What is an earnings claim in franchising?

In practice

Earnings claims rarely arrive labelled. They appear as a salesperson's remark about what owners 'usually take home', a spreadsheet of sample results emailed after a call, or a payback chart on a trade-show stand. Under the US FTC Franchise Rule, a representation counts whether it is made expressly or by implication, and whether it concerns sales, income, gross profits or net profits. A common mistake is keeping no record: saving emails and noting verbal claims with dates lets you compare them with the disclosure document later.

Not to be confused with

An earnings claim is the statement; Item 19 is the only section of a US FDD where the franchisor may make one. The claim can come from any franchise seller, which under the US rule includes employees, agents and third-party brokers. It also differs from unit economics, which is your own analysis rather than a representation made to you.

What to check before you sign

• Did every income figure you were shown, in calls, emails, slide decks or webinars, also appear in the disclosure document?
• Does any questionnaire or agreement ask you to confirm you received no earnings claims, and would that statement actually be true?
• Outside the US, what does local franchise or consumer protection law say about projected earnings given before you sign?

Questions to raise with the franchisor and your own adviser — general information, not legal advice. Rules differ by country.

Related terms