Trade Regulation Rule on Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures

FEDERAL TRADE COMMISSION

16 CFR Part 436

Trade Regulation Rule on Disclosure Requirements and Prohibitions

Concerning Franchising and Business Opportunity Ventures

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (the ``Commission'') proposes to

commence a rulemaking proceeding to amend its Trade Regulation Rule

entitled Disclosure Requirements and Prohibitions Concerning

Franchising and Business Opportunity Ventures (``the Franchise Rule''

or ``the Rule'').

On April 7, 1995, the Commission solicited comment on the Franchise

Rule, as part of its periodic review of all Commission trade

regulations and guides. On the basis of the record developed during the

review of the Franchise Rule, the Commission proposes to commence a

rulemaking to amend the Franchise Rule. The Commission is soliciting

written comment, data, and arguments concerning this proposal. In

addition, the Commission solicits comment on how the Commission can

ensure the broadest participation by affected interests in the Rule

amendment process.

DATES: Comments must be submitted on or before April 30, 1997.

ADDRESSES: Written comments should be identified as ``16 CFR Part 436''

and sent to Secretary, Federal Trade Commission, Room 159, Sixth Street

and Pennsylvania Ave., N.W. Washington, DC 20580. To facilitate prompt

and efficient review and dissemination of the comments to the public,

all written comments should also be submitted, if possible, in

electronic form, on either a 5\1/4\ or a 3\1/2\ inch computer disk,

with a label on the disk stating the name of the commenter and the name

and version of the word processing program used to create the document.

Programs based on DOS are preferred. In order for files from other

operating systems to be accepted, they should be submitted in ASCII

text format.

The Commission will also accept comments submitted to the following

E-Mail address: ``[email protected]''. In addition, commenters may leave a

short comment on a telephone hotline number designated for this

purpose: (202) 326-3573.

All comments will be placed on the public record and will be

available for public inspection in accordance with the Freedom of

Information Act, 5 U.S.C. 552, and the Commission's Rules of Practice,

16 CFR 4.11, during normal business days from 8:30 a.m. to 5:00 p.m.,

at the Public Reference Room, Room 130, Federal Trade Commission, 6th

Street and Pennsylvania Avenue, N.W. Washington, DC 20580. In addition,

comments will be placed on the Internet at the FTC's web site:

http://www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Steven Toporoff, (202) 326-3135, or

Myra Howard (202) 326-2047, Division of Marketing Practices, Bureau of

Consumer Protection, Federal Trade Commission, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Part A--General Background Information

The Commission is publishing this notice pursuant to Section 18 of

the Federal Trade Commission (``FTC'') Act, 15 U.S.C. 57a et seq., and

the provisions of Part 1, Subpart B of the Commission's Rules of

Practice, 16 CFR 1.7, and 5 U.S.C. 551 et seq. This authority permits

the Commission to promulgate, modify, and repeal trade regulation rules

that define with specificity acts or practices that are unfair or

deceptive in or affecting commerce within the meaning of Section

5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

The Commission promulgated the Franchise Rule on December 21, 1978,

43 FR 59614. On April 7, 1995, the Commission published a request for

comment on the Rule, 60 FR 17656 (``FR Notice''), as part of its

continuing review of its trade regulation rules (``Rule Review'') to

determine their current effectiveness and impact. The FR Notice sought

comment on the standard regulatory review questions, such as what are

the costs and benefits of the Rule, what changes in the Rule would

increase the Rule's benefits to consumers and how would those changes

affect compliance costs, and what changes in the marketplace and new

technologies may affect the Rule.

The FR Notice also sought comment on several specific issues: (1)

Whether the Commission should amend the Rule by replacing the

disclosures with those set forth in the revised Uniform Franchise

Offering Circular (``UFOC'') guidelines; (2) Whether the Commission

should amend the Rule to distinguish between disclosures required for

business opportunities and those required for franchises; (3) Whether

the Commission should retain the conditional exemption for trade show

promoters; (4) Whether the Commission should amend the Rule to require

franchisors to disclose earnings information; and (5) Whether the

Commission should amend the Rule to address new marketing practices

(such as international franchise sales) and new technologies (such as

the Internet).

In addition to soliciting written comment on these issues,

Commission staff held two public workshop conferences on the Rule.

Staff held the first conference on September 11-13, 1995, in

Bloomington, Minnesota. The participants discussed whether there is a

continuing need for the Rule, and, if so, whether the Commission could

improve the Rule. Staff held the second conference in Washington, D.C.,

on March 11, 1996, and the participants focused on the application of

the Franchise Rule to international franchise sales.1

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1 The transcript of the September 1995 Conference is cited as

``[name of commenter], TR at ____;'' the transcript of the March

1996 Conference is cited as ``[name of commenter], TR2 at ____.''

For a complete list of panelists, and the abbreviations used to

identify each panelist in this Advance Notice of Proposed Rulemaking

(``ANPR''), see Attachments 1 and 2. The transcripts are on the

public record and are available for public inspection.

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The Rule Review elicited 75 written comments.2 The comments

generally express continuing support for the Rule, stating that pre-

sale disclosure is a cost-effective way to disseminate material

information to prospective franchisees that otherwise might be

unavailable.3 Pre-sale disclosure is also necessary to prevent

fraud 4 and to reduce the level of post-sale franchise

relationship disputes.5 Most commenters state that the Rule's

benefits outweigh the costs

[[Page 9116]]

imposed on consumers.6 On the basis of the Rule Review record, the

Commission has decided that the Rule serves a useful purpose.

Nonetheless, the Commission seeks additional comment on possible

modifications to the Rule, as discussed below.

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\2\ The commenters included franchisors, franchisees, franchisor

and franchisee trade associations, state franchise and business

opportunity regulators, Bar Associations, franchise consultants,

academicians, and a journalist. The comments are cited as ``[name of

commenter], Comment [designated number], at ____.'' For a complete

list of the commenters, and the abbreviations used to identify each

commenter in this ANPR, see Attachment 3. All Rule Review comments

are on the public record and are available for public inspection.

\3\ See, e.g., DSA, Comment 21, at 2; Commissioner McDonald,

Comment 30, at 2; Rabenberg, TR at 103-06. See also IFA, Comment 32,

at 4; Little Caesars, Comment 31, at 1; Southland Corp., Comment 37,

at 2. But see Midgol, Comment 3, at 2; AAFD, Comment 39, at 3.

Several commenters recommended that the Commission replace its Rule

with the UFOC disclosure format. See, e.g., IFA, Comment 32, at 2-3;

Simon, Comment 36, at 3-4.

\4\ See, e.g., General Ryan, Comment 25, at 1; Bortner, Comment

37, at 1; NASAA, Comment 43, at 1.

\5\ See, e.g., ABA AT, Comment 22, at 7-8; SBA Advocacy, Comment

34, at 9; Simon, Comment 36, at 2; Shay, TR at 22-23.

\6\ See, e.g., Dub, Comment 2, at 2; McBirney, Comment 7, at 2;

ABA AT, Comment 22, at 8-9.

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Part B--Objectives the Commission Seeks to Achieve and Possible

Regulatory Alternatives

1. Modifications to the Franchise Rule Disclosure Requirements

a. Background

The Commission wants to ensure that the Franchise Rule continues to

serve a useful purpose and does not impose unnecessary regulatory

burdens. Accordingly, the Commission seeks comment on whether the Rule

itself or any specific provisions of the Rule no longer serve a useful

purpose and should be deleted.

The Commission also recognizes that many commenters recommend that

the Commission revise the Rule's disclosure requirements. In

particular, these commenters suggest that the Commission replace the

Rule's disclosures with those set forth in the revised UFOC

guidelines.7 They contend that the UFOC's disclosures are superior

to those of the Rule, and the UFOC's format is more ``user friendly.''

8 This group of commenters further believes that revising the Rule

to mirror the UFOC guidelines would promote a more uniform, national

disclosure standard.9 Commenters also believe that, as a practical

matter, the vast majority of franchisors use the UFOC in order to

comply with state registration laws. Thus, they conclude that revising

the Rule would cause few franchisors to incur additional costs.10

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\7\ See, e.g., D'Imperio, Comment 16, at 1; ABA AT, Comment 22,

at 5-6; General Ryan, Comment 25, at 1; Snap-On, Comment 27, at 1;

NASAA, Comment 43, at 2; Forte Hotels, Comment 52, at 1.

\8\ See, e.g., Wieczorek, Comment 23, at 2; IFA, Comment 32, at

3-4; AAFD, Comment 39, at 6; CA BLS, Comment 45, at 4; Simon, TR at

211; Perry, TR at 263.

\9\ See, e.g., Wieczorek, Comment 23, at 1; Maxey, TR at 36.

\10\ See, e.g., McBirney, Comment 7, at 2; Wieczorek, Comment

23, at 1; Lewis, Comment 40, at 1; Hayden, Comment 42, at 1; CA BLS,

Comment 45, at 1-2.

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A few commenters, however, oppose revising the Rule based on the

UFOC guidelines model. They contend that small or regional franchisors

who use the FTC format will incur significant expenses if forced to

convert to a disclosure format akin to the UFOC guidelines.11

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\11\ See Dub, Comment 2, at 1-2; Nopar, Comment 26, at 1-2. See

also Century 21, Comment 41, at 1.

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Some commenters also recommend that, if the Commission revises the

Rule based on the UFOC guidelines disclosure requirements, it should

first modify or fine-tune several of those disclosures. For example,

several commenters recommend that the Commission revise the disclosure

of statistics on the franchisees who have left the franchise system

(Item 20 of the UFOC). They note that Item 20, as currently written,

may cause franchisors to overcount franchisee closures, leading to

inflated franchisee failure rates.12 Commenters also recommend

that the Commission continue to permit a three-year phase-in of audited

financial statements.13

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\12\ See, e.g., Simon, TR at 224; Perry, TR at 263.

\13\ See, e.g., Wieczorek, Comment 23, at 2; IFA, Comment 32, at

4.

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b. Objectives and Regulatory Alternatives

On the basis of the Rule Review record, the Commission wishes to

explore further whether it should revise the Rule's disclosures based

on the UFOC guidelines.14 At the same time, the Commission

recognizes that franchisors and state regulators have more than two

years of experience with the revised UFOC disclosure requirements.

Accordingly, in considering whether to revise the Rule based upon the

UFOC model, the Commission seeks additional comment on whether any of

the UFOC's required disclosures should be modified or fine-tuned.

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\14\ This proposal does not contemplate preemption of state law.

If the Commission were to revise its Rule based upon the UFOC

disclosure requirements, there would be no change in state franchise

laws. Franchisors would remain free to use either the UFOC format or

the Commission's format, albeit the two formats would be

substantially similar. In addition, any state modifications to the

UFOC guidelines in the future would not alter the Commission's

disclosure requirements, unless the Commission similarly amended its

Rule.

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In particular, the Commission seeks comment on whether the

litigation disclosures (Item 3 of the UFOC guidelines) should be

expanded to include the disclosure of lawsuits filed by franchisors

against franchisees. This modification would require the broadest

disclosure of lawsuits involving the franchise relationship.

Further, the Commission seeks comment on whether the disclosure of

franchisee statistics (Item 20 of the UFOC guidelines) should be

modified. In particular, the Commission solicits comment on whether the

franchisee statistics, as required by Item 20 of the UFOC, accurately

reflect franchisees' performance history and, if they do not, how could

the Commission modify those disclosures to reflect such performance

history more accurately? In connection with the disclosure of

information concerning former and existing franchisees, the Commission

also seeks comment on the use of ``gag-order'' provisions by

franchisors that may effectively bar some franchisees from sharing

their experiences with prospective franchisees. The Commission is

concerned that such gag-orders may enable franchisors to circumvent the

very purpose of a disclosure such as Item 20 of the UFOC--to enable

prospective franchisees to learn material information about the

franchise system through discussions with former and existing

franchisees.

Finally, the Commission wants to ensure that the Rule does not

create unreasonable barriers to entry for start-up franchisors.

Accordingly, the Commission seeks comment on whether it should retain

its policy of permitting a three-year phase-in of audited financial

statements for new entrants.

2. Distinguishing Between Disclosure Requirements for Business

Opportunities and for Franchises

a. Background

The Franchise Rule covers different types of business arrangements:

package and product franchises and business opportunities. In package

and product franchises, the investor sells goods or services that are

associated with the franchisor's trademark and are subject to

significant control by, or receive significant assistance from, the

franchisor.15 In contrast, business opportunities often do not

involve a trademark. Rather, the investor typically distributes goods

or services supplied by the seller or an affiliate and receives

accounts or locations in which to conduct the business. Vending machine

or rack display routes are typical examples of a business opportunity.

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\15\ Restaurant outlets are a typical example of a package

franchise, where the investor typically produces goods or services

according to the franchisor's specifications. Gasoline stations are

an example of a product franchise, where the investor typically

gains the right to distribute the franchisor's trademarked products.

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The Franchise Rule imposes identical disclosure requirements for

business opportunities and franchises. In the FR Notice, the Commission

sought comment on whether the Commission should distinguish between

these two business formats. The Commission also asked how the Rule

should define the

[[Page 9117]]

term ``business opportunity'' and what disclosures are relevant to the

sale of business opportunities.

The commenters overwhelmingly recommend that the Commission amend

the Rule to distinguish between business opportunities and

franchises.16 Commenters note that business opportunities and

franchises are distinct business formats 17 and that it is

confusing to use the term ``franchise'' to describe both

formats.18 There is no consensus, however, on how to define a

business opportunity or what pre-sale disclosures are appropriate for

the sale of business opportunities.

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\16\ See, e.g., Kestenbaum, Comment 14, at 1-2; D'Imperio,

Comment 16, at 1-3; Commissioner McDonald, Comment 30, at 3-4; SBA

Advocacy, Comment 34, at 37-39; NASAA, Comment 43, at 2-3;

Rabenberg, TR at 129; Shay, TR at 132.

\17\ See, e.g., DSA, Comment 21, at 2.

\18\ See, e.g., D'Imperio, Comment 16, at 1; DSA, Comment 21, at

2.

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b. Objectives and Regulatory Alternatives

The Rule Review record supports amending the Rule to distinguish

between disclosure requirements for business opportunities and for

franchises. The record also supports amending the Rule to define

precisely the term ``business opportunity.''

At this time, however, the Commission is not prepared to make

specific recommendations on either the appropriate disclosures for

business opportunities, or a definition of the term ``business

opportunity.'' During the Rule Review, the Commission received only a

few comments addressing this issue. Specifically, the Commission

received comments from one business opportunity purchaser, 19 one

association that arguably represents the interests of some business

opportunity sellers, 20 and one attorney who has represented

multilevel distributors. 21 At this time, the record is

insufficient on this issue.

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19 See Rabenberg, Comment 28.

20 See DSA, Comment 21.

21 See Brooks, Comment 29.

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In order to develop the record more fully on business

opportunities, the Commission solicits comment on which types of

business opportunities are known to engage in deceptive or fraudulent

conduct and what disclosures are material to business opportunity

purchasers. In addition, the Commission seeks comment on the

appropriate definition of the term ``business opportunity.''

As a starting point in the discussion, the Commission solicits

comment on the following definition of ``business opportunity''

contained in many Federal District Court injunctions 22 obtained

by the Commission: ``Business opportunity'' is defined as any written

or oral business arrangement, however denominated, which consists of

the payment of any consideration for:

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22 See, e.g., F.T.C. v. Telecommunications of America,

Inc., Civ. No. 95-693-CIV-ORL-22 (M.D. Fla. 1995)(Stipulated Final

Order for Permanent Injunction); F.T.C. v. United States Business

Bureau, Civ. No. 95-6636-CIV-Ferguson (S.D. Fla. 1995)(Stipulated

Final Order for Permanent Injunction); F.T.C. v. Car Checkers of

America, Civ. No. 93-623 (MLP) (D. N.J. 1993)(Stipulated Final Order

for Permanent Injunction).

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A. The right or means to offer, sell, or distribute goods or

services (whether or not identified by a trademark, service mark, trade

name, advertising, or other commercial symbol); and

B. More than nominal assistance to any person or entity in

connection with or incident to the establishment, maintenance, or

operation of a new business, or the entry by an existing business into

a new line or type of business.

The Commission also solicits suggestions of alternative definitions

of the term ``business opportunity.'' Finally, the Commission seeks

comment on how it can ensure greater participation by business

opportunity interests in the rulemaking process.

3. Conditional Exemption for Trade Show Promoters

a. Background

Trade show promoters are jointly and severally liable for Rule

violations as ``franchise brokers.'' However, they are conditionally

exempt from liability if they provide attendees at their shows with a

specific consumer education notice. In the FR Notice, the Commission

solicited comment on whether the Commission should retain this

conditional exemption.

Several commenters, including several trade show promoters and

their representatives, recommend that the Commission no longer hold

trade show promoters jointly and severally liable as brokers for Rule

violations. They contend that trade show promoters do not function as

franchise brokers as contemplated by the Rule.23 Further, they

believe that trade show promoters lack the ability to monitor

franchisor-exhibitors' sales practices at shows 24 and do not have

any incentive to mislead consumers.25 In the alternative,

commenters urge the Commission to retain the conditional exemption for

trade show promoters. They contend that holding trade show promoters

liable as ``brokers'' would harm both franchisors and consumers by

making it impossible for trade shows to continue in business.26

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23 See, e.g., Brownstein Zeidman, Comment 33, at 3-4; Perry, TR

at 262.

24 See, e.g., Q.M. Marketing, Comment 17, at 2; Wieczorek,

Comment 23, at 3; CA BLS, Comment 45, at 10.

25 See Brownstein Zeidman, Comment 33, at 4. See also

Huke, TR at 235.

26 See Brownstein Zeidman, Comment 33, at 8. See also

Gaston, Comment 46, at 1.

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Other commenters recommend that the Commission revoke the

conditional exemption on the grounds that trade show promoters should

be held accountable for questionable advertising and sales practices

made at shows they sponsor.27 They contend that franchise show

promoters should not be able to turn a ``blind eye'' to violations of

the Franchise Rule, while indirectly profiting from such

violations.28

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27 See, e.g., General Ryan, Comment 25, at 2; Commissioner

McDonald, Comment 30, at 6; Bortner, Comment 37, at 3; NASAA,

Comment 43, at 2.

28 See Hayden, Comment 42, at 2.

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b. Objectives and Regulatory Alternatives

The Commission wishes to explore further whether trade show

promoters should no longer be held liable as ``franchise brokers.'' The

Rule Review record supports the view that trade show promoters do not

act as brokers: they do not participate in the offer and sale of

franchises, do not make sales recommendations, and do not create

materials used by franchisor-exhibitors to sell franchises (such as

brochures, product displays, agreements, or disclosure documents).

Further, trade show promoters, as a practical matter, lack the ability

to monitor franchisor-exhibitors' sales practices at their shows.

Accordingly, the Commission seeks comment on whether the Commission

should amend the Rule's definition of the term ``franchise broker'' to

specifically exempt trade show promoters.

At the same time, the Commission seeks comment on whether

prospective franchisees attending trade shows should readily be able to

verify claims made by franchisor-exhibitors and their sales agents. Our

law enforcement experience indicates that franchisors and business

opportunity sellers at trade shows may make various oral or written

misrepresentations or unsubstantiated earnings claims. Accordingly, the

Commission solicits comment on whether a trade show sales section

should be added to the Rule that would require franchisors and their

sales agents to have readily available for public inspection at each

trade show they attend either a specimen copy of their disclosure

document or a letter

[[Page 9118]]

from an attorney stating that, although they are covered by the Rule's

definition of a franchise, they fall within one of the Rule's

exclusions or exemptions. In the alternative, the Commission solicits

comment on whether the Rule's definition of ``personal meeting'' should

be modified to require all franchisors and their sales agents to have

readily available for public inspection at each trade show they attend

either a specimen copy of their disclosure document or a letter from an

attorney stating that, although they are covered by the Rule's

definition of a franchise, they fall within one of the Rule's

exclusions or exemptions.

4. Earnings Disclosures

a. Background

In the FR Notice, the Commission solicited comment on whether it

should modify the Rule to require franchisors to disclose earnings

information. The Commission also solicited comment on the extent to

which franchisors disclose financial data to prospective franchisees;

the types of financial data currently available to franchisors; the

costs and benefits of possible required earnings disclosures; and

possible earnings disclosure formats and exemptions.

State franchise regulators, franchisees, and franchisee

representatives recommend that the Commission mandate earnings

disclosures. They believe that earnings information is the most

material information prospective franchisees need to make an informed

investment decision.29 They also believe that franchisors already

have such information and that it is deceptive for such franchisors to

fail to disclose this information to prospective franchisees.30

They also contend that disclosure of earnings information will reduce

the level of false and unsubstantiated oral and written earnings

claims.31 Several commenters also contend that the franchise

marketplace and competition would benefit from the free flow of

earnings information.32 Finally, commenters note that a mandatory

earnings disclosure would correct the misrepresentation made by some

franchisors that the Franchise Rule or the FTC prohibits the making of

earnings disclosures.33

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29 See, e.g., Lagarias, Comment 13, at 1-2; SBA Advocacy,

Comment 34, at 55; AFA, Comment 38, at 1; AAFD, Comment 39, at 6.

30 See, e.g., Pennell, Comment 5, at 1; Brown, Comment 9,

at 3-129; Lagarias, Comment 13, at 3; AFA, Comment 38, at 1.

31 See, e.g., Lagarias, Comment 13, at 2; AAFD, Comment

39, at 7; Selden, Comment 49, at 4.

32 See, e.g., ABA AT, Comment 22, at 5-6.

33 See, e.g., Lagarias, Comment 13, at 2; AFA, Comment 38,

at 9; Perry, Comment 44, at 5.

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Franchisors generally oppose mandatory disclosure of earnings

information.34 They contend that it is impossible for the

Commission to create one earnings disclosure format for all franchised

businesses that will not be misleading, noting that information

collected from franchisees is not uniform 35 and may be

inaccurate.36 In addition, they contend that not all franchisors

have the contractual ability to gather earnings data from their

franchisees.37 These commenters are also concerned that earnings

information collected from franchisees may have little predictive value

to a prospective franchisee 38 and that such information may be

misinterpreted as a guarantee of future performance.39 They also

believe that mandating an earnings disclosure would increase the

burdens and costs on existing franchisees: franchisors may require them

to submit earnings information and may subject them to increased

liability for reporting inaccurate earnings information.40 For

these reasons, many commenters believe that mandating earnings

disclosures would have a negative impact upon the franchisor-franchisee

relationship.41

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34 See, e.g., Dub, Comment 2, at 4; RENN, Comment 24, at 2;

Snap-On, Comment 27, at 2; IFA, Comment 32, at 14; Gaston, Comment

46, at 1.

35 See U-Save Auto Rental, Comment 19, at 2; IFA, Comment

32, at 12-13; Simon, Comment 36, at 6.

36 See, e.g., Glenn, Comment 6, at 2; SRA International,

Comment 8, at 3; CA BLS, Comment 45, at 13; Forseth, TR at 298;

Tifford, TR at 303-04; Gaston, TR at 533.

37 See, e.g., Glenn, Comment 6, at 2; U-Save Auto Rental,

Comment 19, at 3; Nopar, Comment 26, at 2; Simon, Comment 36, at 7.

38 See, e.g., Dub, Comment 2, at 4; SRA International,

Comment 8, at 2; RENN, Comment 24, at 2; Nopar, Comment 26, at 4.

39 See, e.g., D'Imperio, Comment 16, at 11; Simon, Comment

36, at 5.

40 See, e.g., RENN, Comment 24, at 2; Little Caesars,

Comment 31, at 2; Simon, Comment 36, at 4-5; Century 21, Comment 41,

at 2; Medicap, Comment 48, at 2.

41 See, e.g., Glenn, Comment 6, at 2; SRA International,

Comment 8, at 3; Simon, Comment 36, at 7; Gaston, TR at 531-32. See

also ABA AT, Comment 22, at 11.

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b. Objectives and Regulatory Alternatives

The Commission believes that consumers should have access to

material information before investing in a franchise or business

opportunity. The Rule Review record, however, does not support the view

that a franchisor's failure to provide earnings information is

necessarily deceptive or unfair. Approximately 20 percent of

franchisors currently choose to make earnings disclosures.42 Thus,

in theory, prospective franchisees can find franchise systems that

voluntarily disclose earnings information.43 If prospective

franchisees were to seek out such franchise systems, or demand the

disclosure of such information from franchisors, ordinary market forces

may compel an increasing number of franchisors to disclose earnings

information voluntarily, without federal government intervention.

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42 See, e.g., Bortner, Comment 37, at 3; NASAA, Comment

43, at 3.

43 See Lewis, Comment 40, at Exhibit G (compilation of

sales, cost, and profit information on 145 franchise systems in 70

business categories).

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In addition, the Rule Review record indicates that prospective

franchisees can obtain earnings information from other sources. For

example, typical expenses, such as labor and rent, may be available

from industry trade associations and industry trade press.44 In

addition, prospective franchisees are free to discuss earnings and

other performance issues with former and existing franchisees.

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44 See, e.g., U-Save Auto Rental, Comment 19, at 2; RENN,

Comment 24, at 1.

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Moreover, the Rule Review record does not provide a sufficient

basis for the Commission to formulate an earnings disclosure that would

be both useful and not misleading to prospective franchisees. Finally,

mandating earnings might impose additional burdens and costs on

existing franchisees. Yet, the Rule Review record is insufficient to

establish that these increased burdens and costs are outweighed by

benefits to prospective franchisees.

Nonetheless, the Commission believes that it is important to

correct the misrepresentation made by some franchisors that the

Commission or the Franchise Rule actually prohibits the disclosure of

earnings information. At the same time, the Commission wants to caution

prospective franchisees not to rely on unsubstantiated earnings

representations. Accordingly, the Commission solicits comment on

whether the Rule should be modified to require all franchisors to make

the following prescribed statement in their disclosure document:

The FTC's Franchise Rule permits a franchisor to provide you

with information about the actual or potential sales, income, or

profits of its outlets, provided that there is a reasonable basis

for such information and the franchisor offers to provide you with

written substantiation. You should not rely on any information on

sales, income, or profits provided by a franchisor or its

salesperson if written substantiation is not offered.

[[Page 9119]]

In addition, the Commission solicits comment on whether

franchisors who do not disclose earnings information should include

the following additional prescribed statement:

This franchisor does not make any representations about sales,

income, or profits. We also do not authorize our salespersons to

make any such representations either orally or in writing.

5. New Marketing Practices and Technological Developments

a. Background

In the FR Notice, the Commission sought information on new

marketing practices and technological developments that might have an

impact on the Rule. In response, several commenters note the increase

in international franchise sales by American franchisors.45 These

commenters request that the Commission clarify its position on whether

the Franchise Rule applies in such circumstances. In order to develop

the record on this issue, Commission staff held a one-day public

workshop conference in March 1996.

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45 See, e.g., IFA, Comment 32, at 15-16; Zwisler, Comment

59, at 6; Tifford, TR at 199. See generally Mazero, Comment 50.

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The Rule Review record strongly supports modification of the Rule

to clarify that international franchise sales are not within its

purview. Among other factors, commenters note that: (1) the Commission

did not contemplate international franchising when it promulgated the

Rule;46 (2) the disclosures required by the Franchise Rule are

aimed at the domestic market;47 (3) foreign franchise purchasers

are sophisticated and do not need the Rule's protections;48 (4)

attempting to comply with the Franchise Rule in foreign sales might

result in the dissemination of inaccurate or misleading

information;49 and (5) application of the Franchise Rule to

international sales would unnecessarily impede competition.50

---------------------------------------------------------------------------

46 See, e.g., Clanton, TR2 at 169; Baer, TR2 at 160-61; Wulff,

TR2 at 154.

47 See, e.g., Wieczorek, Comment 60, at 3-5; Pepsico,

Comment 62, at 2-3; IFA, Comment 63, at 4; Clanton, TR2 at 169.

48 See, e.g., IFA, Comment 64, at 3; Loewinger, TR2 at 85;

Swartz, TR2 at 113. See also Mazero, Comment 50, at 33; Zwisler,

Comment 59, at 3.

49 See, e.g., Friday's, Comment 58, at 1; Mazero, TR at

188. See also Wieczorek, Comment 60, at 3-5; Miolla, TR2 at 74-75;

Ainsley, TR2 at 116.

50 See, e.g., Zeidman, TR2 at 109; Brennan, TR2 at 165;

Mills, TR2 at 203.

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In addition to the international sales issue, the Commission

explored whether the Rule should be modified in light of increased

sales of franchises and business opportunities through the telephone

and the Internet. For example, one commenter observes that the day may

come when franchise sales are conducted solely via computer without any

``personal meeting.'' 51

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51 See Pineles, TR at 180-81.

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The Commission also believes that two additional marketing

developments warrant further comment. First, the Commission notes the

increased sale of ``stream of revenue'' package franchises. Most often

used in commercial janitorial services franchises, stream of revenue

franchises involve a promise by the franchisor to provide the

franchisee with accounts that will generate a certain level of income.

The franchisee then selects the level of accounts desired and pays a

franchise fee that varies in some proportion to the value of those

accounts. The Commission believes that the offer of accounts worth a

certain value suggests to the prospective franchisee a particular level

of potential income, which constitutes the making of an earnings

representation under the Rule.

Second, the Commission notes the increasing sale of ``co-branded''

franchises, in which two or more franchisors combine forces to offer a

franchisee the opportunity to operate two or more trademarked

franchises in one outlet. For example, an ice cream franchisor and a

donuts franchisor might offer one joint franchise system. In such

circumstances, the Commission is uncertain whether the franchisee is

purchasing two individually trademarked franchises (and thus should

receive separate disclosures from each franchisor) or is purchasing a

hybrid franchise arrangement that has its own risks (and thus should

receive a single unified disclosure document).52

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52 Co-branding raises a number of disclosure issues. For

example, should the purchaser of a co-branded franchise receive

disclosures of franchisee statistics from each individual franchisor

participating in the co-branded arrangement, or should the purchaser

also receive statistics on previous purchasers of the co-branded

franchise. Similarly, must termination and renewal rights be

consistent for each participating franchisor, or may each

participating franchisor impose their own termination and renewal

rights?

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b. Objectives and Regulatory Alternatives

The Commission wants to ensure that the Rule does not impose

unnecessary costs and burdens without corresponding benefits to

consumers. Accordingly, the Commission seeks comment on whether it

should modify the Rule to clarify that the Rule does not reach the sale

of franchises to be located or operated outside the United States, its

territories, and possessions. The Commission also seeks comment on the

appropriate language for such a modification.

The Commission also wants to ensure that consumers receive pre-sale

disclosures early in the sales process. The Rule requires franchisors

to provide prospective franchisees with a disclosure document at the

earlier of the ``time for making of disclosures'' 53 or the first

``personal meeting.'' 54 The Commission believes that the term

``personal meeting,'' which triggers the franchisor's obligation to

provide a disclosure document, may be obsolete in light of the

increasing use of the telephone and the Internet to market franchises

and business opportunities. The term ``personal meeting'' contained in

the Rule was designed to reach that point in the sales process when the

franchise seller engages a prospective franchisee in substantive

discussion about the venture being offered. Accordingly, the Commission

seeks comment on whether the Rule should be modified to replace the

term ``personal meeting'' with a term such as ``first substantive

discussion.'' The Commission seeks comment on alternatives, as well as

any costs or benefits associated with each such alternative. At the

same time, the Commission seeks comment on how franchisors might be

able to comply with the Rule's disclosure requirements through the

Internet.

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53 The term ``time for making of disclosures'' means ten

business days prior to the earlier of: (1) the execution of a

franchise agreement or other agreement imposing a binding legal

obligation; or (2) the payment of a fee in connection with the sale

of the proposed franchise. See 15 CFR Sec. 436.2(g).

54 The term ``personal meeting'' means a face-to-face

meeting held for the purpose of discussing the sale or possible sale

of a franchise. See 16 CFR Sec. 426.2(o).

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In addition, the Commission wants to ensure that franchisors and

franchisees are clear about what constitutes an earnings representation

that would trigger the Rule's substantiation requirements. Accordingly,

the Commission seeks comment on whether it should amend the Rule's

treatment of earnings representations to make explicit that the offer

of a stream of revenue franchise is the making of an earnings

representation that would trigger the Rule's earnings substantiation

requirements.

Finally, the Commission wants to ensure that prospective

franchisees receive complete and relevant disclosures. Accordingly, the

Commission seeks comment on the sale of co-branded franchises. In

particular, the Commission seeks information on the extent to which

franchise sales involve more than one trademark. It also

[[Page 9120]]

solicits comment on whether there is any confusion among franchisors

with respect to their disclosure obligation when joining forces to sell

a co-branded franchise. The Commission also seeks comment on whether

any need exists to clarify the Rule to address disclosure obligations

with respect to the sale of a co-branded franchise system.

6. Alternatives to Burdensome Regulations and Enforcement

a. Background

On March 4, 1995, the White House issued a Memorandum directed at

all heads of federal departments and agencies on the Regulatory

Reinvention Initiative. This memorandum makes regulatory reform a top

priority. Among other things, the memorandum asks agencies to learn

from those affected by regulation, as well as to consider ways to

promote better communication, consensus building, and a less

adversarial environment between regulators and the regulated.

Specifically, the memorandum asks agencies to consider if the intended

goals of regulation can be achieved in a more efficient, less intrusive

way, and whether private sector alternatives can better achieve the

public good envisioned by the regulation.

In response to the March 4, 1995, memorandum on the Regulatory

Reinvention Initiative, the Commission intends to reduce regulatory

burdens, where appropriate. The Commission also intends to use the

private sector as a partner in a cooperative effort to tackle deceptive

and unfair trade practices where they exist. Indeed, developing

partnership with industry has become vital in an age of reduced law

enforcement resources. Thus, in addition to its role as a vigilant law

enforcement agent, the Commission will encourage self-regulation by the

private sector, where appropriate.

b. Objectives and Regulatory Alternatives

In keeping with the goals of the Regulatory Reinvention Initiative,

the Commission seeks comment on whether it should develop a program to

reduce or waive civil penalties for violations of the Franchise Rule

under limited circumstances. In an age of decreasing resources, the

Commission questions whether it should continue to use its limited

resources to pursue technical or minor violations of the Franchise

Rule, instead of focusing its attention on more serious violations that

have caused significant consumer injury.

Accordingly, the Commission solicits comment on: (1) whether it

should develop a program to reduce or waive civil penalties for

technical or minor violations of the Franchise Rule; (2) under what

circumstances should the Commission consider reducing or waiving civil

penalties?; (3) under what circumstances would it be inappropriate for

the Commission to reduce or waive a civil penalty?; and (4) what terms

and conditions should accompany the waiver or reduction of a civil

penalty? The Commission also seeks comments on the costs and benefits

of any such program to reduce civil penalties on both franchisors and

franchisees?

7. The Rulemaking Process

The Commission seeks the broadest participation by the affected

interests in the rulemaking. To that end, the Commission will revise

the Franchise Rule through an ``open rulemaking,'' which will provide

all affected interests numerous opportunities to submit comments and to

participate in the rule amendment process.

The Commission encourages all interested parties to submit written

comments. The Commission, however, recognizes that some interested

parties may find it easier to submit comments through the Internet or

by telephone. Accordingly, the Commission will permit comments to be

filed via an E-Mail address on the Internet and through a telephone

hotline number designated for this purpose.

The Commission also expects the affected interests to assist the

Commission in analyzing various options and in drafting a proposed

amended rule. The Commission believes that public workshop conferences

to discuss the various issues involving the Rule are a productive and

efficient means to develop the record and explore various alternatives.

The Commission will also use public workshop conferences to assist the

Commission in drafting a proposed amended rule.

a. Internet Comments

Staff will place a copy of this ANPR on the Internet at the FTC's

web site: http://www.ftc.gov. In addition, the Commission will accept

comments through the Internet. Accordingly, all interested parties may

submit a comment through an E-Mail address designated for this purpose:

``[email protected]'' Each comment should contain the name and address of

the commenter. The Commission will place all comments on the public

record and on the Internet at its web site.

b. Telephone Hotline

Parties interested in submitting a comment via telephone may do so

by calling the Commission's telephone hotline number designated for

this purpose: (202) 326-3573. This hotline number is intended to

facilitate public comment on the rulemaking; it is not intended as a

hotline number for disseminating franchise information or for receiving

complaint information. The Commission requests all callers to identify

themselves clearly, including their name, address, and telephone

number. Staff will transcribe all messages verbatim and place them on

the public record and on the Internet at the FTC's web site.

c. Public Workshop Conferences

In order to facilitate the greatest participation by the public in

the rule amendment process, Commission staff will hold several public

workshop conferences to discuss the issues noted above. Staff will

announce a schedule of these conferences after the close of the comment

period.

Part C--Request for Comments

Members of the public are invited to comment on any issues or

concerns they believe are relevant or appropriate to the Commission's

consideration of the proposed amendments to the Franchise Rule. The

Commission requests that factual data upon which the comments are based

be submitted with the comments. In addition to the issues raised above,

the Commission solicits public comment on the specific questions

identified below. These questions are designed to assist the public and

should not be construed as a limitation on the issues on which public

comment may be submitted.

Questions

A. The Franchise Rule

1. Is there a continuing need for the Commission's Franchise Rule?

Are there any specific Rule disclosure requirements that no longer

serve a useful purpose? Should the Commission modify the Rule to delete

those requirements? What would be the costs and benefits to franchisors

and to prospective franchisees?

B. The UFOC Guidelines

2. Should the Commission revise the Rule based on the UFOC

guidelines disclosure requirements? What would be the costs and

benefits to franchisors and to prospective franchisees?

3. If the Commission revises the Rule based on the UFOC guidelines

disclosure requirements, should the

[[Page 9121]]

Commission modify the litigation disclosures (Item 3 of the UFOC) to

require franchisors to disclose law suits filed by franchisors against

franchisees, in addition to suits by franchisees against franchisors?

What would be the costs and benefits to franchisors and to prospective

franchisees?

4. If the Commission revises the Rule based on the UFOC guidelines

disclosure requirements, should the Commission modify the franchisee

statistics disclosures (Item 20 of the UFOC guidelines), and if so,

how? What would be the costs and benefits to franchisors and to

prospective franchisees?

5. To what extent do franchisors use ``gag orders'' to inhibit

former or existing franchisees from speaking with prospective

franchisees or other parties? Should the Commission modify the Rule to

prohibit franchisors from using such gag order provisions and, if so,

how? What alternatives would ensure that prospective franchisees can

freely obtain information from former and existing franchisees about

their experiences with the franchise system? What would be the costs

and benefits of such alternatives?

6. Should the Commission retain the three-year phase-in of

financial statements for new entrants? What alternative phase-in

provisions would be appropriate? What are the costs and benefits of

each alternative?

7. If the Commission uses the UFOC guidelines as a model for

revising the Franchise Rule, should the Commission consider modifying

or fine-tuning any of the UFOC disclosure requirements? Which ones

should be modified and, if so, how? What would be the costs and

benefits to franchisors and to prospective franchisees?

C. Business Opportunities

8. What types of business opportunities are common in the United

States? What trade associations or other organizations represent the

interests of business opportunities?

9. Are there certain types of business opportunities where

purchasers are more likely to lose money than others? What are the

characteristics of these loss-prone business opportunities? How can the

Commission distinguish between the loss-prone business opportunities

and those that are more likely to prove profitable?

10. What types of business opportunities are known to engage in

fraud? How can the Commission distinguish between fraudulent business

opportunities and legitimate business opportunities?

11. Should the minimum investment of $500 that triggers Franchise

Rule coverage be lowered for business opportunities? If so, what should

be the minimum threshold? What would be the costs and benefits of such

a minimum? What would be the costs and benefits of requiring

disclosures for sales that involve investments smaller than $500.

12. How should the Commission define the term ``business

opportunity'' for Rule purposes? What characteristics distinguish

selling a business opportunity from just selling goods or services? How

can these characteristics be used to limit the scope of any business

opportunity rule? What would be the costs and benefits of any

definition offered?

13. What types of offers of assistance are crucial to a business

opportunity? In seeking to define the term ``business opportunity,''

what types of assistance should the Commission focus on? What would be

the costs and benefits of such proposals?

14. Should the Commission define the term ``business opportunity''

as:

Any written or oral business arrangement, however denominated,

which consists of the payment of any consideration for:

A. The right or means to offer, sell, or distribute goods or

services (whether or not identified by a trademark, service mark, trade

name, advertising, or other commercial symbol); and

B. More than nominal assistance to any person or entity in

connection with or incident to the establishment, maintenance, or

operation of a new business, or the entry by an existing business into

a new line or type of business.

What alternative definitions of the term ``business opportunity''

would be appropriate? What would be the costs and benefits of each

alternative?

15. What pre-sale disclosures are necessary to ensure that business

opportunity purchasers receive material information necessary to make

an informed investment decision? What would be the costs and benefits

of each such disclosure?

16. What pre-sale disclosures are necessary to prevent fraud in the

sale of business opportunities? What would be the costs and benefits of

each such disclosure?

D. Trade Shows

17. Should the Commission modify the Rule to exempt trade show

promoters from Rule coverage as brokers? What would be the costs and

benefits of such an exemption?

18. Should the Commission modify the Rule to contain a separate

trade show sales provision that would require franchisor-exhibitors,

brokers, and their agents to have readily available at trade shows for

public inspection either a specimen copy of their disclosure document

or a letter explaining why they fall within one of the Rule's

exclusions or exemptions? If so, how should the Commission define the

term ``available for public inspection?'' What would be the costs and

benefits of this proposal?

19. In the alternative, should the Commission modify the Rule's

definition of ``personal meeting'' to require franchisor-exhibitors,

brokers, and their agents to have readily available at trade shows for

public inspection either a specimen copy of their disclosure document

or a letter explaining why they fall within one of the Rule's

exclusions or exemptions? If so, how should the Commission define the

term ``available for public inspection?'' What other alternatives

should the Commission consider to reduce the instances of deceptive

sales representations at trade shows? What would be the costs and

benefits of each proposal?

E. Earnings Disclosures

20. To what extent do franchisors represent that either the Rule or

the Commission prohibits them from making earnings representations? Is

there a need to clarify the Rule to make clear that neither the

Commission nor the Rule prohibits franchisors from making earnings

representations?

21. Should the Commission modify the Rule to require all

franchisors to make the following prescribed statement:

The FTC's Franchise Rule permits a franchisor to provide you with

information about the actual or potential sales, income, or profits of

its outlets, provided that there is a reasonable basis for such

information and the franchisor offers to provide you with written

substantiation. You should not rely on any information on sales,

income, or profits provided by a franchisor or its salespersons if

written substantiation is not offered.

What alternative language would be appropriate? What would be the

costs and benefits of such a disclosure?

22. Should the Commission modify the Rule to require all

franchisors who do not make earnings disclosures to make the following

additional prescribed disclosure:

This franchisor does not make any representations about sales,

income, or profits. We also do not authorize our salespersons to make

any such

[[Page 9122]]

representations either orally or in writing.

Would such a disclosure be interpreted to hold harmless a

franchisor whose sales people routinely make unauthorized earnings

representations? What alternative language would be appropriate? What

would be the costs and benefits of such a disclosure?

23. Should the Commission modify the Rule's treatment of earnings

representations to make explicit that the sale of ``stream of revenue

contracts'' is the making of an earnings claim? What would be the costs

and benefits of such a modification?

24. Should the Commission modify the Rule's disclosures for

earnings claims in advertising? What are the costs and benefits

associated with each of the disclosures for earnings claims in

advertising? Does the ``caution'' disclosure provide any information

that is not already conveyed by the other required disclosure

concerning the percentage of outlets that have achieved the earnings

claimed?

25. Should the Commission modify the Rule to require a disclosure

for earnings claims only if a significant percentage of outlets do not

achieve the earnings claimed? If so, what percentage should trigger the

disclosure requirement? What would be the costs and benefits of

adopting such an approach?

F. New Marketing Approaches and New Technologies

26. Should the Commission modify the Rule to clarify that the Rule

does not reach the sale of franchises to be located or operated outside

the United States, its territories, and possessions? If so, please

provide recommended language for such a modification. What would be the

costs and benefits of such a modification?

27. Should the Commission continue to use the term ``personal

meeting'' for making disclosures in light of the use of the telephone,

the Internet, and other technologies to sell franchises? Should the

Commission replace the term ``personal meeting'' with the term ``first

substantive discussion?'' If so, how should the term ``first

substantive discussion'' be defined? What other term would be

appropriate? What would be the costs and benefits of such a

modification?

28. Should the Commission permit franchisors to comply with the

Franchise Rule's disclosure obligations by posting disclosure documents

on the Internet? What would be the costs and benefits to both

franchisors and prospective franchisees? What aspects of the Rule (or

UFOC requirements) might hinder compliance via the Internet? How might

the Commission modify the Rule to protect consumers from any

potentially deceptive or unfair practices that might arise from firms'

efforts to comply with the Rule's disclosure provisions via the

Internet?

29. To what extent do franchisors offer for sale multi-trademark

franchises (``co-branded'' franchises) in the United States? Do

franchisors have sufficient guidance under the Rule to determine their

disclosure obligations with respect to the sale of co-branded

franchises? Do franchisees purchasing a co-branded franchise need

additional or different disclosures than those who purchase a single-

trademark franchise? Should the Commission modify the Rule to address

these concerns and, if so, how? What would be the costs and benefits of

any such modification?

G. Self Regulation and Alternatives to Law Enforcement

30. Should the Commission develop a program to reduce or waive

civil penalties for certain violations of the Franchise Rule? Under

what circumstances would it be appropriate for the Commission to waive

or reduce civil penalties involving Franchise Rule violations? What

terms or conditions should accompany such a waiver or reduction of

civil penalties? Under what circumstances would it be inappropriate to

reduce or waive civil penalties? What would be the costs and benefits

of such a program on franchisors and franchisees?

H. Additional Issues

31. How can the Commission ensure the broadest participation in the

rulemaking process by affected interests? How can the Commission

identify affected interests, facilitate the submission of comments, and

increase participation by affected interests at future public workshop

conferences?

List of Subjects in 16 CFR Part 436

Advertising, Business and industry, Franchising, Trade practices.

Authority: 15 U.S.C. 41-58.

By direction of the Commission.

Donald S. Clark,

Secretary.

Attachment 1--September 1995 Public Workshop Conference

Panelists

1. Harold Brown (``Brown''), Brown & Stadfeld

2. Sam Damico (``Damico''), Q.M. Marketing, Inc.

3. Connie B. D'Imperio (``D'Imperio''), Color Your Carpet, Inc.

4. Eric Ellman (``Ellman''), Direct Selling Association (``DSA'')

5. Mark B. Forseth (``Forseth''), Locke Purnell Rain Harrell

6. Mike Gaston (``Gaston''), Barkley & Evergreen

7. Susan Kezios (``Kezios''), American Franchisee Association

(``AFA'')

8. William Kimball (``Kimball''), Iowa Coalition for Responsible

Franchising

9. Warren Lewis (``Lewis''), Lewis & Trattner

10. Steven Maxey (``Maxey''), North American Securities

Administrators Association, Inc. (``NASAA'')

11. Joyce G. Mazero (``Mazero''), Locke Purnell Rain Harrell

12. Barry Pineles (``Pineles''), U.S. Small Business Administration

(``SBA Advocacy'')

13. Robert Purvin (``Purvin''), American Association of Franchisees

& Dealers (``AAFD'')

14. Steven Rabenberg (``Rabenberg''), Explore St. Louis

15. Matthew R. Shay (``Shay''), International Franchise Association

(``IFA'')

16. Neil A. Simon (``Simon''), Hogan & Hartson

17. Robin Spencer (``Spencer''), representing American Franchisee

Association

18. Leonard Swartz (``Swartz''), Arthur Andersen & Co.

19. John Tifford (``Tifford''), Brownstein Zeidman & Lore

20. Ronnie Volkening (``Volkening''), The Southland Corporation

21. Dennis E. Wieczorek (``Wieczorek''), Rudnick & Wolfe

22. William J. Wimmer (``Wimmer''), Iowa Coalition for Responsible

Franchising

Public Participants

1. Peter Denzen (``Denzen'')

2. Bob Hessler (``Hessler''), Wendy's

3. Chris Huke, (``Huke''), SC Promotions

4. Michael Jorgensen (``Jorgensen'')

5. Robert L. Perry (``Perry'')

6. Brian Schnell (``Schnell''), Gray, Plant, Mooty

Attachment 2--March 1996 Public Workshop Conference

Panelists

1. Kay M. Ainsley (``Ainsley''), Ziebart International Corp.

2. John R.F. Baer (``Baer''), Keck, Mahin & Cate

3. Michael Brennan (``Brennan''), Rudnick & Wolfe

4. Joel R. Bucksberg (``Bucksberg''), HFA Inc.

5. David A. Clanton (``Clanton''), Baker & McKenzie

6. Kenneth R. Costello (``Costello''), Loeb & Loeb

7. Edward J. Fay (``Fay''), Kwik Kopy Corp.

8. Mark B. Forseth (``Forseth''), Locke Purnell Rain Harrell

9. Byron E. Fox (``Fox''), Hunton & Williams

10. Bruce Harsh (``Harsh''), International Trade Specialist, U.S.

Department of Commerce

11. Arnold Janofsky (``Janofsky''), Precision Tune

12. Susan P. Kezios (``Kezios''), American Franchisee Association

(``AFA'')

[[Page 9123]]

13. Alex S. Konigsberg, QC (``Konigsberg''), Lapoint Rosenstein

14. Andrew P. Loewinger (``Loewinger''), Abraham Pressman & Bauer

15. H. Bret Lowell (``Lowell''), Brownstein Zeidman & Lore

16. John Melle (``Melle''), Office of U.S. Trade Representative

17. Raymond L. Miolla (``Miolla''), Burger King Corp.

18. Alec Papadakis (``Papadakis''), Hurt Sinisi Papadakis

19. Matthew R. Shay (``Shay''), International Franchise Association

(``IFA'')

20. Neil A. Simon (``Simon''), Hogan & Hartson

21. Leonard Swartz (``Swartz''), Arthur Andersen & Co.

22. Greg L. Walther (``Walther''), Outback Steakhouse International

23. Dennis E. Wieczorek (``Wieczorek''), Rudnick & Wolfe

24. Erik B. Wulff (``Wulff''), Hogan & Hartson

25. Philip F. Zeidman (``Zeidman''), Brownstein Zeidman & Lore

26. Carl Zwisler (``Zwisler''), Keck, Mahin & Cate

Public Participants

1. Jeff Brams (``Brams''), Sign-A-Rama and Shipping Connection

2. Pamella Mills (``Mills''), Baker & McKenzie

Attachment 3--Table of Commenters

Comment 1. Robert E. Mulloy, Jr. (``Mulloy'')

Comment 2. Stanley M. Dub (``Dub''), Dworken & Bernstein

Comment 3. Marvin J. Migdol (``Migdol''), Nationwide Franchise

Marketing Services

Comment 4. SCPromotions, Inc. (``SCPromotions'')

Comment 5. R. Dana Pennell (``Pennell'')

Comment 6. Robin Day Glenn (``Glenn'')

Comment 7. Jack McBirney (``McBirney''), McGrow Consulting

Comment 8. SRA International (``SRA International'')

Comment 9. Harold Brown (``Brown''), Brown & Stadfeld

Comment 10. Ronald N. Rosenwasser (``Rosenwasser'')

Comment 11. Louis F. Sokol (``Sokol'')

Comment 12. J. Howard Beales III (``Beales''), Professor, George

Washington University

Comment 13. Peter Lagarias (``Lagarias'')

Comment 14. Harold L. Kestenbaum (``Kestenbaum'')

Comment 15. Walter D. Wilson (``Wilson''), Better Business Bureau of

Central Georgia, Inc.

Comment 16. Connie B. D'Imperio (``D'Imperio''), Color Your Carpet,

Inc.

Comment 17. Q.M. Marketing, Inc. (``Q.M. Marketing'')

Comment 18. David Gurnick (``Gurnick''), Kindel & Anderson

Comment 19. U-Save Auto Rental (``U-Save Auto Rental'')

Comment 20. The Longaberger Co. (``Longaberger'')

Comment 21. Direct Selling Association (``DSA'')

Comment 22. American Bar Association, Section of Antitrust Law

(``ABA AT'')

Comment 23. Dennis E. Wieczorek (``Wieczorek''), Rudnick & Wolfe

Comment 24. Real Estate National Network (``RENN'') (representing

Better Homes and Gardens Real Estate Service; Century 21 Real Estate

Corp.; Coldwell Bankers Residential Group; Electronic Realty

Associates (``ERA''); Realty World Corp.; Re/Max International; and

The Prudential Real Estate Affiliates)

Comment 25. Attorney General Jim Ryan (``General Ryan), State of

Illinois

Comment 26. Alan S. Nopar (``Nopar''), Bosco, Blau, Ward & Nopar

Comment 27. Snap-On, Inc. (``Snap-On'')

Comment 28. Steven Rabenberg (``Rabenberg''), Explore St. Louis

Comment 29. Douglas M. Brooks (``Brooks''), Martland & Brooks

Comment 30. Robert N. McDonald (``Commissioner McDonald''),

Securities Commissioner, State of Maryland

Comment 31. Little Caesars (``Little Caesars'')

Comment 32. International Franchise Association (``IFA'')

Comment 33. Brownstein Zeidman & Lore (``Brownstein Zeidman'')

Comment 34. Jere W. Glover (``Glover''), Counsel for Advocacy, U.S.

Small Business Administration (``SBA Advocacy'')

Comment 35. Jan Meyers (``Representative Meyers''), Chair, House

Committee on Small Business

Comment 36. Neil A. Simon (``Simon''), Hogan & Hartson

Comment 37. Deborah Bortner (``Bortner''), Washington State

Department of Financial Institutes, Securities Division

Comment 38. American Franchisee Association (``AFA'')

Comment 39. American Association of Franchisees & Dealers (``AAFD'')

Comment 40. Warren Lewis (``Lewis''), Lewis & Trattner

Comment 41. Century 21 Real Estate Corp. (``Century 21'')

Comment 42. John Hayden (``Hayden'')

Comment 43. North American Securities Administrators Association,

Inc. (``NASAA'')

Comment 44. Robert L. Perry (``Perry'')

Comment 45. The State Bar of California, Business Law Section (``CA

BLS'')

Comment 46. Mike Gaston (``Gaston''), Barkley & Evergreen

Comment 47. The Southland Corporation (``Southland'')

Comment 48. Medicap Pharmacies, Inc. (``Medicap'')

Comment 49. Rochelle B. Spandorf (``Spandorf''), ABA Forum on

Franchising, Andrew C. Selden (``Selden''), David J. Kaufmann

(``Kaufmann'')

Comment 50. Joyce G. Mazero (``Mazero''), Locke Purnell Rain Harrell

Comment 51. Mark B. Forseth (``Forseth''), Locke Purnell Rain

Harrell

Comment 52. Forte Hotels (``Forte Hotels'')

Comment 53. R.A. Politte (``Politte'')

Comment 54. Politte (see supra, Comment 53)

Comment 55. Brown (see supra, Comment 9)

Comment 56. Wieczorek (see supra, Comment 23)

Comment 57. Scott Shane (``Shane''), Georgia Institute of Technology

Comment 58. Friday's

Comment 59. Carl E. Zwisler (``Zwisler''), Keck, Mahin & Cate

Comment 60. Wieczorek (see supra, Comment 23)

Comment 61. Enrique A. Gonzalez (``Gonzalez''), Gonzalez Calvillo Y

Forastierei

Comment 62. Pepsico Restaurants International (``Pepsico'')

Comment 63. IFA (see supra, Comment 32)

Comment 64. Atlantic Richfield Company (``ARCO'')

Comment 65. David Clanton (``Clanton'')

Comment 66. Leonard Swartz (``Swartz''), Arthur Andersen & Co.

Comment 67. John R.F. Baer (``Baer''), Keck, Mahin & Cate

Comment 68. Lynn Scott (``Scott'')

Comment 69. Eversheds (``Eversheds'')

Comment 70. Brownstein Zeidman (see supra, Comment 33)

Comment 71. Penny Ward (``Ward''), Baker & McKenzie

Comment 72. Matthias Stein (``Stein'')

Comment 73. Byron Fox (``Fox''), Hunton & Williams

Comment 74. Papa Johns Pizza (``Papa Johns'')

Comment 75. Harold L. Kestenbaum (see supra, Comment 14)

[FR Doc. 97-4988 Filed 2-27-97; 8:45 am]

BILLING CODE 6750-01-P