HAROLD L. KESTENBAUM, P.C.
Re: 16 CFR Part 436
My name is Harold L. Kestenbaum. I am a practicing attorney who specializes in franchise law. I have responded to Federal Trade Commission ("FTC") requests for documents before (see Attachment 3, Comment 14).
I have chosen to present my comments and suggestions to many of the questions posed by the Commission. I will respond to the questions in order. I will only present my views on questions that I believe are relevant.
A. The Franchise Rule
B. The UFOC Guidelines
E. Earnings Disclosures 20. The answer to this is simple. The rule is clear as are the UFOC guidelines. Earnings claims can be made if the franchisor wants to.
F. 26. This is an issue that I have strongly advocated that the Rule not apply to sales made to franchises to be operated outside of the United States. The language can be simply stated as follows: "The FTC rule does not have application on sales made to persons or entities whose franchises will be located outside of the United States, its possessions or territories. " It is my opinion that this exclusion will decrease the enormous expense involved in rewriting UFOC's to be relevant to an international transaction.
27. In light of the current technological advances that have been made and that are continuing to be made, the suggestion being made, i.e., replacing "personal meeting" with "first substantive discussion" is a viable one. However, the need to specifically define just what this is crucial. A suggestion is to define it as follows:
Excluded from this definition would be the simple dissemination of sales materials containing such relevant information.
29. With respect to what are called co-branded franchises, it is my opinion that a franchisee of one concept, e.g., Subway, that is offered an opportunity to take on a TCBY yogurt brand franchise should receive a TCBY UFOC, which document should include information regarding this "co-branding" concept. Each franchisor who offers this type of arrangement should include language in its UFOC document which reflects this concept. It is not necessary for a franchiser to have to prepare a different or separate UFOC document for this type of relationship.
The costs involved in requiring a franchiser to prepare a separate document that recognizes this association would be very costly to a franchisor, particularly as it relates to legal fees and filing costs.
30. The only suggestion that I could make regarding this issue would be to provide for mitigating circumstances. For example a company may not know what a franchise is or that the Rule exists. When a franchiser can prove this, then a reduction or waiver of civil penalties should be considered.
Very truly yours,
Harold L. Kestenbaum