I
103D CONGRESS
1ST SESSION
H. R. 2595
To revise current Federal law and procedure to provide consumers with
comprehensive and accurate statistical information about franchising and
franchise practices, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 1, 1993
Mr. LAFALCE (for himself, Mr. DICKEY, Mr. MFUME, Mr. WYDEN, Ms.
DANNER, Mr. TOWNS, Mrs. MEEK, Mr. MCDERMOTT, Mrs. CLAYTON,
Mr. TORRES, Mr. OBERSTAR, Mr. ENGLE, Mr. ROMERO-BARCELO´, Ms.
ROYBAL-ALLARD, and Mr. SHAYS) introduced the following bill; which
was referred jointly to the Committees on Energy and Commerce and
Post Office and Civil Service
A BILL
To revise current Federal law and procedure to provide con-
sumers with comprehensive and accurate statistical infor-
mation about franchising and franchise practices, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Federal Franchise
Data and Public Information Act’’.
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SEC. 2. FINDINGS AND PURPOSE.
(a) The Congress makes the following findings:
(1) Franchise business relationships represent a
large and growing segment of the Nation’s retail and
service businesses and are replacing more traditional
forms of small business ownership in the American
economy.
(2) Despite the growing importance of franchis-
ing in the American marketplace, there is little ob-
jective or reliable statistical information available to
the public on the number, ownership, and operation
of franchise businesses; and broad-based, objective
data or investigations of franchise failures are vir-
tually non-existent.
(3) While there is a void of reliable statistics,
a large amount of statistical information is routinely
provided in articles and talks about franchising and
in promotional material for franchise opportunities
that seek to represent franchises as uniformly suc-
cessful and virtually risk free.
(4) Inaccurate or misleading statistical informa-
tion is routinely attributed to Federal Government
agencies and reports, and data on franchise business
compiled prior to 1987 by the United States Depart-
ment of Commerce continue to be widely cited, mis-
represented or misused.
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(5) Franchisees may suffer substantial losses
from investment in a franchise business without ac-
curate or reliable information or with expectations
based on false or misleading statistical information
regarding the operation and success of franchise
businesses.
(b) It is the purpose of this Act to provide the public
with comprehensive statistical information about franchis-
ing and the performance of franchise systems, to enhance
the reliability of information made available to the public
regarding franchise practices, and to assure that prospec-
tive investors have the information necessary to make an
informed decision on whether to invest in a franchise
business.
SEC. 3. NATIONAL FILING AND DATA COLLECTION.
(a) FILING
OF FRANCHISE DISCLOSURE DOCU-
MENTS.—
(1) All persons, partnerships or corporations
engaged in selling or offering for sale any franchise,
or any relationship which is represented either orally
or in writing to be a franchise, whether within a
state or in interstate commerce, shall file with the
United States Department of Commerce (hereafter,
the ‘‘Commerce Department’’) a copy of the
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franchise disclosure document or circular for such
franchise.
(2) The disclosure document or circular to be
filed under this subsection shall be—
(A) the most recent version of such docu-
ment or circular which incorporates information
that is current as of the close of the
franchisor’s most recent fiscal year; and
(B) the most restrictive version of such
document or circular, and of the franchise
agreement, provided by the franchisor to any
prospective franchisee, in terms of the require-
ments imposed on franchisees and the limita-
tions on the rights and remedies available to
franchisees in the franchise agreement.
(3) The disclosure document or circular de-
scribed in paragraph (2) shall be filed annually at a
time and in a manner set forth in regulation by the
Commerce Department.
(4) The Commerce Department shall make
available to the Congress, the Federal Trade Com-
mission and other Federal agencies, as requested,
copies of any disclosure documents filed under this
subsection, and shall establish procedures under
which such documents may be viewed by the public.
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(5) It shall be unlawful for a franchisor,
subfranchisor or franchise broker to make any state-
ment or reference in connection with any advertise-
ment or disclosure document, or in any oral or writ-
ten statement or other representation to a prospec-
tive franchisee, that a disclosure document has been
filed with the Commerce Department, or to make
any statement or representation that suggests or im-
plies that the Commerce Department or an other
Federal agency has in any way reviewed the content
of the disclosure document, made any finding with
regard to the content of such document, or has in
any way passed upon the merits of, or given ap-
proval to, the franchise opportunity.
(b) DATA COLLECTION AND PUBLICATION.—
(1) The Commerce Department shall, not later
than two hundred and forty days after the date of
enactment of this section, establish procedures for
the compilation, analysis and publication of statis-
tical information on franchise ownership and na-
tional franchising practices. For purposes of such
procedures, the Commerce Department shall—
(A) use as the principal source of statis-
tical information on franchise ownership and
practices the disclosure documents for franchise
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opportunities required to be filed annually
under subsection (a);
(B) establish categories of statistical infor-
mation for annual data compilation and analy-
sis, including but not limited to: total numbers
of franchisors and franchise businesses, types of
franchise 
businesses, 
number 
of 
foreign
franchisors, annual growth in franchisors and
franchise businesses, turnover in franchise own-
ership and numbers of franchise failures;
(C) consult with Congress, the Federal
Trade Commission, the North American Securi-
ties Administrators Association and other inter-
ested organizations in identifying additional
categories of statistical information for pur-
poses of data compilation and analysis that—
(i) involve issues or information of po-
tential interest to the public, or of specific
concern to Federal and State regulatory
agencies; and
(ii) are obtainable from disclosure ma-
terials filed in accordance with subsection
(a) and from other public sources of infor-
mation; and
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(D) initiate periodic questionnaires of
franchisors or franchisees to obtain statistical
information to supplement information obtain-
able in disclosure documents filed under sub-
section (a), or information in connection with
topics or categories of statistical information
identified under paragraph (C) for which addi-
tional sources of information may be required,
except that no information obtained from such
questionnaires may be used in lieu of informa-
tion otherwise obtainable in a disclosure docu-
ment filed under subsection (a) of this section
or in data available in the Business Census pur-
suant to section 4 of this Act.
(2) The Commerce Department shall, not later
than eighteen months after the date of enactment of
this section, and then not less than annually there-
after, publish a report on the information and find-
ings relating to franchise ownership and national
franchising practices required to be complied under
this subsection. Such report shall be transmitted to
the appropriate Committees of the Congress and
shall be made available to the public through the Su-
perintendent of Documents.
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SEC. 4. CENSUS DATA ON FRANCHISE BUSINESSES.
(a) The Bureau of the Census of the Department of
Commerce (hereafter, the ‘‘Bureau of the Census’’) shall
include in its Business Census for 1997, and in each such
succeeding census, statistical information on the number,
ownership and operation of franchise businesses.
(b) The Bureau of the Census shall—
(1) consult with the Federal Trade Commission
to establish criteria and procedures to identify fran-
chise businesses to be included in the Business Cen-
sus; and
(2) consult with the Congress, the Federal
Trade Commission and other interested organiza-
tions in establishing categories of statistical informa-
tion to be collected in the Business Census relating
to the number, ownership and operation of franchise
businesses.
(c) Not later than two hundred and eighty days after
the date of enactment of this section, the Bureau of Cen-
sus shall submit a report to the Congress which shall de-
scribe the most cost effective and accurate means to gath-
er and present the statistical information required to be
collected pursuant to this section and identify the cat-
egories of data relating to franchise businesses to be in-
cluded in the Business Census.
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SEC. 5. RULES, REGULATIONS AND FEES.
(a) The Secretary of Commerce (hereafter, the ‘‘Sec-
retary’’) is authorized to make such rules and regulations
as are necessary and appropriate to implement the provi-
sions of this Act. Any rules, regulations, or orders issued
pursuant to this authority may be established in such form
or manner, may contain such classifications or differentia-
tions, and may provide for such adjustments and reason-
able exceptions as in the judgement of the Secretary are
necessary or proper to effectuate the purposes of this Act,
or to prevent circumvention or evasion of any rule, regula-
tion, or order issued hereunder.
(b) The Secretary is further authorized to collect a
filing fee or other reasonable charge from any person,
partnership or corporation subject to the filing require-
ment of section 3(a) of this Act for purposes of defraying
costs incurred by the Commerce Department in connection
with such filing.
SEC. 6. DEFINITIONS.
For purposes of this Act:
(1) The term ‘‘advertisement’’ means a commu-
nication circulated generally by mail, or print media
or electronic media, or otherwise disseminated gen-
erally to the public, in connection with an offer or
sale of a franchise.
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(2) The term ‘‘disclosure document’’ means ei-
ther the disclosure statement required by the Com-
mission in Trade Regulation Rule 436 (16 CFR
436) as it may be amended, or an offering circular
prepared in accordance with Uniform Franchise Of-
fering Circular guidelines as adopted and amended
by the North American Securities Administrators
Association, Inc., or its successor.
(3) The term ‘‘franchise’’ means—
(A) any continuing commercial relationship
created by a contract or agreement, whether ex-
press or implied, oral or written, where—
(i) one person (the franchisor) grants
to another person (the franchisee) the
right to engage in the business of offering,
selling or distributing goods or services, in
which—
(a) the goods or services offered,
sold or distributed by the franchisee
are substantially associated with the
trademark, service mark, trade name,
logotype, advertising, or other com-
mercial symbol owned or used by the
franchisor; or
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(b) the franchisee must conform
to quality standards established by
the franchisor for the goods or serv-
ices to be offered, sold or distributed,
and operate under a name that in-
cludes, in whole or in part, the
franchisor’s trademark, service mark,
trade name, logotype, advertising, or
other commercial symbol;
(ii) the franchisor—
(a) 
communicates 
to 
the
franchisee knowledge, experience, ex-
pertise, knowhow, trade secrets or
other non-patented information, re-
gardless of whether it is proprietary
or confidential;
(b) provides significant assistance
in the franchisee’s method of oper-
ation; or
(c) exercises significant controls
over the franchisee’s method of oper-
ation of the business; and
(iii) the franchisee, as a condition for
obtaining or commencing operation of a
franchise, is required to make, or to com-
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mit to make, payment or other consider-
ation to the franchisor, or an affiliate of
the franchisor, other than payment for
commercially 
reasonable 
quantities 
of
goods for resale at a bona fide wholesale
price.
(B) a subfranchise; or
(C) any commercial relationship entered
into in reasonable reliance on representations,
whether oral or written, that the criteria of sub-
section (A) will be met.
(4) The term ‘‘franchisee’’ means a person to
whom a franchise is granted.
(5) The term ‘‘franchisor’’ means a person who
grants a franchise or a subfranchise.
(6) The term ‘‘person’’ means a natural person
or any legal entity recognized in law.
(7) The term ‘‘subfranchise’’ means a contract
or an agreement by which a person pays a
franchisor for the right to sell, offer for sale or ar-
range the sale of franchises, or to provide goods or
services to franchisees.
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