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What's Cookin'?

The FTC is serving up a new and improved franchise rule, but is it what small-business owners ordered?

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This story appears in the December 2004 issue of Entrepreneur. Subscribe »

The FTC's efforts to revise its 1979 franchise Rule mayfinally be heading toward completion. The commissioners are nowlooking at staff recommendations to expand pre-sale disclosuresthat franchisors are required to make and to develop a separaterule for business opportunity sales. These differ from franchisesales in that they are of shorter duration and involve no trademarkor intellectual property. Some business opportunities-thosewhere a seller provides locations or pre-existingaccounts-are now covered under the franchise regulation.

The FTC staff's backing of a new business opportunity rulewon praise from Matt Shay, executive vice president of the International FranchiseAssociation. He's enthusiastic about the otherrecommendations, too, including the addition of new pre-saledisclosures in the Uniform Franchise Offering Circular aboutfranchisor-initiated litigation, confidentiality clauses andtrademark-specific franchisee associations. "Some franchisorsmay have growing pains dealing with the new disclosures, but thestaff has done a good job of modernizing the rule," Shaysays.

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