This letter rebuts certain proposals regarding those definitions that were made by Mr. Howard E. Bundy in a comment dated December 21, 1999. If adopted, that proposal would constitute a radical departure from the Commission's long-standing policy regarding the definition of a franchise, would create a major inconsistency between the Franchise Rule and the state franchise laws, and would extend the Franchise Rule's coverage to business arrangements which the Rule was never intended to regulate. Courts and agencies have consistently held that payments made to unaffiliated third parties are not franchise fees and do not trigger the application of franchise laws. Thus, Mr. Bundy's proposal would place the Franchise Rule in conflict with its state law counterparts.
Every business makes payments to vendors and service providers.
This undesirable result underscores the soundness of the Commission's historical policy. His proposal would therefore extend the Franchise Rule's coverage to business arrangements that do not involve any type of franchise fee, and consequently have never been regulated under the Franchise Rule or under state franchise laws. Certainly there is no basis for subjecting such a business to such regulation. The current Franchise Rule includes a similar definition . In fact, however, the Commission's definition of that term is quite broad and flexible, and Mr. Bundy's concerns are unfounded.