Seven Days, and a Document, Before Any Money Moves

What the Rule Covers

Not every pitch for paid work falls under the Business Opportunity Rule. The Federal Trade Commission's regulation at 16 CFR Part 437 defines a covered "business opportunity" as an arrangement in which the seller: solicits a prospective buyer to enter a business, the buyer makes a required payment, and the seller — or an affiliated person — makes an earnings claim, promises to buy back goods, provides outlets or accounts for the buyer's goods or services, or promises to provide locations where the buyer can operate. Hit those conditions and the Rule applies, regardless of whether the seller calls the product a "system," a "license," a "kit," or something else entirely.

The Rule was amended and restated by the Commission in 2011, tightening a framework that had previously applied only to specific franchise and business-opportunity categories. The revised rule replaced a lengthy disclosure document with a single, standardised one-page form — a deliberate choice to make comparison easier and evasion harder.

The Seven-Day Clock and What the Document Must Say

The mechanism is straightforward, and that is the point. At least seven calendar days before a prospective buyer signs any contract or makes any payment, the seller must hand over the disclosure document in the Commission's prescribed format. The cooling-off period is not waivable by either party. No urgency pitch, no "limited-time" framing, and no verbal assurance substitutes for the written form delivered on time.

The disclosure document itself must contain specific items. The seller's identifying information comes first — legal name, principal business address, telephone number, and any website. The Rule then requires the seller to disclose whether it, or any of its key personnel, has been the subject of any civil or criminal legal action involving misrepresentation, fraud, securities law violations, or unfair or deceptive business practices in the previous ten years. That litigation history must be listed in full, not summarised.

If the seller makes any earnings claim — an express or implied representation about what a buyer can expect to earn — that claim must appear on the disclosure form and be substantiated. The Rule requires the seller to state the time period on which the claim is based, the beginning and ending dates of the period, the number and percentage of buyers who achieved that result, and to note whether the figures relate to buyers in general or a specific subset. An earnings claim attached to the form without that context is itself a violation.

The seller must also list references: at least ten purchasers from the most recent period who are geographically closest to the prospective buyer, along with contact information, so the buyer can speak with people already inside the arrangement. If fewer than ten prior purchasers exist, all of them must be listed. And if the seller is offering any refund or cancellation policy, its complete terms must appear on the form.

Why the Structure Matters

The Rule's architecture addresses a specific problem documented in the Commission's rulemaking record: sellers of business opportunities routinely used high-pressure sales environments — live events, hotel meetings, limited-time offers — to compress the decision window to hours or minutes. The seven-day wait is a structural counter to that compression. It gives the prospective buyer time to contact the listed references, check the litigation history, and verify any earnings figures before money moves.

Sellers who violate the Rule expose themselves to civil penalties under Section 5 of the FTC Act. The Commission has used the Rule as a predicate in enforcement actions against schemes that, on their face, appeared to be legitimate training programs or licensing arrangements — MOBE and Digital Altitude being among the more prominent examples, where the absence of compliant disclosures formed part of the Commission's case alongside substantive fraud allegations.

The Rule does not cover franchises — those remain under the separate FTC Franchise Rule — nor does it cover securities, employment arrangements, or genuine licensing of intellectual property. What it covers, it covers precisely: the moment a seller asks for money in exchange for a promised earning opportunity, the clock starts, and the document has to be in the buyer's hands first.