Federal Trade Commission (accessed 2026-10-06)
  19. Prepared Statement of the FTC: The Rising Scam Economy (Joint Economic Committee, March 2026), Federal Trade Commission (accessed 2026-10-06)
  20. FTC Testifies before the Joint Economic Committee on Agency's Efforts to Combat Fraud, Federal Trade Commission (accessed 2026-10-06)
  21. GAO-23-105338: FTC Actions Needed to Improve Education Efforts and Awareness of Complaint Process for Franchise Owners (April 2023), U.S. Government Accountability Office (accessed 2026-10-06)
  22. Issue Spotlight: Risks to Small Business Success in Franchising, Federal Trade Commission (accessed 2026-10-06)
  23. Cases and Proceedings filtered to Franchises, Business Opportunities, and Investments, Federal Trade Commission (accessed 2026-10-06)
  24. Franchises, Business Opportunities, and Investments: press releases, Federal Trade Commission (accessed 2026-10-06)
  25. FTC Secures Settlement Against Xponential Fitness for Franchise Rule Violations (2026-03-18), Federal Trade Commission (accessed 2026-10-06)
  26. Premier Martial Arts Franchisor and its Former Franchise Sales Organization Settle FTC Charges (2026-10-05), Federal Trade Commission (accessed 2026-10-06)
  27. FTC Takes Action Against Qargo Coffee for Franchise Rule Violations (2024-10-16), Federal Trade Commission (accessed 2026-10-06)
  28. FTC Proposes Rule Changes and New Rule to Deter Deceptive Earnings Claims (2025-01-13), Federal Trade Commission (accessed 2026-10-06)
  29. FTC Publishes Inflation-Adjusted Monetary Thresholds for Three Exemptions in Franchise Rule (2024-07-12), Federal Trade Commission (accessed 2026-10-06)
  30. FTC Takes Action to Ensure Franchisees' Complaints are Heard and to Protect Against Illegal Fees (2024-07-12), Federal Trade Commission (accessed 2026-10-06)
  31. 16 CFR 436.1 Definitions (Franchise Rule), eCFR, Office of the Federal Register (accessed 2026-10-06)
  32. 16 CFR 436.2 Obligation to furnish documents, eCFR, Office of the Federal Register (accessed 2026-10-06)
  33. 16 CFR 436.8 Exemptions, eCFR, Office of the Federal Register (accessed 2026-10-06)
  34. 16 CFR 437.1 Definitions (Business Opportunity Rule), eCFR, Office of the Federal Register (accessed 2026-10-06)
  35. 16 CFR 437.2 The obligation to furnish written documents, eCFR, Office of the Federal Register (accessed 2026-10-06)
  36. 16 CFR 437.3 The disclosure document, eCFR, Office of the Federal Register (accessed 2026-10-06)
  37. 16 CFR 437.6 Other prohibited practices, eCFR, Office of the Federal Register (accessed 2026-10-06)
  38. 16 CFR 437.8 Franchise exemption, eCFR, Office of the Federal Register (accessed 2026-10-06)
  39. eCFR version history, 16 CFR part 437, eCFR, Office of the Federal Register (accessed 2026-10-06)
  40. FTC Regulatory Agenda, 91 FR (2026-08-14), FR Doc. 2026-16617, Federal Register (GovInfo) (accessed 2026-10-06)
  41. Franchise Rule information collection, 91 FR 24235 (2026-05-05), Federal Register (GovInfo) (accessed 2026-10-06)
  42. Business Opportunity Rule information collection, FR Doc. 2023-16454 (2023-08-02), Federal Register (GovInfo) (accessed 2026-10-06)
  43. A Consumer's Guide to Buying a Franchise (September 2020), Federal Trade Commission (accessed 2026-10-06)
  44. When a Business Offer or Coaching Program Is a Scam (August 2022), Federal Trade Commission (accessed 2026-10-06)
  45. ReportFraud.ftc.gov, Federal Trade Commission (accessed 2026-10-06)
  46. Avoiding Franchise Investment Fraud, Wisconsin Department of Financial Institutions (accessed 2026-10-06)
  47. Franchises & Franchise Brokers, California Department of Financial Protection and Innovation (accessed 2026-10-06)
  48. Actions and Orders (public search index), California Department of Financial Protection and Innovation (accessed 2026-10-06)
  49. Division of Securities Enforcement Actions (2025 and later), Washington State Department of Financial Institutions (accessed 2026-10-06)
  50. Division of Securities Enforcement Actions by year (2003 to 2024 pages), Washington State Department of Financial Institutions (accessed 2026-10-06)
  51. Franchises (registration under RCW 19.100), Washington State Department of Financial Institutions (accessed 2026-10-06)
  52. CARDS: Franchise Registrations search, Minnesota Department of Commerce (accessed 2026-10-06)

How to cite and reuse

Franchise Consultants and Brokers Editorial Team. "Franchise Fraud in the US: What Complaint and Enforcement Records Show." Franchise Consultants and Brokers, updated October 6, 2026. https://franchiseconsultantsandbrokers.com/research/franchise-fraud/

The data tables and charts on this page are licensed under CC BY 4.0. Please credit “Franchise Consultants and Brokers, franchiseconsultantsandbrokers.com” with a link to this page.

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