[Federal Register Volume 85, Number 67 (Tuesday, April 7, 2020)]
[Notices]
[Pages 19479-19481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07269]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: In accordance with the Paperwork Reduction Act of 1995 
(``PRA''), the Federal Trade Commission (``FTC'' or ``Commission'') is 
seeking public comment on its proposal to extend for an additional 
three years the Office of Management and Budget clearance for 
information collection requirements in its Trade Regulation Rule on 
Disclosure Requirements and Prohibitions Concerning Franchising 
(``Franchise Rule'' or ``Rule''). That clearance expires on October 31, 
2020.

DATES: Comments must be submitted by June 8, 2020.

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://www.regulations.gov, by following the instructions on 
the web-based form. If you prefer to file your comment on paper, mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Christine M. Todaro, Attorney, 
Division of Marketing Practices, Bureau of Consumer Protection, Federal 
Trade Commission, 600 Pennsylvania Avenue

[[Page 19480]]

NW, Room 8607, Washington, DC 20580, (202) 326-3711, [email protected].

SUPPLEMENTARY INFORMATION: 
    Title of Collection: Franchise Rule, 16 CFR part 436.
    OMB Control Number: 3084-0107.
    Type of Review: Extension without change of currently approved 
collection.
    Affected Public: Private Sector: Businesses and other for-profit 
entities.
    Estimated Annual Burden Hours: 16,750.
    Estimated Annual Labor Costs: $3,603,125.
    Estimated Annual Non-Labor Costs: $7,250,000.
    Abstract: 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 and 
compare different franchise offerings. The Rule requires franchisors to 
furnish 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 Rule also requires that franchisors maintain records to 
facilitate enforcement of the Rule.\1\ The franchisor must preserve 
materially different copies of its FDD for 3 years, as well as 
information that provides a reasonable basis for any financial 
performance representation it elects to make.
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    \1\ The Rule was amended in 2007 to conform its disclosure 
requirements with the disclosure format accepted by 15 states that 
have franchise registration or disclosure laws. See 72 FR 15444 
(Mar. 30, 2007). The amended Rule has significantly minimized any 
compliance burden beyond what is required by state law.
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    Estimated Annual Hours Burden: 16,750.
    Based on information from state regulatory authorities and relevant 
trade journals, staff estimates that there are approximately 2,500 
sellers of franchises covered by the Rule, with approximately 10% of 
that total reflecting an equal amount of new and departing business 
entrants.\2\ Staff estimates that the average annual disclosure burden 
for established franchisors to update existing disclosure documents 
will be three hours per seller for a total of 6,750 hours (2,250 
franchisors x 3 hours). For new franchisors, staff estimates that 
preparation of disclosure documents by new sellers of franchise 
opportunities will require approximately 30 hours for a total of 7,500 
hours (250 new franchisors x 30 hours).
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    \2\ This number 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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    Covered franchisors also may need to maintain an alternative 
version of the FDD for use in non-registration states, which may differ 
from FDDs used in registration states. Staff estimates that this 
recordkeeping obligation would require approximately one hour per year. 
This results in an additional burden of 2,500 hours (2,500 franchisors 
x 1 hour). Under the Rule, a franchisor is also required to retain 
copies of receipts of 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 that have franchise registration and 
disclosure laws. Accordingly, staff believes that incremental 
recordkeeping burden, if any, would be de minimis.
    Estimated Annual Labor Costs: $3,603,125.
    Labor costs are derived by applying estimated hourly cost figures 
to the burden hours described above. FTC staff anticipates that an 
attorney will prepare required disclosure documents at an estimated 
hourly attorney rate of $250.\3\ For established franchisors, estimates 
the following annual labor costs: $750 per established franchisor (3 
hours x $250) for a total annual cost burden of $1,687,500 ($750 x 
2,250 established franchisors). For new franchisors, this yields an 
annual cost of $7,500 per new franchisor (30 hours x $250) for a total 
annual cost burden of $1,875,000 for new franchisors ($7,500 x 250 new 
franchisors).
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    \3\ Commission staff believes this is a reasonable estimate for 
mean hourly attorney rates for franchisor consultation on compliance 
with the Rule's disclosure and recordkeeping requirements.
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    The FTC additionally anticipates that recordkeeping under the Rule 
will be performed by clerical staff at approximately $16.25 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 
$40,625.
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    \4\ Based on mean hourly wages for file clerks found in Table 1. 
``National employment and wage data from the Occupational Employment 
Statistics survey by occupation, May 2018,'' at https://www.bls.gov/news.release/ocwage.t01.htm.
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    Estimated Annual Non-Labor Costs: $7,250,000.
    In developing cost estimates 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 franchisors generally.
    FTC staff estimates that the non-labor burden incurred by 
franchisors differs based on the length of the disclosure document, the 
number produced, and the method of distribution employed by 
franchisors. Staff estimates that the estimated 2,500 sellers of 
franchise opportunities distribute approximately 100 disclosure 
documents each annually for a total of 250,000 disclosure documents. 
Staff estimates that 80% of these disclosure documents are distributed 
in hard copy format at a cost of $35 each for printing and mailing 
costs. This results in a total estimated $7,000,000 in non-labor costs 
printing and mailing disclosure documents (200,000 x $35). Staff 
estimates that the remaining 20% of disclosure documents (50,000) are 
distributed electronically, at a cost of $5 per electronic disclosure. 
This yields a total non-labor cost burden associated with the 
electronic distribution of disclosure documents of $250,000 (50,000 x 
$5).
    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 clearance for the information collection 
requirements contained in the Franchise Rule, 16 CFR part 436 (OMB 
Control No. 3084-0107).

Request for Comment

    Pursuant to Section 3506(c)(2)(A) of the PRA, 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.

[[Page 19481]]

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before June 8, 2020. 
Write ``Franchise Rule, PRA Comment, FTC File No. P094400'' on your 
comment. 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. To make sure that the Commission considers 
your online comment, you must file it through the https://www.regulations.gov website by following the instructions on the web-
based form provided. Your comment, including your name and your state--
will be placed on the public record of this proceeding, including the 
https://www.regulations.gov website.
    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 your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610, 
Washington, DC 20024. If possible, please submit your paper comment to 
the Commission by courier or overnight service.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure that your comment does not include 
any sensitive or confidential information. In particular, your comment 
should not include any sensitive personal information, such as your or 
anyone else'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, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by 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)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on https://www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment from https://www.regulations.gov, unless you submit a confidentiality request that 
meets the requirements for such treatment under FTC Rule 4.9(c), and 
the General Counsel grants that request.
    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 June 8, 2020. 
For information on the Commission's privacy policy, including routine 
uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Josephine Liu,
Assistant General Counsel for Legal Counsel.
[FR Doc. 2020-07269 Filed 4-6-20; 8:45 am]
BILLING CODE 6750-01-P