[Federal Register: October 14, 2008 (Volume 73, Number 199)]
[Notices]
[Page 60696-60698]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14oc08-51]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
Agency Information Collection Activities; Submission for OMB
Review; Comment Request; Extension
AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The information collection requirements described below will
be
[[Page 60697]]
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\2\ 73 FR 40580.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\3\ 72 FR 15444 et seq.
---------------------------------------------------------------------------
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
[[Page 60698]]
the PRA, and for which the Commission seeks to extend existing
clearance.\4\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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]