FTC Seeks Comments on Amended Franchise Rule

04/16/2019 / Susan E. Tegt

The Federal Trade Commission has requested public comments on whether to make changes to its rule known as “Disclosure Requirements and Prohibitions Concerning Franchising” (“Amended Franchise Rule) as a part of systematic review of all current FTC rules and guides.  Comments must be received on or before May 13, 2019. 

The original Franchise Rule, adopted in 1978 and effective in 1979, was enacted to provide prospective purchasers of franchises the material information they need in order to weigh the risks and benefits of such an investment by providing disclosure requirements in a uniform format that facilitates comparison shopping.  The Amended Franchise Rule, issued in 2007, made certain changes to reduce inconsistencies between state and federal law and established a set of uniform disclosure requirements in a Franchise Disclosure Document (“FDD”).  Now, as a part of its standard period review regarding the costs and benefits of the Amended Franchise Rule, and its regulatory and economic impact, the FTC is seeking public comment on specific issues about the Amended Franchise Rule, including the continuing need for the rule and whether the Amended Franchise Rule should be amended to adapt to new technological efficiencies.   

The FTC has issued the following thirteen questions for public comment:

  1. Is there a continuing need for the Amended Franchise Rule? Why or why not?
     
  2. What benefits, if any, has the Amended Franchise Rule provided to prospective franchisees, including small businesses? What evidence supports the asserted benefits?
     
  3. What modifications, if any, should be made to the Amended Franchise Rule to increase its benefits to prospective franchisees, including small businesses?
     
    • What evidence supports the proposed modifications?
    • How would these modifications affect the costs the Amended Franchise Rule imposes on franchisors and franchise sellers, including small businesses?
    • How would these modifications affect the benefits to prospective franchisees?
       
  4. What impact has the Amended Franchise Rule had on the flow of truthful information and on the flow of deceptive information to prospective franchisees?
     
  5. What significant costs, if any, has the Amended Franchise Rule imposed on prospective franchisees, including small businesses? What evidence supports the asserted costs?
     
  6. What modifications, if any, should be made to the Amended Franchise Rule to reduce any costs on prospective franchisees, including small businesses?

  • What evidence supports the proposed modifications?
  • How would these modifications affect the benefits provided by the Amended Franchise Rule?

  1. ​What benefits, if any, has the Amended Franchise Rule provided to franchisors and franchise sellers, including small businesses? What evidence supports the asserted benefits?
     
  2. What modifications, if any, should be made to the Amended Franchise Rule to increase its benefits to franchisors and franchise sellers, including small businesses?

  • What evidence supports the proposed modifications?
  • How would these modifications affect the costs the Amended Franchise Rule imposes on franchisors and franchise sellers?
  • How would these modifications affect the benefits to prospective franchisees?

  1. What significant costs, if any, including costs of compliance, has the Amended Franchise Rule imposed on franchisors and franchise sellers, including small businesses? What evidence supports the asserted costs?
  2. What modifications, if any, should be made to the Amended Franchise Rule to reduce the costs imposed on franchisors and franchise sellers, including small businesses?

  • What evidence supports the proposed modifications?
  • How would these modifications affect the costs the Amended Franchise Rule imposes on franchisors and franchise sellers
  • How would these modifications affect the benefits to prospective franchisees?

  1. What evidence is available concerning the degree of industry compliance with the Amended Franchise Rule?
     
  2. What modifications, if any, should be made to the Amended Franchise Rule to account for changes in relevant technology or economic conditions? What evidence supports the proposed modifications?
     
  3. Provide comment on any overlap or conflict with other federal, state, or local laws, or regulations.

  • What evidence supports any asserted conflicts?
  • With reference to asserted conflicts, should the Amended Franchise Rule be modified? If so, why or why not?

As of the date of this article, there are no public comments available for viewing.  Readers interested in reviewing public comments should check this link periodically:  https://www.regulations.gov/document?D=FTC-2019-0014-0001