First, a negative you can rely on

Any page telling you the Foreign Affairs Manual has franchise rules is wrong. Search 9 FAM 402.9 for “franchise,” “franchisor,” or “franchisee” and you will find nothing. The same is true of the regulation.

Good news and bad. A franchise is not disfavored. But the franchisor’s brand does nothing for you at the consulate. Your petition has to prove what any other E-2 petition proves: capital at risk and irrevocably committed, a real and active enterprise, an investment substantial in proportion to the cost, a business that is not marginal, and your own development and direction of it. See The Nine E-2 Requirements.

What a franchise is, legally

Under the FTC Franchise Rule, 16 C.F.R. § 436.1(h), three elements have to be present: the right to operate a business identified with the franchisor’s trademark, or to sell goods or services associated with it; significant control or significant assistance from the franchisor over your method of operation; and a required payment as a condition of obtaining or commencing the franchise.

The disclosure clock, and why a visa deadline is no reason to compress it

Fourteen calendar days. Under § 436.2(a), the franchisor must give you the current disclosure document at least fourteen calendar days before you sign any binding agreement with, or make any payment to, the franchisor or an affiliate.

Seven calendar days for a revised agreement, under § 436.2(b), where the franchisor unilaterally and materially alters the basic franchise or related agreements. Changes arising from negotiations you initiated do not trigger it, which matters if you are negotiating terms through counsel.

Do not let a broker compress those periods because your visa timeline is tight. The clock is a federal requirement, and a rushed signature is exactly what produces the deal terms that break a petition.

Which Items carry which part of the petition

Item 7 is not the denominator

This is the most common mistake in franchise E-2 filings.

Item 7 is the franchisor’s estimated initial investment, published as a range. The E-2 denominator for a new business is “the actual cost needed to establish such a business to the point of being operational,” proved by invoices, contracts, appraisals, and audits. Item 7 corroborates that figure. It does not substitute for it.

An officer comparing your claimed investment against an Item 7 range you never tracked with real invoices is an officer writing a request for evidence.

Item 19 is optional, and that is a real problem

The Franchise Rule permits a franchisor to make financial performance representations. It does not require them. A franchisor that declines has to say so in the FDD, in words to the effect that it makes no representations about future or past financial performance and does not authorize its representatives to make them.

Where a substantive Item 19 exists, you have franchisor-substantiated unit economics, which is far stronger support for a five-year marginality projection than a self-serving pro forma. You are also entitled under § 436.9(d) to request the franchisor’s written substantiation for it, and that substantiation makes excellent supporting evidence.

Where Item 19 is blank, you build the projection from other sources: Item 7 ranges, Item 20 outlet and closure data, comparable-market analysis, and interviews with existing franchisees whose contact details Item 20 requires the franchisor to disclose.

Where franchise law and immigration law collide

If an earnings claim is not in Item 19, it does not go in your business plan.

Under § 436.9(c), a franchise seller may not disseminate a financial performance representation unless the franchisor has a reasonable basis and written substantiation at the time it is made and the representation appears in Item 19. Under § 436.9(a), no claim may contradict the required disclosures. And under § 436.9(h), a franchisor cannot make you waive reliance on the disclosure document.

So when a broker tells you verbally what “a typical unit earns” for a system whose Item 19 is blank, that statement is very likely a Franchise Rule violation by the seller. It is also radioactive as immigration evidence. Building a marginality projection on it puts an unsubstantiated third-party earnings claim in front of a consular officer, in a document you signed.

I have seen the request for evidence that results. A client’s business plan projected $410,000 in year-three revenue, a figure his broker had given him over coffee and which appeared nowhere in the FDD. The officer asked for the source. There was no source. Rebuilding the projection from Item 20 closure data and three franchisee interviews took six weeks and produced a lower number that held up.

That collision is why the franchise review and the petition should be done by the same office.

Where you have to register, and where you do not

Texas is not a franchise registration state. It regulates through the Business Opportunity Act, Tex. Bus. & Com. Code ch. 51, and franchises are exempt under § 51.003(b)(8) if the franchisor materially complies with the FTC Rule and files a short notice with the Secretary of State before offering or selling. No state agency reviews or registers the FDD, and there is no pre-sale approval.

Illinois is a registration state. Under the Illinois Franchise Disclosure Act of 1987, 815 ILCS 705/10, a franchisor may not sell or offer a franchise in Illinois to an Illinois-domiciled franchisee, or where the offer is made or accepted in Illinois and the business will be located there, unless it has registered with the Administrator. Registration becomes effective on the twenty-first day after filing absent a denial, and franchisors must file annually, no later than one business day before expiration, which falls 120 days after the franchisor’s fiscal year end.

Confirm the franchisor’s registration status in the state where you will operate. A franchisor that cannot lawfully sell to you in Illinois is not a timing problem you can negotiate around.

What is new

The FTC’s inflation-adjusted exemption thresholds rose on July 12, 2024: the minimum payment exemption to $735, the large franchise investment exemption to $1,469,600, and the large franchisee exemption to $7,348,000. The same day, the FTC issued a policy statement on franchisor contract provisions and staff guidance stating that franchisors cannot lawfully impose and collect fees that were not previously disclosed.

And on March 18, 2026, the FTC secured a stipulated order against Xponential Fitness with $17 million in consumer redress, which the agency described as the most redress in its history for an alleged Franchise Rule violation. The allegations included misrepresenting how long studios took to open, failing to disclose material litigation and bankruptcy involving executives, and misreporting information about franchisees whose studios had ceased operating.

Every one of those categories is something an E-2 applicant would have relied on in a business plan.

One thing nobody can tell you

No government agency publishes data on how many E-2 visas involve franchise investments. The State Department reports E-2 issuances only by nationality and post, and no franchise regulator tracks purchaser immigration status. Any specific figure you encounter on this point is an estimate, not a statistic.

Send us the FDD before the fourteen days run. We read it for the franchise terms and for what the petition will need from it. Those are two different reviews, and most buyers get them from two different offices, or from none. Call or text 512.761.8479.

Read next: Buying an Existing Business on an E-2 · How Much Do You Have to Invest · The Nine E-2 Requirements

My franchise practice spans Texas and Illinois, and the two states sit at nearly opposite ends of American franchise regulation. First-time franchisors expanding from one into the other are routinely surprised by how different the rules are, so this comparison earns its own post.

Illinois is a registration state. Under the Illinois Franchise Disclosure Act, a franchisor generally must register its franchise disclosure document with the Illinois Attorney General’s office before offering or selling franchises in Illinois, and must keep that registration current through annual renewals and amendment filings. The Act also reaches into the relationship itself: as of this writing, it requires good cause to terminate a franchise, imposes limits around nonrenewal, and voids waivers of its protections, so a franchise agreement cannot simply contract around Illinois law for an Illinois franchisee, no matter what the choice-of-law clause says.

Texas takes the opposite approach. There is no franchise registration requirement; a franchisor complying with the federal FTC Franchise Rule generally files a one-time business opportunity exemption notice with the Texas Secretary of State, and from there the relationship is governed primarily by the contract and the federal disclosure rules. That freedom cuts both ways. Texas franchisees enjoy far fewer statutory protections, which means the agreement itself is nearly the whole ballgame, and the pre-signing review discussed earlier in this section matters even more on the Texas side of the border.

The map matters as much as the paperwork. Offer a franchise in a registration state without a current registration and every sale there is a violation, with rescission and enforcement exposure to match. A Texas franchisor selling into Illinois, or an Illinois franchisor selling into Texas, needs a state-by-state compliance check before the first offer is ever made. Because I practice in both states, I run that check in both directions.

Franchising from Texas into Illinois, or from Illinois into Texas? Run the compliance check in both directions before the first offer. Call or text 512.761.8479.

Your concept works. Customers ask about opening one in their town. Franchising can be the way to grow with other people’s capital and energy, but the moment you sell the right to operate under your brand, you step into a regulated world with disclosure obligations and documentation requirements that surprise most first-time franchisors.

Building a franchise system properly means more than one document. It requires the structure and disclosure package the process demands, plus the broader legal framework around it: the entity structure that holds the brand, the trademark protection that makes the brand worth licensing, the operations standards that keep quality consistent, and contracts that anticipate how relationships end as well as how they begin. It also requires knowing where you may sell, because several states require a franchisor to register before offering franchises there, and the differences between Texas and Illinois on this point are large enough that I compare them in the next post.

Because I also handle general business, contract, and litigation work, I can support that whole framework. When disputes arise between franchisees and franchisors over fees, territory, compliance, or termination, I draw on both franchise knowledge and litigation experience to pursue or defend a claim. Subject to limitations arising from conflicts or potential conflicts, my firm may advise on both sides of the franchise relationship, which means I know where the pressure points are before they become your problem.

If customers keep asking to open one in their town, let’s talk about whether franchising fits and what building the system properly requires. Call or text 512.761.8479.

Buying a franchise means signing two of the longest documents most people will ever encounter: the Franchise Disclosure Document and the franchise agreement. The FDD discloses the franchise system’s fees, litigation history, obligations, financial performance representations, and more. It exists because regulators decided buyers deserve the full picture, but the picture only helps if you actually study it.

These are standardized documents drafted to favor the franchisor. The fees section rarely ends at the initial fee: royalties, advertising-fund contributions, technology fees, and required purchases add up. Territory provisions decide whether the brand can open a competing unit across the street. Renewal and termination terms decide what happens to the business you spent a decade building. Personal guarantees and non-competes decide what happens to you.

An attorney review before you commit will not turn a bad franchise into a good one, but it will make sure you understand the fees, obligations, territory, renewal and termination terms, and restrictions you are agreeing to, and it can flag terms worth negotiating while you still have leverage. Understanding the documents before you sign prevents expensive surprises after. It is the cheapest insurance in franchising.

Before you sign that FDD, have it reviewed while you still have leverage. Call or text 512.761.8479.