Final answer:
The FTC requires franchisors to provide prospective franchisees with a franchise disclosure document at least 14 business days prior to signing a contract or making any payments. They also require franchisors to disclose any litigation the company has been involved in. Franchisors are not specifically required to provide earnings information or disclose how many franchisees have gone out of business.
Step-by-step explanation:
The Federal Trade Commission (FTC) requires franchisors to provide prospective franchisees with a franchise disclosure document at least 14 business days prior to signing a contract or making any payment. This document contains important information about the franchisor, including details about the business model, fees, and obligations.
Additionally, the FTC requires franchisors to disclose any litigation the company has been involved in. This ensures that prospective franchisees are aware of any legal issues that may affect the franchise's reputation or success.
Franchisors are not specifically required to provide earnings information on the company. However, the franchise disclosure document may include information about the potential earnings or financial performance of the franchise, but this information is typically presented as historical data or estimates, rather than guarantees.
Finally, franchisors are not required by the FTC to disclose how many franchisees have gone out of business in the prior five years. However, this information may be available through the franchise disclosure document or by conducting research on the franchisor's track record.