Item 2 of the Franchise Disclosure Document (“FDD”) discloses the business experience of the individuals who manage the franchise system and the sale and operation of its franchises. Prospective franchisees use Item 2 to understand who is leading the system they are considering joining. The disclosure must therefore be accurate, complete, and current.
What Item 2 Requires
Under the FTC Franchise Rule, Item 2 requires disclosure of the franchisor’s:
- directors, trustees, and general partners;
- principal officers; and
- any other individuals who have management responsibility relating to the sale or operation of the franchises offered by the FDD.
For each individual, Item 2 discloses:
- the individual’s name and position with the franchisor; and
- their principal positions and employers during the past five years, including the starting and ending date and location of each position.
Item 2 is limited to this information. Narrative biographies, educational background, and promotional descriptions don’t belong in Item 2, and state examiners commonly ask that they be removed.
Whose Business Experience Must Be Disclosed
The standard is management responsibility relating to the sale or operation of franchises. Item 2 covers individuals who have that responsibility and individuals who will have it. Principal officers include the chief executive and chief operating officers, and the officers responsible for finance, franchise sales and marketing, training, and franchisee service.
Disclosure depends on an individual’s actual responsibilities, not their title. It also does not depend on which entity employs them. An individual with management responsibility must be disclosed whether employed by the franchisor, an affiliate, or a parent company.
According to the FTC’s Franchise Rule Compliance Guide, an individual’s business experience should be disclosed if their involvement in sales or operations is such that a prospective franchisee would rely on their expertise, formulation of policy, or control of the system in making an investment decision. Not every manager meets this standard. Typically, the franchisor’s leaders of franchise development, franchisee training and field support, and franchise operations do.
Franchise Brokers and Referral Sources
The FTC Franchise Rule does not require Item 2 disclosure of the business experience of franchise brokers. A broker or referral source who introduces candidates to a franchise system generally is not an Item 2 individual. Brokers involved in a sale must still be identified as franchise sellers on the FDD receipt page, and certain states require brokers to register before selling.
Franchise Sales Organizations and Outside Salespeople
Many franchisors engage outside franchise sales organizations (“FSOs”) and outside salespeople to perform franchise sales functions. The management-responsibility standard applies to them in the same way it applies to anyone else.
Some FSOs and outside salespeople go beyond lead generation and referral and take on the franchisor’s sales function. They may manage the sales process, serve as the candidate’s primary point of contact, deliver sales presentations, conduct discovery or confirmation days, or influence which candidates move forward. When that happens, their personnel may have management responsibility relating to the sale of franchises, and Item 2 disclosure may be required. The analysis turns on how the relationship operates in practice, not on titles or how the relationship is described.
FTC Enforcement Involving a Franchise Sales Organization
On October 5, 2026, the Federal Trade Commission announced proposed settlements with a franchisor and its former franchise sales organization. This has been reported as the first FTC enforcement action against an outside franchise sales organization under the Franchise Rule.
Among other things, the FTC alleged that the FSO’s personnel had management roles in marketing and selling the franchise, and that the franchisor failed to disclose them as required by the Franchise Rule. The FTC also alleged that financial performance and operating claims were made outside the FDD. These included claims about semi-absentee ownership and limited time commitment.
The action applies the existing management-responsibility standard to an FSO whose role went beyond introducing candidates. Franchisors that rely on an FSO or outside salespeople to manage or lead their franchise sales process should evaluate, with their franchise attorney, whether those individuals should be disclosed in Item 2.
Related Disclosures
Item 2 disclosure has consequences elsewhere in the FDD:
- Items 3 and 4. Individuals disclosed in Item 2 are subject to the litigation and bankruptcy disclosures in Items 3 and 4. This includes matters arising from their prior employers or other franchise systems. Franchisors typically obtain signed written questionnaires or certifications from Item 2 individuals before disclosure and before each renewal.
- Receipt page. Franchise sellers involved in a sale must be identified on the FDD receipt page, whether or not they are disclosed in Item 2.
Keeping Item 2 Current
Item 2 must reflect the franchisor’s current management team. Hiring, departures, title changes, changes in responsibility, and new FSO relationships may require an FDD amendment. Franchisors commonly maintain an internal roster of individuals who qualify for Item 2 disclosure and review it whenever personnel or sales relationships change.
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