To: Myra Howard, Division of Marketing Practices
From: Kat Tidd
Because of present time constraints, I am limiting my comment to the general issue of whether and how the Rule might be changed as it applies to business opportunities.
From my experience as a franchise attorney of more than 15 years, many enterpreneurs will choose to risk not complying with the Rule because the cost of compliance is too high relative to the size of the company, the size of the investment to be made and/or the number of, or profits to be derived from the sale of the opportunities
The costs typically at issue are legal and accounting which are generally high because of the complexity of compliance and the concern over preparing a prospectus to be provided to third parties. The level of disclosure for a business opportunity should in some way be scaled to the level of the investment/risk incurred by the typical purchaser.
Dropping the bar from $500 to a lesser amount will not materially alleviate the problems. As a practical matter, consistent, broad scale enforcement of the curren state and federal regulatory scheme, along with a private right of action for the Franchise Rule, is likely to be more effective in protecting the investing public than widening the net to encompass more "business opportunities", however defined.