The New FTC Franchise Disclosure Rule
The Federal Trade Commission (FTC) approved a new Franchise Rule on January 22, 2007. The new Rule is in the form of an amendment to the old FTC Franchise Rule.
The amendment to the old FTC Franchise Rule modifies what franchisors must disclose in their franchise disclosure documents (formerly known as Uniform Franchise Offering Circulars (UFOC's)), as well as the timing requirements for making the required disclosures. The new Franchise Rule was effective on a voluntary basis on July 1, 2007. The new Franchise Rule will become effective on July 1, 2008.
The new Franchise Rule contains a number of innovative modifications to the old Franchise Rule. These modifications include the elimination of the "first personal meeting requirement", the elimination of the requirement to separately furnish a completed franchise agreement, and the addition of an allowance for electronic delivery and execution of the franchise disclosure document and agreement. There are also changes to requirements concerning financial disclosures, disclosure of franchisee associations, disclosure of confidentiality clauses and agreements, as well as a number of other changes.
Franchises can be a very complicated area of business law. Any Michigan business or resident who is involved in a franchise transaction should seek the counsel of an experienced Michigan franchise lawyer to help them through the complexities and potential pitfalls of franchise law.
