The FTC Rule was created and adopted in the mid-1970s to meet the needs of the states that required disclosure on the part of the franchisor. Essentially, it requires that franchisors furnish prospective franchisees with very specific information about themselves, the business, and the terms of the franchise relationship. A franchisor's Uniform Franchise Offering Circular (UFOC) provides vital and legally required information about the franchisor and its franchising program.

In addition to providing a format for disclosure (although one not as comprehensive as the UFOC), the FTC Rule defined the type of business relationship that is considered a franchise and exempts, among others, such relationships as membership in retail-owned cooperatives and the granting of single-trademark licenses.

The federal government's attempt to regulate franchising activity with the FTC Rule did not diminish the states' authority to do so, and was in fact stated to be a minimum standard on which states could add additional protection as they saw fit. The FTC Rule allows franchisors to comply with the Uniform Franchise Offering Circular in lieu of the FTC format document. The penalties for failing to comply with the FTC Rule are severe.