Franchise Rule

Background material on the rule and a list of questions for comment were published today in the Federal Register. Written comments on the rule will be accepted until August 11, 1995. In addition, the Commission will host a public workshop/conference in September to discuss issues raised in the Federal Register Notice.

The Franchise Rule was promulgated in 1978 to give consumers more information to weigh the risks and benefits of investing in a franchise business. The rule requires franchise sellers to provide all potential franchisees with a disclosure document containing 20 categories of information about the franchise, its officials, and other franchisees. The rule also requires franchisors who choose to make earnings claims to have a reasonable basis for the claims, and to provide an additional disclosure document including the substantiation for such claims.

As in other instances where it has sought comments on existing rules, the Commission seeks comments on the continuing need for the rule, as well as its costs and benefits.

The Commission is also seeking comments on whether the rule should be amended to:

-- replace the rule's disclosure requirements with those in the revised Uniform Franchise Offering Circular Guidelines, approved by the Commission on Dec. 30, 1993;

-- change the applicability of the Franchise Rule to business opportunities; -- change the applicability of the rule to trade show promoters; and

-- require the disclosure of earnings information.

The Commission vote to seek public comments on the rule was 4-0.

Comments should be identified as "Franchise Rule, 16 CFR Part 436--Comment," and addressed to the Secretary, Federal Trade Commission, Room H-159, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

Copies of the Federal Register notice announcing the request for public comment and of the rule itself are available from the FTC's Public Reference Branch, Room 130, same address as above.

(FTC File No. P954402)

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