Question
(redacted)
March 28, 1996
BY HAND DELIVERY
Richard B. Smith, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Ave., NW
Room 323
Washington, D.C. 20580
RE: Franchise Situs
Dear Dick:
The purpose of this letter is to confirm our telephone discussion yesterday regarding the situs of an exclusive franchise for purposes of subsections 802.50(a), 802.50(b)(1), 802.51(a) and 802.51(b)(1). Each of those provisions relates to the exemption of transactions involving the acquisition, directly or indirectly, of assets outside the United States.
The question posed was whether an exclusive right or franchise granted by a U.S. grantor, to do business in a foreign city, is a U.S. asset or a foreign asset in the hands of the franchisee. Although our conversation also dealt with questions concerning U.S. revenue related to the operation of the franchised business, it is not my purpose here to deal with those issues.
The result of our discussion on the situs issue was agreement that, for purposes of the exemption rules noted above, the franchise is to be viewed as an asset located in the geographic area covered by the franchise, i.e., the right or franchise is not an asset in the United States held by the foreign franchisee or licensee.
Please contact me if this letter does not accurately reflect your conclusion on this single issue.
Sincerely,
(redacted)