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BY JULY 1, 2008, ALL FRANCHISORS MUST COMPLY WITH NEW FTC FRANCHISE RULE

The Federal Trade Commission has released a new franchise rule, approved on January 23, 2007, which involves changes to almost all of the Uniform Franchise Offering Circular disclosure items. The FTC’s statement and explanation of the Rule exceeds 390 pages and is located at www.ftc.gov. Currently, franchisors have the option of following the new Rule or complying with either the original rule or individual state disclosure laws. However, all franchisors are required to comply wi the new Rule by July 1, 2008.

In short, the new Rule requires franchisors to provide all potential franchisees with a disclosure document containing 23 pieces of information. The amendment is intended to reduce compliance costs, tackle common franchise complaints, and address changes in franchise marketing and new technologies. It is also intended to bring the federal rule closer to the majority of states’ franchise disclosure laws. The changes include, but are not limited to, greater detail of the franchisor’s litigation history, including lawsuits filed by the franchisor against franchisees, the franchisor’s use of confidentiality clauses in settlement agreements, the requirement for participation in franchisee associations, defining renewal, whether there is an exclusive territory included with the franchise, purchase and startup costs, contact information for past and current franchisees, and representations about the financial performance of the franchise and the basis for those representations.

We have experience in handling a wide range of franchise matters. If Stokes Lazarus & Carmichael LLP can assist you with revisions to your UFOC to ensure compliance, or if you are a franchisee with questions, please contact Stokes Lazarus & Carmichael LLP at 404-352-1465, extension 24.