FTC Seeks Public Comment on Revisions to Franchise Rule

The Federal Trade Commission is seeking public comment on whether it should revise its Franchise Rule to reduce incon sistencies in 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. Comments must be received by April 30, 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 April, 1995, the FTC announced that it was reviewing the rule and asked for public comment on several issues, including whether to modify the rule’s disclosure requirements; to change the disclosure requirements for business opportunity ventures; and to require mandatory disclosure of earnings information. In addition, it hosted two public workshops to discuss issues raised during the review.

The Commission is once again seeking comments on whether the Franchise Rule should be amended to:

• revise the rule’s disclosure requirements based on those in the 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;
• modify earnings disclosure requirements currently contained in the Rule;
• address changes in the marketing of franchises, such as international franchise sales and sales through the internet.

The Commission vote to publish the Advance Notice of Proposed Rulemaking in the Federal Register for a 60 day public comment period was 5-0. Written comments should be identified as "16 CFR Part 436" and sent to Secretary, Federal Trade Commission, Room 159, 6th Street and Pennsylvania Ave., N.W., Washington, D.C. 20580. Comments also can be submitted by e-mail addressed to "FRANPR@ftc.gov". In addition, comments can be submitted by telephone at the Commission’s Franchise Rulemaking Hotline 202-326-3573. All comments will be placed on the public record and will be available for public inspection on normal business days from 8:30 a.m. to 5:00 p.m., in Room 130 at the above address. Comments will also be placed on the Internet at the FTC’s web site: http://www.ftc.gov (no period).

Copies of the Federal Register Notice announcing the request for public comment and of FTC news releases and other material are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov(no period) Copies also are available 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. 954402)