Sponsoring a sweepstakes can be a great way for a franchise brand to help drive sales to the brand’s franchised and company-owned outlets. In addition to offering traditional monetary prizes or vacations, creative franchisors can offer prizes that help drive consumers to the brand’s outlets. Such brand-specific prizes can include prizes such as free meals for a restaurant franchise, complimentary memberships for fitness brands, or other free goods and services offered at franchised locations.

However, before sponsoring a sweepstakes, franchisors must keep in mind that sweepstakes are highly regulated. Failure to comply with laws and regulations governing sweepstakes can subject the franchisor, as the sponsor of the sweepstakes, to serious legal penalties and damage to the franchisor’s brand and goodwill.  In addition, specific to the franchise industry, franchisors should make efforts to ensure that its franchisees uniformly comply with the rules governing the sweepstakes.

Sweepstakes are governed by various state laws. Certain federal laws may come into play as well. Failure to comply with these laws can result in claims that a sweepstakes sponsor has administered an illegal lottery, breached a contract with entrants, engaged in deceptive practices, and committed other violations. In addition, if a franchisor promotes a sweepstakes using social media, the social media companies typically have their own requirements. Facebook®, for instance, requires sweepstakes sponsors to include specific releases and disclaimers in the sweepstakes rules.

For these reasons, before implementing a sweepstakes, it is important to review applicable federal and state laws.