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

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.

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.

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.

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).

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.

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.

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.