[Federal Register Volume 73, Number 199 (Tuesday, October 14, 2008)]
[Notices]
[Pages 60696-60698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24232]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Submission for OMB 
Review; Comment Request; Extension

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

ACTION: Notice.

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SUMMARY: The information collection requirements described below will 
be

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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 October 31, 
2011, 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 October 31, 2008.

DATES: Comments must be submitted on or before November 13, 2008.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Franchise 
Rule, PRA Comment, FTC File No. P094400'' to facilitate the 
organization of comments. Please note that comments will be placed on 
the public record of this proceeding--including on the publicly 
accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm)--and therefore should not include any sensitive or 
confidential information. In particular, comments should not include 
any sensitive personal information, such as an individual'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. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secrets and 
commercial or financial information obtained from a person and 
privileged or confidential. . . .,'' as provided in Section 6(f) of the 
FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). 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).\1\
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    \1\ FTC Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (http://secure.commentworks.com/ftc-franchiserule) (and following the 
instructions on the web-based form). To ensure that the Commission 
considers an electronic comment, you must file it on the web-based form 
at the weblink (http://secure.commentworks.com/ftc-franchiserule). If 
this Notice appears at (http://www.regulations.gov/search/index.jsp), 
you may also file an electronic comment through that website. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC website at http://www.ftc.govto read the 
Notice and the news release describing it.
    A comment filed in paper form should include the ``Franchise Rule, 
PRA Comment, FTC File No. P094400'' reference both in the text and on 
the envelope, and should be mailed or delivered to the following 
address: Federal Trade Commission, Office of the Secretary, Room H-135 
(Annex J), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC 
is requesting that any comment filed in paper form be sent by courier 
or overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions.
    All comments should additionally be submitted to: Office of 
Information and Regulatory Affairs of OMB, Attention: Desk Officer for 
the Federal Trade Commission. Comments should be submitted via 
facsimile to (202) 395-6974 because U.S. Postal Mail is subject to 
lengthy delays due to heightened security precautions.
    The FTC Act and other laws 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, whether filed in paper or electronic 
form. Comments received will be available to the public on the FTC 
website, to the extent practicable, at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of discretion, the Commission makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).

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., N.W., Washington, D.C. 
20580, (202) 326-2970.

SUPPLEMENTARY INFORMATION: On July 15, 2008, the FTC sought comment on 
the information collection requirements associated with the Franchise 
Rule, 16 CFR Part 436 (Control Number: 3084-0107).\2\ No comments were 
received. Pursuant to the OMB regulations, 5 CFR Part 1320, that 
implement the PRA, 44 U.S.C. 3501-3521, the FTC is providing this 
second opportunity for public comment while seeking OMB approval to 
extend the existing paperwork clearance for the Rule. All comments 
should be filed as prescribed in the ADDRESSES section above, and must 
be received on or before November 13, 2008.
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    \2\ 73 FR 40580.
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    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. Revisions to 
the Rule promulgated on March 30, 2007,\3\ which took final effect on 
July 1, 2008, after a one-year phase-in, largely merged the Rule's 
disclosure requirements with the Uniform Franchise Offering Circular 
(``UFOC'') disclosure format accepted by 15 states that have franchise 
registration and disclosure laws. This should significantly minimize 
any compliance burden beyond what is now required by state law.
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    \3\ 72 FR 15444 et seq.
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    As amended, the Rule requires franchisors to furnish to prospective 
purchasers a disclosure document 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

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the PRA, and for which the Commission seeks to extend existing 
clearance.\4\
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    \4\ The current clearance under OMB Control Number 3084-0107 
covers the disclosure and recordkeeping requirements of the original 
Franchise Rule, 16 CFR Part 436, which applied both to the sale of 
franchises and of business opportunity ventures. The disclosure and 
recordkeeping requirements applicable to business opportunity 
ventures are now separately set forth in 16 CFR Part 437, and are 
covered under recently assigned OMB Control Number 3084-0142. The 
portion of the prior clearance applicable to business format 
franchisors under Part 436 retains the pre-existing OMB Control 
Number 3084-0107.
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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.\5\ Staff's burden hour 
estimate reflects the incremental burden that part 436 may impose 
beyond the information and recordkeeping requirements imposed by state 
law and/or followed by franchisors who have been using the UFOC 
disclosure format nationwide.\6\ 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).\7\
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    \5\ This is one-half of the number used in the 2005 clearance 
request, when both franchises and business opportunities were 
covered by the Rule, and reflects the fact that business 
opportunities are now separately covered by Part 437 and a separate 
OMB clearance. 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.
    \6\ Staff estimates that about 95 percent of all franchisors use 
the UFOC format because the original Franchise Rule authorized use 
of the UFOC in lieu of the Rule disclosure format to satisfy the 
Rule's disclosure requirements and reduce compliance burdens.
    \7\ 16 CFR 436.8(a)(5). This exemption was added by the amended 
Rule.
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    For October 31, 2008 to October 31, 2009, the first twelve months 
of prospective 3-year renewed PRA clearance, staff estimates that the 
average annual disclosure burden to update existing disclosure 
documents will be three hours each year for the 2,250 established 
franchisors, or 6,750 hours, and 30 hours each year for the 250 or so 
new entrant franchisors to prepare their initial disclosure documents, 
or 7,500 hours. These estimates for the amended Rule are based on 
staff's prior estimates for the original Rule, and further adopt the 
analysis of the 2005 clearance request and the Statement of Basis and 
Purpose (``SBP'') for the amended Rule.\8\
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    \8\ 70 FR 28937, 28940 (May 19, 2005); 70 FR 51817, 51819 (Aug. 
31, 2005) (``2005 Notices''); 72 FR 15444, 15542 (Mar. 30, 2007). 
Although the 2005 Notices and the amended Rule's SBP assumed that 
additional time (cumulatively, 2,750 hours) would be required to 
prepare disclosures during the transition to compliance with the 
amended Rule, the one-year transition period ended on July 1, 2008, 
when the amended Rule took full effect.
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    As discussed in the 2005 Notices and the SBP, as under the original 
Rule, 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. 
This yields an additional cumulative total of 2,500 hours per year for 
covered franchisors (1 hour x 2,500 franchisors).
    Part 436 of the amended Rule would also increase franchisors' 
recordkeeping obligations. Specifically, a franchisor would be 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.
    Thus, staff estimates the average hours burden for new and 
established franchisors during the three-year clearance period ahead 
would be 16,750 ((30 hours of annual disclosure burden x 250 new 
franchisors = 7,500 hours) + (3 hours of average annual disclosure 
burden x 2,250 established franchisors = 6,750 hours) + (1 hour of 
annual recordkeeping burden x 2,500 franchisors = 2,500 hours)).

Estimated annual labor cost burden for part 436: $3,595,000

    Labor costs are derived by applying appropriate hourly cost figures 
to the burden hours described above. The hourly rates used below are 
estimated averages.
    As stated in the 2005 Notices, staff believes that an attorney will 
prepare the disclosure document, and at an estimated $250 per hour. 
Accordingly, staff estimates that 250 new franchisors will each 
annually incur $7,500 in labor costs (30 hours x $250 per hour) and 
2,250 established franchisors will each incur $750, annually, in labor 
costs (3 hours x $250 per hour).
    Further, staff anticipates that recordkeeping under part 436 will 
be performed by clerical staff at approximately $13 per hour. Thus, 
2,500 hours of recordkeeping burden per year for all covered 
franchisors will amount to a total annual labor cost of $32,500.
    Cumulatively, then, total estimated labor costs under part 436 is 
$3,595,000 (($7,500 attorney costs x 250 new franchisors = $1,875,000) 
+ ($750 attorney costs x 2,250 established franchisors = $1,687,500) + 
($13 clerical costs x 2,500 franchisors = $32,500)).

Estimated non-labor costs for part 436: $8,000,000

    As an initial matter, in developing cost estimates, Commission 
staff consulted with practitioners who prepare disclosure documents for 
a cross-section of franchise systems. Accordingly, the Commission 
believes that its cost estimates are representative of the costs 
incurred by franchise systems generally. In addition, many franchisors 
establish and maintain websites 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 part 436 
appear to be minimal.
    As set forth in the 2005 Notices, staff estimates that the non-
labor burden incurred by franchisors under part 436 will differ based 
on the length of the disclosure document and the number of disclosure 
documents 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 will each 
incur $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 part 436 of 
the amended 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)).

William Blumenthal,
General Counsel.
[FR Doc. E8-24232 Filed 10-10-08: 8:45 am]
[BILLING CODE: 6750-01-S