TO: Federal Trade Commission
FROM: NaturaLawn of America, Inc.
REF: 16 CFR Part 436 - Franchise Rule
We have reviewed the recent UFOC-Plus Proposal and have the following initial comments:
Item 3 Disclosure of Litigation
While this is important information should the franchisor be involved multiple, regular lawsuits whether initiated or not, a prospective franchisee candidate needs only to know about the litigious nature of a franchisor. As such, disclosure of limited lawsuits over mid to long time can effect the franchisor negatively. Therefore, the following recommendation is suggested.
Make disclosure necessary only when there has been 3 consecutive fiscal years of lawsuits regardless of the total number of lawsuits. This provides potential franchise candidates with the right amount of information to make a decision without negatively impacting either party.
Item 4 Bankruptcy Disclosure
It is important bankruptcy proceedings are disclosed in which any parent, or any other officer of the company filed such a proceeding as it relates to the franchisor or other previous business activity. However, it should not include personal bankruptcy proceedings caused by reasons such as divorces, medical issues, insurance claims, etc.
Item 20 Chart For Operating Franchised Outlets
The existing chart is very confusing to those who read it and it needs to be simplified and more understandable. We also suggest a category be added to the list that includes number of new locations opened and an elimination of other categories that are redundant.
Item 20 Gag Clauses
This should not be required. It creates perceived issues and problems where they may not exist. An agreement between the franchisor and franchisee is privileged information. Including gag clauses in the new UFOC will cause harm to the franchisee and the franchisor especially since the issues cannot be discussed anyway. There is no true value to either party by including this clause.
Revised Disclosure Document Within 90 Days After Close of Each Fiscal Year
This is a particularly onerous section and we are strongly against its inclusion. While this is fine for non-registration states, it places a tremendous burden on the franchisor from the registration states because registration states react very slowly to the franchisors needs.
The Term Renewal versus Extension
This term renewal is synonymous with franchising and we cannot ever recall when it was perceived as a misleading term.
Disclosure of The Names, Addresses, Phone Numbers of Individuals Responsible For Preparing Franchisor's UFOC
As a franchisor, our decision whether to select legal counsel and any other individual responsible for help in preparing our UFOC is a private business matter, not a public one. In addition, making this information public would probably cause franchise candidates to contact these representatives creating undue hardship on their personal life and time. This is a bad idea and we are strongly opposed to it.