[Federal Register Volume 76, Number 154 (Wednesday, August 10, 2011)]
[Notices]
[Pages 49479-49481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20111]


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FEDERAL TRADE COMMISSION


Franchise Rule Information Collection Activities; Proposed 
Collection; Comment Request

AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').

ACTION: Notice.

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SUMMARY: The information collection requirements described below will 
be submitted to the Office of Management and Budget (``OMB'') for 
review, as required by the Paperwork Reduction Act (``PRA''). The FTC 
is seeking public comments on its proposal to extend through December 
31, 2014, the current PRA clearance for information collection 
requirements contained in its Trade Regulation Rule on Disclosure 
Requirements and Prohibitions Concerning Franchising (``Franchise 
Rule''). That clearance expires on December 31, 2011.

DATES: Comments must be submitted on or before October 11, 2011.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Franchise Rule, PRA 
Comment, FTC File No. P094400'' on your comment, and file your comment 
online at https://ftcpublic.commentworks.com/ftc/franchiserulePRA by 
following the instructions on the Web-based form. If you prefer to file 
your comment on paper, mail or deliver your comment to the following 
address: Federal Trade Commission, Office of the Secretary, Room H-113 
(Annex J), 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the proposed information requirements for the Franchise Rule 
should be addressed to Craig Tregillus, Staff Attorney, Division of 
Marketing Practices, Bureau of Consumer Protection, Federal Trade 
Commission, Room H-238, 600 Pennsylvania Ave., NW., Washington, DC 
20580, (202) 326-2970.

SUPPLEMENTARY INFORMATION: Under the PRA, 44 U.S.C. 3501-3521, Federal 
agencies must obtain approval from OMB for each collection of 
information they conduct or sponsor. ``Collection of information'' 
means agency requests or requirements that members of the public submit 
reports, keep records, or provide information to a third party. 44 
U.S.C. 3502(3); 5 CFR 1320.3(c). As required by section 3506(c)(2)(A) 
of the PRA, the FTC is providing this opportunity for public comment 
before requesting that OMB extend the existing paperwork clearance for 
the Franchise Rule, 16 CFR part 436 (OMB Control Number 3084-0107).
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    The Franchise Rule ensures that consumers who are considering a 
franchise investment have access to the material information they need 
to make an informed investment decision provided in a format that 
facilitates comparisons of different franchise offerings. The Rule 
requires that franchisors disclose this information to consumers and 
maintain records to facilitate enforcement of the Rule. Amendments to 
the Rule promulgated on March 30, 2007, which took effect after a one-
year phase-in on July 1, 2008, merged the Rule's disclosure 
requirements with the disclosure format accepted by 15 states that have 
franchise registration or disclosure laws.\1\ The amended Rule has 
significantly minimized any compliance burden beyond what is already 
required by state law.
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    \1\ 72 FR 15544 et seq.
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    The amended Rule requires franchisors to furnish to prospective 
purchasers with a Franchise Disclosure Document (``FDD'') that provides 
information relating to the franchisor, its business, the nature of the 
proposed franchise, and any representations by the franchisor about 
financial performance regarding actual or potential sales, income, or 
profits made to a prospective franchise purchaser. The franchisor must 
preserve materially different copies of its disclosures and franchise 
agreements, as well as information that forms a reasonable basis for 
any financial performance representation it elects to make. These 
requirements are subject to the PRA, and for which the Commission seeks 
to extend existing clearance.
    Estimated annual hours burden: 16,750 hours.
    Based on a review of trade publications and information from state 
regulatory authorities, staff believes that, on average, from year to 
year, there are approximately 2,500 sellers of franchises covered by 
the Rule, with perhaps about 10% of that total reflecting an equal 
amount of new and departing business entrants.\2\ Commission staffs 
burden hour estimate reflects the incremental tasks that the Rule may 
impose beyond the

[[Page 49480]]

information and recordkeeping requirements imposed by state law and/or 
followed by franchisors who have been using the FDD disclosure format 
nationwide. This estimate likely overstates the actual incremental 
burden because some franchisors, for various reasons, may not be 
covered by the Rule (e.g., they sell only franchises that qualify for 
the Rule's large franchise investment exemption of at least $1 
million).
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    \2\ This number, which was also used in the 2008 clearance 
request, appears to be consistent with the number of business format 
franchise offerings registered in compliance with state franchise 
laws, and listed in franchise directories.
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    Staff estimates that the average annual disclosure burden to update 
existing disclosure documents will be 3 hours each for the 2,250 
established franchisors, or 6,750 hours cumulatively for them, and 30 
hours apiece each year for the 250 or so new entrant franchisors to 
prepare their initial disclosure documents, or 7,500 hours, 
cumulatively, for the latter group. These estimates parallel staff's 
2008 estimates for the amended Rule.\3\ No public comments were 
received on those prior estimates; accordingly, the FTC retains them 
for the instant analysis subject to further opportunity for public 
comment.
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    \3\ See 73 FR 40580 (July 15, 2008); 73 FR 60696 (Oct. 14, 
2008).
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    As recognized in the 2008 analysis, covered franchisors also may 
need to maintain additional documentation for the sale of franchises in 
non-registration states, which could take up to an additional hour of 
recordkeeping per year. Assuming, as before, an hour of incremental 
recordkeeping per covered franchisor, this yields an additional 
cumulative total of 2,500 hours for all covered franchisors.
    Under the Rule, a franchisor is required to retain copies of 
receipts for disclosure documents, as well as materially different 
versions of its disclosure documents. Such recordkeeping requirements, 
however, are consistent with, or less burdensome than, those imposed by 
the states. Accordingly, staff believes that incremental recordkeeping 
burden, if any, would be de minimis.
    Based on the above assumptions and estimates, average yearly burden 
for new and established franchisors during a prospective 3-year 
clearance would be 16,750 hours ((30 hours of annual disclosure burden 
x 250 new franchisors) + (3 hours of average annual disclosure burden x 
2,250 established franchisors) + (1 hour of annual recordkeeping burden 
x 2,500 franchisors)).
    Estimated annual labor cost burden: $3,597,500.
    Labor costs are derived by applying appropriate hourly cost figures 
to the burden hours described above. The hourly rates used below are 
estimated averages.
    Commission staff anticipates that an attorney will prepare the 
disclosure document. Applying the above assumptions to an estimated 
hourly attorney rate of $250, yields the following yearly totals: 
$7,500 per new franchisor (or, $1,875,000, cumulatively, for new 
franchisors) and $750 per established franchisor (or, $1,687,500, 
cumulatively, for established franchisors).
    Combined, then, cumulative labor costs for all covered franchisors 
to prepare the disclosure document is $3,562,500.
    The FTC additionally anticipates that recordkeeping under the Rule 
will be performed by clerical staff at approximately $14 per hour.\4\ 
Thus, 2,500 hours of recordkeeping burden per year for all covered 
franchisors will amount to a total annual labor cost of $35,000.
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    \4\ Based on mean and median hourly rates for file clerks found 
in the ``National Compensation Survey: Occupational Earnings in the 
United States 2010,'' U.S. Department of Labor, released May 2011, 
Bulletin 2753, Table 3 (``Full-time civilian workers,'' mean and 
median hourly wages), available at http://www.bls.gov/ncs/ocs/sp/nctb1477.pdf.
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    Cumulatively, then, total estimated labor cost under the Rule is 
$3,597,500 (($7,500 attorney costs x 250 new franchisors = $1,875,000) 
+ ($750 attorney costs x 2,250 established franchisors = $1,687,500) + 
($14 clerical costs x 2,500 franchisors = $35,000)).
    Estimated non-labor costs: $8,000,000.
    In developing cost estimates initially for this Rule, FTC staff 
consulted with practitioners who prepare disclosure documents for a 
cross-section of franchise systems. The FTC believes that its cost 
estimates remain representative of the costs incurred by franchise 
systems generally. In addition, many franchisors establish and maintain 
Web sites for ordinary business purposes, including advertising their 
goods or services and to facilitate communication with the public. 
Accordingly, any costs franchisors would incur specifically as a result 
of electronic disclosure under the Rule appear to be minimal.
    As set forth in the 2008 Notices, FTC staff estimates that the non-
labor burden incurred by franchisors under the Franchise Rule differ 
based on the length of the disclosure document and the number of them 
produced. Staff estimates that 2,000 franchisors (80% of total 
franchisors covered by the Rule) will print and mail 100 disclosure 
documents at $35 each. Thus, these franchisors would each incur an 
estimated $3,500 in printing and mailing costs. Staff estimates that 
the remaining 20% of covered franchisors (500) will transmit 50% of 
their 100 disclosure documents electronically, at $5 per electronic 
disclosure. Thus, these franchisors will each incur $2,000 in 
distribution costs (($250 for electronic disclosure [$5 for electronic 
disclosure x 50 disclosure documents]) + ($1,750 for printing and 
mailing [$35 for printing and mailing x 50 disclosure documents])).
    Accordingly, the cumulative annual non-labor costs for the Rule is 
approximately $8,000,000 (($3,500 printing and mailing costs x 2,000 
franchisors = $7,000,000) + ($250 electronic distribution costs + 
$1,750 printing and mailing costs) x 500 franchisors = $1,000,000)).

Request for Comment

    You can file a comment online or on paper. For the FTC to consider 
your comment, we must receive it on or before October 11, 2011. Write 
``Franchise Rule, PRA Comment, FTC File No. P094400'' on your comment. 
Your comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[trade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential * * *'' as provided in Section 6(f) of the FTC Act, 15 
U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). If you want 
the Commission to give your comment confidential treatment, you must 
file it in paper form, with a request for confidential treatment, and 
you have to follow the

[[Page 49481]]

procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c).\5\ Your comment 
will be kept confidential only if the FTC General Counsel, in his or 
her sole discretion, grants your request in accordance with the law and 
the public interest.
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    \5\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online, or to send them to the Commission by courier or 
overnight service. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/franchiserulePRA by following the instructions on the Web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``Franchise Rule, PRA 
Comment, FTC File No. P094400'' on your comment and on the envelope, 
and mail or deliver it to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-113 (Annex J), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If possible, submit 
your paper comment to the Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before October 11, 2011. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.fte.gov/ftc/privacy.htm.

Willard K. Tom,
General Counsel.
[FR Doc. 2011-20111 Filed 8-9-11; 8:45 am]
BILLING CODE 6750-01-M