FTC Seeks Comments on the Staff Report on the Franchise Rule

The Federal Trade Commission is announcing the availability of the Staff Report on the Trade Regulation Rule titled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures – (Franchise Rule).” The Report sets forth the staff’s recommendations to the Commission on the various proposed amendments to the Franchise Rule. The Commission has not reviewed or approved the Report. Comments on the Staff Report will be accepted until November 12, 2004.

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 financial performance representations, the rule requires the franchisor to have a reasonable basis for those claims and also to provide a document to potential franchisees substantiating those claims.

The Commission has engaged in an ongoing effort to amend the Franchise Rule, starting with a review of the Franchise Rule in 1995, followed by the publication of an Advanced Notice of Proposed Rulemaking in 1997 and the publication of a Notice of Proposed Rulemaking in 1999. The Staff Report announced today summarizes the rulemaking record to date, analyzes the various alternatives, and sets forth the staff’s recommendations as to the form of the final revised Franchise Rule.

Written comments should be identified as “Franchise Rule Staff Report” and sent to the Secretary, FTC, Room H-159 (Annex W), 600 Pennsylvania Ave., N.W., Washington, D.C. 20580. Comments filed in paper form should be sent by courier or overnight services. U.S. postal mail in the Washington area and at the FTC is subject to delay due to heightened security precautions. Comments can also be filed electronically, in the manner detailed in the Federal Register Notice that will be published in the Federal Register shortly. 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.

The Commission vote approving publication of the Federal Register notice was 5-0.

Copies of the Staff Report, the Federal Register Notice, and other documents mentioned in this release are or will be available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Call toll-free: 1-877-FTC-HELP.

(FTC Matter No. R511003)