What Is Item 18 in an FDD? Public Figures

Item 18 — Public Figures is the shortest item in most Franchise Disclosure Documents. For the majority of brands it consists of a single sentence: the franchisor does not use any public figure to promote the franchise. When Item 18 is used, it is one of the most visible items in the document — disclosing celebrity endorsements, athlete spokespeople, and the occasional founder-as-public-figure arrangement.

What Item 18 requires

The FTC Franchise Rule at 16 CFR §436.5(r) requires the franchisor to disclose any compensation or other benefit given or promised to a public figure in return for either (1) the use of the public figure in the name or symbol of the franchise, or (2) an endorsement or recommendation of the franchise to prospective franchisees. Specifically, the disclosure must include:

• The nature, extent, and duration of the public figure's promotion or endorsement of the franchise.
• The total investment the public figure has made in the franchisor or any of its affiliates, if any.
• The compensation or other benefit given or promised to the public figure.
• Any management role the public figure has in the franchisor's organization.

A "public figure" under the rule means a person whose name or physical appearance is generally known to the public in the geographic area where the franchise will be located. The category covers entertainers, professional athletes, business celebrities, and political figures, but does not generally include the franchisor's own founders or executives unless their personal celebrity is being used in marketing distinct from their corporate role.

If the franchisor does not use any public figure, Item 18 must say so explicitly with a "Not Applicable" disclosure, often phrased: "We do not use any public figures to promote our franchise."

What it actually tells you

For most franchise brands, Item 18 is "Not Applicable" and the disclosure ends there. The interesting cases are the minority where a public figure is involved.

When a public figure is used

The franchisor must disclose four categories of facts:

1. The relationship. Is the public figure an endorser appearing in marketing materials? A licensed name on a product line? A founder of the underlying brand who continues to be a public face? An investor in the franchisor with a passive role? Each pattern carries different commercial and legal weight.

2. The compensation. Item 18 must quantify what the public figure receives. Common structures:

   • Flat licensing fee for use of name and likeness.
   • Per-unit royalty paid to the public figure or to a licensing entity.
   • Equity in the franchisor (sometimes substantial).
   • Performance-based compensation tied to system growth or revenue.
   • Use of franchise units or product as in-kind compensation.

3. The duration and termination. How long is the public figure contractually obligated to promote the franchise, and what happens to the brand if the relationship ends? An athlete endorsing a chain for a fixed three-year term has a different effect on brand identity than a founder whose name is the brand.

4. Any management role. If the public figure has board observer rights, an advisory-board seat, or operational involvement, Item 18 must disclose it. A figure who is purely a paid endorser is different from one with governance influence.

Founder-celebrity cases

Some franchises are built around a founder whose personal celebrity is part of the brand. In these cases the founder is typically also disclosed in Item 2 (business experience of officers and directors) and Item 1 (the franchisor and its predecessors). Item 18 still applies if the founder's name and likeness are used in marketing in a manner that goes beyond ordinary corporate identification — and the disclosure must include the founder's compensation arrangement specifically for the celebrity-endorsement role, separate from their salary as an officer.

Why Item 18 exists

The FTC adopted Item 18 because celebrity endorsements have historically been used to add unwarranted credibility to franchise opportunities. Item 18 forces transparency about (a) what the public figure is being paid, which lets prospective franchisees gauge whether the endorsement is independent or transactional, and (b) any actual operational or financial role, which lets prospective franchisees distinguish a marketing relationship from a controlling one.

What it does NOT tell you

• Item 18 is not an endorsement of quality. A celebrity's involvement is a marketing arrangement, not an evaluation of unit economics. The presence of a public figure says nothing about Item 19 financial performance, Item 20 unit counts, or Item 21 financial statements.
• Item 18 does not cover ordinary marketing. Use of stock models, voice talent, social-media influencers below the public-figure threshold, and franchisor-employed corporate spokespeople is generally not within Item 18's scope. The rule applies only to people of broad public recognition.
• Item 18 does not cover sub-celebrity influencer arrangements. A regional sponsorship deal with an influencer who is not "generally known to the public" in the franchise's geographic area is not an Item 18 disclosure, though it may appear in Item 11 (advertising and marketing programs) if it is funded from the ad fund.
• Item 18 does not predict the longevity of the relationship. If a public figure's endorsement contract has a fixed term, that term is disclosed; what is not disclosed is whether the relationship will be renewed or what happens to brand equity if it is not.
• Item 18 is not a guarantee the public figure has invested. The rule asks the franchisor to state any investment by the public figure. "No investment" is a common answer even where the figure is heavily compensated as an endorser.

Reading tips

When Item 18 contains content rather than the standard "Not Applicable" disclosure:

1. Match compensation to operational role. A public figure compensated heavily but without any management role is a marketing asset; one with a board seat or active operational involvement is a governance factor. The two are very different from a buyer's standpoint.
2. Read the duration. A short contractual term means the brand identity could change materially within the franchisee's initial term. A perpetual license tied to a founder's name is more durable but introduces concentration risk if the founder's reputation changes.
3. Check Item 11 advertising. If the public figure is funded from the system advertising fund, that obligation flows through to franchisee ad-fund contributions. Item 11 will disclose how ad-fund dollars are allocated; Item 18 only discloses the existence of the public-figure arrangement.
4. Look for ownership. Public figures who are equity owners of the franchisor are simultaneously disclosed in Item 18 and (above the relevant threshold) in Item 1's discussion of parents and affiliates or Item 2's officers-and-directors list. Cross-referencing those items completes the picture.
5. Note the absence. For most brands, Item 18 is "Not Applicable" and adds no information. When it contains content, it warrants careful reading.

Item 18 is short, narrowly scoped, and "Not Applicable" in the great majority of FDDs. When it is used, it should be read alongside Item 11 (marketing programs) and Item 17 (term and termination of the agreement), since the public-figure relationship interacts with both ongoing marketing obligations and the long-term identity of the brand the franchisee is buying into.