bus70-franchise-rule-compliance-guide
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bus70-franchise-rule-compliance-guide
39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guide Commission’s amended Franchise Rule. The original Franchise Rule went into effect on October 21. 1979. rhe Federal Trade Commission ("FTC” or “the Commission") approved amendments to the Franchise Rule on January' 22, 2007.Since July I, 2007, franchisors could comply with the FTC’s disclosure requi bus70-franchise-rule-compliance-guiderements by using any one of the following formats: (I) the original Franchise Rule: (2) the Uniform Franchise Offering Circular (“UFOC"); or (3) the abus70-franchise-rule-compliance-guide
mended Franchise Rule. Once a franchisor selects a disclosure format, it must use that format and no other. As of July 1.2008, however, all franchisor39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guideit does not exhaustively cover every requirement contained in the amended Rule, but focuses on amended Rule provisions that depart from the familiar UFOC Guidelines. This Guide also includes sample disclosures that illustrate the new provisions and will be useful in preparing compliant disclosures.T bus70-franchise-rule-compliance-guidehere is no substitute for the text of the amended Rule. It is the authoritative statement of what franchisors need to do to comply. Thus, the amendedbus70-franchise-rule-compliance-guide
Rule’s text - along with its explanatory Statement of Basis and Purpose - is the starting point and ultimate authority in preparing compliant disclosu39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guidenterpretive issues arise.Other important resources for compliance guidance are the “Amended Franchise Rule FAQ’s’’ on the FTC’s web site at http: www.ftc.go\ bep franchise amendcd-rulc-faqs.shtm. and staff opinions that have been issued in response to specific requests regarding particular fact situ bus70-franchise-rule-compliance-guideations. The staff opinions can be found at http: ’ wu w.ftc.gov bep franchise nctadopin.shtm.The advice in this Guide is not binding on the Commissionbus70-franchise-rule-compliance-guide
. In addition, the original Rule's Statement of Basis and Purpose and previous informal stair advisory opinions remain valid sources of interpretation39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guidee requires franchisors to give prospective franchisees material information, including background information on the franchisor, the costs of entering into the business, the legal obligations of the franchisor and the franchisee, statistics on franchised and company-owned outlets, and audited financ bus70-franchise-rule-compliance-guideial information. In addition, if franchisors elect to make any financial performance representations, the amended Franchise Rule requires certain discbus70-franchise-rule-compliance-guide
losures and substantiation for those representations. For the most part, these disclosures arc based upon the UFOC Guidelines, with which many franchi39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guidespects. First, the amended Rule updates the UFOC Guidelines to address new technologies, like the Internet. Second, the amended Rule requires more disclosure about the nature of franchisor-franchisee relationships. The amended Rule includes several disclosure requirements not included in the UFOC Gu bus70-franchise-rule-compliance-guideidelines. Also, the Amended Rule exempts certain entities that the original Rule did not exempt, and prohibits certain practices not addressed in thebus70-franchise-rule-compliance-guide
original Rule.-ii-TABLE OF CONTENTSFranchise Rule Coverage...............................................................1What Types of Relationships 39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guide or Assistance” Element..........................2When Is Control or Assistance Significant.........................2What Activities Do Not Constitute Significant Control or Assistance. ... 4The "Required Payment” Element...........................................4What Types of Payments Constitute “ bus70-franchise-rule-compliance-guideRequired Payments".............5What Types of Payments Do Not Constitute “Required Payments”.......6What Types of Relationships Arc Not Covered.......bus70-franchise-rule-compliance-guide
.............................6Business Opportunities...................................................6Sales of Franchises to Be LocatedOutside of th39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade bus70-franchise-rule-compliance-guidePayment Exemption................................................7Fractional Franchise Exemption...........................................8Whose Experience May Be Considered................................8What Docs "Same Line of Business” Mean............................8How Is Sales Volume Calcul bus70-franchise-rule-compliance-guideated....................................8Leased Department Exemption..............................................939569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal Trade 39569FRANCHISE RULE16C.F.R. Part 436COMPLIANCE GUIDEINTRODUCTION'I his Compliance Guide is intended to help franchisors comply with the Federal TradeGọi ngay
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