Growth in International Franchise Sales to be Topic at FTC Workshop

For Release

The growth in international franchise transactions, in part due to the explosion of ads for American franchise systems on the Internet, will be the topic of a Federal Trade Commission workshop in Room 332 of the FTC's headquarters building, 6th Street and Pennsylvania Avenue N.W., in Washington, D.C. on March 11, 1996. A primary focus of the workshop will be whether the FTC's Franchise Rule -- in large part, a pre-purchase disclosure rule -- applies to American franchisors selling territories and franchises in overseas locations.

In preparation for the workshop, the FTC is seeking public comments by March 8 on a number of questions, which are listed in a notice in today's Federal Register. Those wishing to participate in the workshop should notify the FTC by March 4.

The FTC's Franchise Rule requires franchise sellers to give potential purchasers a detailed disclosure document containing 20 categories of information about the business, including the financial and legal history of the franchise and the seller's principal officers, the names and addresses of current and former franchisees in the area, and the cost of the franchise. In addition, if a franchisor makes claims about the potential or actual earnings of franchisees, the rule requires that the franchisor provide an additional disclosure document containing substantiation for those claims.

The workshop announced today grew out of the overall review the Commission is conducting of its Franchise Rule. Many who responded to the Commission's April 1995 solicitation for comments on the rule requested guidance from the Commission on whether the rule applies to international sales and, if so, what form the disclosures should take. The Commission said it will keep the rule review record open to incorporate comments on these issues.

Generally, the Commission is seeking comments to help it quantify the current and future growth in international franchising, the extent to which American franchisors provide disclosure documents in international sales transactions, and the costs of doing so. Comments and requests to participate in the workshop should be addressed to Steven Toporoff, Division of Marketing Practices, FTC, Room H-159, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

The Commission vote to hold the workshop was 5-0.

Copies of the Franchise Rule and the Federal Register notice listing the specific questions on which the Commission is seeking comment 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 news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

 

(FTC File No. P954402)

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