Federal Register, Volume 62 Issue 40 (Friday, February 28, 1997)

[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Proposed Rules]
[Pages 9115-9123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4988]

[[Page 9115]]

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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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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

51 See Pineles, TR at 180-81.
---------------------------------------------------------------------------

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

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?
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

^{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).
---------------------------------------------------------------------------

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}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}