A Little Light Reading

If you're having trouble getting to sleep at night, you may want to heft the 423 page report released in August of 2004 by the Federal Trade Commission (FTC) of the United States on its proposed changes to the the FTC Rule on Franchising into bed with you.

The Rule on Franchising, which was issued in 1978, forms the basis for the requirement that Franchisors in the United States provide disclosure, through the Uniform Franchise Offering Circular, to prospective Franchisees.

The report contains a number of suggested changes (although at 423 pages, there should be a number of suggested changes).  Among them, recommendations that:

1.  Franchisors be required to disclose when the franchise doesn't include an exclusive market;

2.  Franchisors be required to provide additional information on competition which Franchisees may face from alternative distriubution channels (see my "I Scream You Scream" post for more on this);

3.  Franchisors be required to disclose the existence of independent Franchisee associations for there Franchise Systems; and

4.  Disclosure through electronic means be specifically provided for.

The International Franchise Association has lauded the work done by the FTC in its report, so not surprisingly, many Franchisee organizations are less impressed by its recommendations.  You can read the report for yourself here.  Comments were accepted by the FTC until November, 2004, but given the glacial speed that this process has moved at thus far (the report was started in 1995), it's difficult to say when and what changes to the Rule on Franchising will come into effect.