FTC Publishes Staff Report on Proposed Franchise Rule Amendments

On August 25, 2004, the FTC released its long-awaited Staff Report on the proposed amendments to the FTC Franchise Rule.  This staff report, which consists of 400-plus pages, contains the staff’s recommendations on the pending amendments to the Franchise Rule.  The Staff Report is based on the rulemaking record created during the FTC’s Advance Notice of Proposed Rulemaking issued in 1997 and the Notice of Rulemaking Proceeding issued in 1999.  The staff report consists of: (i) a discussion and analysis of the issues and comments appearing in the rulemaking record; and (ii) the text of the proposed amended rule whose adoption the staff is prepared to recommend to the Commission.

The proposed amended rule reflects evolutionary rather than revolutionary changes to a rule which has not changed in the nearly 25 years since it became effective on December 21, 1979.  These changes affect both the form and content of the disclosure documents provided to prospective franchisees, as well as the procedures by which disclosures are made.  Indeed, it will alter--for all franchisors--the manner in which they offer and sell franchises in the United States.

This FranCast describes some of the most notable proposed changes.