FTC Seeks Discussion on Franchise Rule

The Federal Trade Commission will host 6 public workshops in 5 cities across the country to encourage public participation in the rulemaking proceeding on the rule that requires franchise sellers to disclose specific information about the franchise system to prospective buyers before a sales agreement is completed. The workshops will be held in Washington, D.C., Chicago, IL, New York, NY, Dallas, TX and Seattle, WA starting in July and continuing through November. In addition to the workshops, the agency is extending the period during which it will accept comments about the Rule until December 31, 1997.

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. If the franchisor chooses to make earnings claims, the Rule requires the franchisor to have a reasonable basis for those claims and also to provide a document to potential franchisees containing that substantiation.

In February 1997, the FTC sought public comment on whether it should revise the rule to more closely align federal and state disclosure requirements governing franchise sales, and to address changes in the marketing of franchises, such as the sale of franchises internationally and through the Internet. The workshops are intended to provide additional information in advance of final rulemaking.

The Commission is seeking comment about whether the Franchise Rule should be amended to distinguish between disclosures for business opportunities and franchises, and three of the workshops -- in Chicago, Dallas and Washington, D.C. -- will focus on that subject. Sessions in New York and Seattle will address: whether the rule’s disclosure requirements should be based on the Uniform Franchise Offering Circular (UFOC) Guidelines and possible modifications; changes in the marketing of franchises, such as international franchise sales and sales through the Internet; co-branding and alternative law enforcement. A workshop in Washington, D.C. will serve as a forum to address whether to change the applicability of the Rule to trade show promoters.

According to a Federal Register Notice, published today, the first day of each 2-day workshop will consist of a roundtable discussion followed by public comment on the day’s topic(s). The second day will consist of an open session where the general public may share their comments and concerns about any of the topics raised by the Advanced Notice of Proposed Rulemaking. Roundtable participants will be selected by Commission staff from franchisors, franchisees, business opportunity promoters and purchasers, consultants, economists, academicians and others who have submitted written comments and notified the Commission that they wish to participate. Comments on the Rule and notification of an interest in participating in one or more roundtable discussions can be addressed to Myra Howard, Division of Marketing Practices, Federal Trade Commission, Washington, D.C. 20580; sent via E-mail to "FRANPR@ftc.gov;" or directed to the FTC’s ANPR hotline at 202-326-3573.

The schedules, topics and locations of the workshops are:

Copies of the Federal Register Notice are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. R511 003)