[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2595 Introduced in House (IH)]
103d CONGRESS
1st Session
H. R. 2595
To revise current Federal law and procedure to provide consumers with
comprehensive and accurate statistical information about franchising
and franchise practices, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 1, 1993
Mr. LaFalce (for himself, Mr. Dickey, Mr. Mfume, Mr. Wyden, Ms. Danner,
Mr. Towns, Mrs. Meek, Mr. McDermott, Mrs. Clayton, Mr. Torres, Mr.
Oberstar, Mr. Engle, Mr. Romero-Barcelo, Ms. Roybal-Allard, and Mr.
Shays) introduced the following bill; which was referred jointly to the
Committees on Energy and Commerce and Post Office and Civil Service
_______________________________________________________________________
A BILL
To revise current Federal law and procedure to provide consumers with
comprehensive and accurate statistical information about franchising
and franchise practices, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Federal Franchise Data and Public
Information Act''.
SEC. 2. FINDINGS AND PURPOSE.
(a) The Congress makes the following findings:
(1) Franchise business relationships represent a large and
growing segment of the Nation's retail and service businesses
and are replacing more traditional forms of small business
ownership in the American economy.
(2) Despite the growing importance of franchising in the
American marketplace, there is little objective or reliable
statistical information available to the public on the number,
ownership, and operation of franchise businesses; and broad-
based, objective data or investigations of franchise failures
are virtually non-existent.
(3) While there is a void of reliable statistics, a large
amount of statistical information is routinely provided in
articles and talks about franchising and in promotional
material for franchise opportunities that seek to represent
franchises as uniformly successful and virtually risk free.
(4) Inaccurate or misleading statistical information is
routinely attributed to Federal Government agencies and
reports, and data on franchise business compiled prior to 1987
by the United States Department of Commerce continue to be
widely cited, misrepresented or misused.
(5) Franchisees may suffer substantial losses from
investment in a franchise business without accurate or reliable
information or with expectations based on false or misleading
statistical information regarding the operation and success of
franchise businesses.
(b) It is the purpose of this Act to provide the public with
comprehensive statistical information about franchising and the
performance of franchise systems, to enhance the reliability of
information made available to the public regarding franchise practices,
and to assure that prospective investors have the information necessary
to make an informed decision on whether to invest in a franchise
business.
SEC. 3. NATIONAL FILING AND DATA COLLECTION.
(a) Filing of Franchise Disclosure Documents.--
(1) All persons, partnerships or corporations engaged in
selling or offering for sale any franchise, or any relationship
which is represented either orally or in writing to be a
franchise, whether within a state or in interstate commerce,
shall file with the United States Department of Commerce
(hereafter, the ``Commerce Department'') a copy of the
franchise disclosure document or circular for such franchise.
(2) The disclosure document or circular to be filed under
this subsection shall be--
(A) the most recent version of such document or
circular which incorporates information that is current
as of the close of the franchisor's most recent fiscal
year; and
(B) the most restrictive version of such document
or circular, and of the franchise agreement, provided
by the franchisor to any prospective franchisee, in
terms of the requirements imposed on franchisees and
the limitations on the rights and remedies available to
franchisees in the franchise agreement.
(3) The disclosure document or circular described in
paragraph (2) shall be filed annually at a time and in a manner
set forth in regulation by the Commerce Department.
(4) The Commerce Department shall make available to the
Congress, the Federal Trade Commission and other Federal
agencies, as requested, copies of any disclosure documents
filed under this subsection, and shall establish procedures
under which such documents may be viewed by the public.
(5) It shall be unlawful for a franchisor, subfranchisor or
franchise broker to make any statement or reference in
connection with any advertisement or disclosure document, or in
any oral or written statement or other representation to a
prospective franchisee, that a disclosure document has been
filed with the Commerce Department, or to make any statement or
representation that suggests or implies that the Commerce
Department or an other Federal agency has in any way reviewed
the content of the disclosure document, made any finding with
regard to the content of such document, or has in any way
passed upon the merits of, or given approval to, the franchise
opportunity.
(b) Data Collection and Publication.--
(1) The Commerce Department shall, not later than two
hundred and forty days after the date of enactment of this
section, establish procedures for the compilation, analysis and
publication of statistical information on franchise ownership
and national franchising practices. For purposes of such
procedures, the Commerce Department shall--
(A) use as the principal source of statistical
information on franchise ownership and practices the
disclosure documents for franchise opportunities
required to be filed annually under subsection (a);
(B) establish categories of statistical information
for annual data compilation and analysis, including but
not limited to: total numbers of franchisors and
franchise businesses, types of franchise businesses,
number of foreign franchisors, annual growth in
franchisors and franchise businesses, turnover in
franchise ownership and numbers of franchise failures;
(C) consult with Congress, the Federal Trade
Commission, the North American Securities
Administrators Association and other interested
organizations in identifying additional categories of
statistical information for purposes of data
compilation and analysis that--
(i) involve issues or information of
potential interest to the public, or of
specific concern to Federal and State
regulatory agencies; and
(ii) are obtainable from disclosure
materials filed in accordance with subsection
(a) and from other public sources of
information; and
(D) initiate periodic questionnaires of franchisors
or franchisees to obtain statistical information to
supplement information obtainable in disclosure
documents filed under subsection (a), or information in
connection with topics or categories of statistical
information identified under paragraph (C) for which
additional sources of information may be required,
except that no information obtained from such
questionnaires may be used in lieu of information
otherwise obtainable in a disclosure document filed
under subsection (a) of this section or in data
available in the Business Census pursuant to section 4
of this Act.
(2) The Commerce Department shall, not later than eighteen
months after the date of enactment of this section, and then
not less than annually thereafter, publish a report on the
information and findings relating to franchise ownership and
national franchising practices required to be complied under
this subsection. Such report shall be transmitted to the
appropriate Committees of the Congress and shall be made
available to the public through the Superintendent of
Documents.
SEC. 4. CENSUS DATA ON FRANCHISE BUSINESSES.
(a) The Bureau of the Census of the Department of Commerce
(hereafter, the ``Bureau of the Census'') shall include in its Business
Census for 1997, and in each such succeeding census, statistical
information on the number, ownership and operation of franchise
businesses.
(b) The Bureau of the Census shall--
(1) consult with the Federal Trade Commission to establish
criteria and procedures to identify franchise businesses to be
included in the Business Census; and
(2) consult with the Congress, the Federal Trade Commission
and other interested organizations in establishing categories
of statistical information to be collected in the Business
Census relating to the number, ownership and operation of
franchise businesses.
(c) Not later than two hundred and eighty days after the date of
enactment of this section, the Bureau of Census shall submit a report
to the Congress which shall describe the most cost effective and
accurate means to gather and present the statistical information
required to be collected pursuant to this section and identify the
categories of data relating to franchise businesses to be included in
the Business Census.
SEC. 5. RULES, REGULATIONS AND FEES.
(a) The Secretary of Commerce (hereafter, the ``Secretary'') is
authorized to make such rules and regulations as are necessary and
appropriate to implement the provisions of this Act. Any rules,
regulations, or orders issued pursuant to this authority may be
established in such form or manner, may contain such classifications or
differentiations, and may provide for such adjustments and reasonable
exceptions as in the judgement of the Secretary are necessary or proper
to effectuate the purposes of this Act, or to prevent circumvention or
evasion of any rule, regulation, or order issued hereunder.
(b) The Secretary is further authorized to collect a filing fee or
other reasonable charge from any person, partnership or corporation
subject to the filing requirement of section 3(a) of this Act for
purposes of defraying costs incurred by the Commerce Department in
connection with such filing.
SEC. 6. DEFINITIONS.
For purposes of this Act:
(1) The term ``advertisement'' means a communication
circulated generally by mail, or print media or electronic
media, or otherwise disseminated generally to the public, in
connection with an offer or sale of a franchise.
(2) The term ``disclosure document'' means either the
disclosure statement required by the Commission in Trade
Regulation Rule 436 (16 CFR 436) as it may be amended, or an
offering circular prepared in accordance with Uniform Franchise
Offering Circular guidelines as adopted and amended by the
North American Securities Administrators Association, Inc., or
its successor.
(3) The term ``franchise'' means--
(A) any continuing commercial relationship created
by a contract or agreement, whether express or implied,
oral or written, where--
(i) one person (the franchisor) grants to
another person (the franchisee) the right to
engage in the business of offering, selling or
distributing goods or services, in which--
(a) the goods or services offered,
sold or distributed by the franchisee
are substantially associated with the
trademark, service mark, trade name,
logotype, advertising, or other
commercial symbol owned or used by the
franchisor; or
(b) the franchisee must conform to
quality standards established by the
franchisor for the goods or services to
be offered, sold or distributed, and
operate under a name that includes, in
whole or in part, the franchisor's
trademark, service mark, trade name,
logotype, advertising, or other
commercial symbol;
(ii) the franchisor--
(a) communicates to the franchisee
knowledge, experience, expertise,
knowhow, trade secrets or other non-
patented information, regardless of
whether it is proprietary or
confidential;
(b) provides significant assistance
in the franchisee's method of
operation; or
(c) exercises significant controls
over the franchisee's method of
operation of the business; and
(iii) the franchisee, as a condition for
obtaining or commencing operation of a
franchise, is required to make, or to commit to
make, payment or other consideration to the
franchisor, or an affiliate of the franchisor,
other than payment for commercially reasonable
quantities of goods for resale at a bona fide
wholesale price.
(B) a subfranchise; or
(C) any commercial relationship entered into in
reasonable reliance on representations, whether oral or
written, that the criteria of subsection (A) will be
met.
(4) The term ``franchisee'' means a person to whom a
franchise is granted.
(5) The term ``franchisor'' means a person who grants a
franchise or a subfranchise.
(6) The term ``person'' means a natural person or any legal
entity recognized in law.
(7) The term ``subfranchise'' means a contract or an
agreement by which a person pays a franchisor for the right to
sell, offer for sale or arrange the sale of franchises, or to
provide goods or services to franchisees.
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