Item 3: Litigation

Item 3 includes disclosure of certain lawsuits involving the franchisor, its affiliates, or key executives, including material civil, criminal, or administrative actions that may be relevant to a prospective franchisee’s evaluation of the franchise system. This disclosure is intended to provide transparency regarding legal matters that could impact the franchisor’s operations, reputation, or ability to support the franchise network.

What is Item 3

Item 3 summarizes material litigation involving the franchisor, its affiliates and its executives. This includes pending actions, past convictions, civil judgments and administrative claims.

Why Item 3 Matters

Litigation disclosures help prospects evaluate:

legal risks
system stability
enforcement trends
past disputes involving franchisees

High litigation volume is a red flag for many buyers.

What Item 3 Must Include

Item 3 must disclose:

pending lawsuits
criminal convictions
certain civil actions
administrative or regulatory actions
franchisee related litigation involving the system
material claims resolved in the last fiscal year

Related Terms

Franchise Disclosure Document
FDD Renewal
Material Change
Franchise Examiner
Franchise Exemption
Notice Filing State
Non Registration State
Registration Filing State
Stop Order

Related Features

Franchise Registration Management
Franchise Territory Mapping
Demographic Analysis
Integrated Document Signing
CRM Tools

Related Blogs

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2025 Guide to Franchise Registration States in the U.S.
State Franchise Registration: What Franchisors Need to Know Before Expanding
Zors Improves Franchise Registration Tracking With Color-Coded Map Status
Why a Federally Registered Trademark Matters When Offering Franchise Opportunities
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Last updated: January 23, 2026