[Federal Register Volume 61, Number 32 (Thursday, February 15, 1996)]
[Proposed Rules]
[Pages 5969-5970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3416]



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FEDERAL TRADE COMMISSION

16 CFR Part 436


Franchise Rule Review Public Workshop Conference on the 
Application of the Franchise Rule to International Sales

AGENCY: Federal Trade Commission.

ACTION: Public Workshop Conference.

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SUMMARY: The Federal Trade Commission (``Commission'') will hold a 
Public Workshop Conference on the application of the Commission's Trade 
Regulation Rule on Disclosure Requirements and Prohibitions Concerning 
Franchising and Business Opportunity Ventures (``the Franchise Rule'' 
or ``Rule'') to international franchise sales. This Public Workshop 
Conference is being conducted as part of the Commission's ongoing 
regulatory review of the Franchise rule.

DATES: The Public Workshop Conference will be held on March 11, 1996, 
at the Federal Trade Commission, Room 332, Sixth Street and 
Pennsylvania Avenue, N.W., Washington, DC 20580. Notification of 
interest in participating in the Public Workshop Conference should be 
submitted in writing on or before March 4, 1996. Interested parties may 
submit written comments in lieu of participating in the Public Workshop 
Conference. Accordingly, the Rule Review record will remain open. The 
Commission staff encourages interested parties to submit any comments 
before March 8, 1996, so they can be considered during the Conference.

ADDRESSES: Notification of interest in participating in the Public 
Workshop Conference should be submitted in writing to Steven Toporoff, 
Division of Marketing Practices, Federal Trade Commission, Washington, 
DC 20580. Written comments should be directed to: Secretary, Federal 
Trade Commission, Room H-159, Sixth Street and Pennsylvania Avenue, 
N.W., Washington, DC 20580. Comments should be identified as ``16 CFR 
Part 436--Comment.''

FOR FURTHER INFORMATION CONTACT:
Steven Toporoff, (202) 326-3135, Division of Marketing Practices, 
Bureau of Consumer Protection, Federal Trade Commission, Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: As part of its systematic review of trade 
regulations and guides, the Commission published a request for public 
comment on the Franchise Rule. 60 FR 17656 (April 7, 1995). In 
September 1995, the Commission held a Public Workshop Conference in 
Bloomington, Minnesota, to discuss the comments and issues raised 
during the Rule Review. See 60 FR 34485 (July 3, 1995).
    Among other issues, the Commission solicited comment on what 
effects, it any, changes in relevant technology, economic conditions, 
and industry practices have had on the Rule. In response, the 
Commission received several comments noting that, since the Franchise 
Rule went into effect in the late 1970's, the market for franchises has 
grown both domestically and internationally. In the international 
arena, many American franchisors are selling territories and individual 
units to American and foreign investors to operate overseas. These 
commentors requested Commission guidance on whether the Franchise Rule 
applies to international sales and, if so, what form the disclosures 
should take.

A. The Public Workshop Conference

    The Public Workshop Conference will afford Commission staff and 
interested parties an opportunity to discuss whether the Franchise Rule 
applies to international franchise sales transactions. Commission staff 
will consider the views and suggestions made during the Conference, as 
well as any written comments, in formulating its final recommendations 
to the Commission.
    The Commission staff will select a limited number of parties to 
participate as panelists during the Conference. These parties will 
participate in an open discussion of the issues. It is contemplated 
that the panelists might ask and answer questions based upon their 
respective views.
    In addition, the Conference will be open to the general public. 
Members of the general public who attend the Conference may have an 
opportunity to make a brief oral statement presenting their views on 
the application of the Franchise Rules to international sales 
transactions. Oral statements of views by members of the general public 
will be limited to a few minutes. The time allotted for these 
statements will be determined on the basis of the time available and 
the number of persons who wish to make statements. This discussion will 
be transcribed and placed on the public record. In addition, written 
submissions of views, or any other written or visual materials, will be 
accepted during the Conference and will be made part of the public 
record.
    To the extent possible, Commission staff will select parties to 
represent the following affected interests: franchisors; franchisees; 
franchise brokers and consultants; economists and academicians; 
federal, state, and foreign 

[[Page 5970]]
law enforcement and regulatory authorities; and any other interests 
that Commission staff may identify and deem appropriate for 
representation.
    Parties representing the above-referenced interests will be 
selected on the basis of the following criteria:
    1. The party notifies Commission staff in writing of its interest 
on or before March 4, 1996;
    2. The party's participation would promote a balance of interests 
being represented at the Conference;
    3. The party's participation would promote the consideration and 
discussion of a variety of issues raised;
    4. The party has experience or expertise in international franchise 
sales transactions or related issues; and
    5. The number of parties selected will not be so large as to 
inhibit effective discussion among them.
    The Conference will be facilitated by a Commission staff member. It 
will be held on March 11, 1996, in Room 332, Federal Trade Commission, 
Sixth Street and Pennsylvania Avenue, N.W., Washington, DC 20580.
    To foster discussion at the Conference, and to assist the 
Commission in considering possible enforcement strategies, the 
Commission requests that the Conference participants bring with them 
specific written recommendations with respect to the application of the 
Franchise Rule in international sales. For example, if a participant 
believes that the sale of franchises in the international arena should 
be exempt from the Rule, then the Commission requests that participant 
to bring a written draft of such an exemption. Similarly, if a 
participant believes that the Commission should issue a policy 
statement on international sales, then the Commission requests that 
participant to bring a written draft of such a policy statement.

B. Issues for Discussion

    The Commission staff and panelists will discuss the following 
issues during a Public Workshop Conference:
    (1) What is the current state of international franchising?
    (a) How many American companies sell franchises internationally? 
How many outlets do American franchisors have located in foreign 
countries? Are the firms involved in international transactions 
primarily the larger franchise systems? What are the similarities and 
differences between franchisors that focus on domestic franchise sales 
and those that have an international presence?
    (b) What is the expected rate of growth in international franchise 
sales?
    (c) What is the state of franchise regulation in foreign countries?
    (d) Is there any case law on the application of the Franchise Rule 
to international sales? Explain the facts and any court rulings.
    (e) What are the relevant conflict of international law principles 
the Commission should consider?
    (2) How do American franchisors market their franchises overseas?
    (a) How do American franchisors attract prospective buyers?
    (b) How are international sales transactions similar to or 
different from the sales of domestic franchises?
    (c) How is the market for international sales similar to or 
different from the domestic market?
    (d) What are the similarities and differences between domestic 
franchisees and international franchisees? To what extent are American 
franchisors' sales of international franchises being made to American 
citizens? To what extent do they involve sales to foreign nationals? 
Are there differences between purchasers of domestic and international 
franchises with respect to their level of business sophistication, 
financial resources, and/or prior experience with franchising?
    (3) To what extent do American franchisors provide disclosure 
documents in international sales transactions?
    (a) What format do these disclosure documents follow (an FTC 
disclosure document, a UFOC, a country specific disclosure document, an 
international disclosure document, an amendment to a domestic 
disclosure document)?
    (b) What costs, over and above the costs of making disclosures on 
domestic sales, do American franchisors incur when they provide 
disclosure documents in international sales transactions?
    (c) To what extent do American franchisors provide other 
disclosures in international franchise sales?
    (4) What are the advantages and disadvantages, including costs, of 
complying with the Franchise Rule in international sales transactions?
    (5) Is application of the Franchise Rule to international sales 
necessary or desirable to protect franchise purchasers?
    (6) Is application of the Franchise Rule to international sales 
necessary or desirable to protect competition among American 
franchisors? Among American and foreign franchisors? Among American 
franchisors and other American business investment promoters not 
covered by the Franchise Rule?
    (7) What other factors or policies should the Commission consider 
in formulating an enforcement policy with respect to the application of 
the Franchise Rule to international sales?

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.
[FR Doc. 96-3416 Filed 2-14-96; 8:45 am]
BILLING CODE 6750-01-M