Recent Franchise Rule Opinions
(1995 to Present)

The Division of Marketing Practices periodically issues informal staff advisory opinions in response to requests for interpretation of the Franchise Rule. These opinions are issued, pursuant to Rules 1.1-1.4 of the Commission's Rules of Practice, 16 C.F.R. §§ 1.1-1.4., in response to questions of general public interest.

2007

• Opinion 07-1
  Addresses whether a franchisor may distribute disclosure documents in a foreign language.
  
• Opinion 07-2
  Addresses whether affiliates must disclose audited financial statements under Item 21.

2006

• Opinion 06-1
  Discusses whether franchisors can seek leads by placing advertisements on employment websites.
  
• Opinion 06-2
  Addresses the preparation of auditied financial statements following a corporate restructuring and change in fiscal year.

2005

• Opinion 05-1
  Addresses the Franchise Rule's single trademark license exclusion.
  
• Opinion 05-2
  Discusses the applicability of the Franchise Rule to a license to use a method designed to increase sales of experienced
  businesses.
• Opinion 05-3
  Discusses the application of the Franchise Rule to an opportunity involving the use of point-of-sale touch screen terminals.
  
• Opinion 05-4
  Addresses a request to conduct a demonstration project for electronic compliance with the Franchise Rule.
  
• Opinion 05-5
  Discusses: (1) a successor's obligation to prepare audited financial statements following an asset purchase agreement;
  and (2) the disclosure of parent information.

2004

• Opinion 04-1
  Discusses the application of the Franchise Rule to a trademarked business planning course.
  
• Opinion 04-2
  Addresses earnings claims in electronic advertisements, including bulk commercial email.
  
• Opinion 04-3
  Discusses the application of the Franchise Rule to a web-based travel service.
  
• Opinion 04-4
  Addresses the application of the Franchise Rule to a membership network.
  

2003

• Opinion 03-1
  Discusses whether a franchisor must disclose a guilty plea involving a violation of the Ontario Gaming Control Act under section 436.1(a)(4) of the Franchise Rule.
  
• Opinion 03-2
  Discusses whether the Franchise Rule applies to a license agreement for the manufacture and distribution of a soil supplement.
  
• Opinion 03-3
  Addresses a request to conduct a demonstration project for electronic compliance with the Franchise Rule.
  
• Opinion 03-4
  Discusses the application of the Franchise Rule to automotive paint matching businesses.
  
• Opinion 03-5
  Addresses a request to conduct a demonstration project for electronic compliance with the Franchise Rule.
  

2002

• Opinion 02-1
  Discusses whether the grant of multiple licenses to the same licensee qualifies for the Franchise Rule's single license exclusion.
   
• Opinion 02-2
  Discusses whether a not-for profit 501(c)(3) organization satisfies the definition of a franchise under the Franchise Rule.
   
• Opinion 02-3:
  Addresses whether a franchisor must furnish disclosures to an existing franchisee when the franchisee initiates a modification of the franchise agreement’s protected territory provision.
   
• Opinion 02-4:
  Discusses whether franchisors may use financial statements prepared according to non-American generally accepted accounting principles (GAAP).

2001

• Opinion 01-1
  Discusses the application of the Franchise Rule to a business arrangment involving multiple limited liability "strategic partners."
   
• Opinion 01-2
  Discusses whether the franchisor's or franchisee's degree of controlling interest in an outlet affects the application of the Franchise Rule.
   
• Opinion 01-3
  Provides guidance on how a franchisor may comply with the Franchise Rule via the Internet.

2000

• Opinion 00-1
  Discusses the application of the Franchise Rule to a program offering advertising opportunities involving Internet Web sites.

• Opinion 00-2
  Discusses whether the required payment element is satisfied if the franchisee pays no initial up-front franchise fee, but leases the premises and equipment from the restaurant-franchisor, pays a "working capital" deposit, and must permit the withdrawal of funds from a shared franchisor-franchisee "subaccount" to pay for operating expenses.
   
• Opinion 00-3
  Discusses the application of the single trademark license exemption.
   
• Opinion 00-4
  Discusses whether a non-profit, tax exempt corporation qualifies as a "franchisor" under the Franchise Rule.

1999

• Opinion 99-1
  Clarifies a previous opinion addressing when a future payment may satisfy the Rule's minimum payment requirement.

• Opinion 99-2
  Discusses whether the sale of a pay telephone business opportunity meets the Rule's "continuing commercial relationship" requirement

• Opinion 99-3
  Discusses the application of the Franchise Rule to free-standing sandwhich shops.

• Opinion 99-4
  Discusses the meaning of "commercial relationship

• Opinion 99-5
  Discusses the fractional franchise exemption, in particular:  (1) whether the location of the fractional franchise may be disqualifying; (2)  whether the exemption is available to a partnership; and (3) whether the exemption is available where the fractional franchisee operates the new line of business as a newly formed corporate subsidiary.

• Opinion 99-6
  Discusses business consultants' obligation to furnish disclosure documents.

• Opinion 99-7
  Responds to requests for clarification of Advisory 99-6 addressing business consultants' disclosure obigations.

1998

• Opinion 98-1
  Apparent applicability of Rule to company providing locator services to business opportunity purchasers while also offering to sell vending machines. (01/06/98)

• Opinion 98-2
  Discusses disclosure updating requirements, concluding that the Rule permits an additional update after the most recent quarterly update to disclose new litigation against a franchisor, but requires such an update only if the franchisor makes earnings claims and the litigation is material to the claims. (01/07/98)

• Opinion 98-3
  Discusses the "required payment" coverage prerequisite, concluding that Rule coverage will not be triggered by the fact that a seller obtains collateral as security for a non-negotiable note due more than six months after a purchaser opens his or her business. (05/04/98)

• Opinion 98-4
  Apparent applicability of Rule to licensing arrangement in which seller provides significant assistance and exercises significant control by restricting geographic territories in which licensees can solicit business. (06/08/98)

• Opinion 98-5
  Possible applicability of Rule to licensing arrangement in which the seller becomes a minority shareholder entitled to a percentage of the profits of a corporation formed by the purchaser. (06/24/98)

• Opinion 98-6
  Possible availability of the "fractional franchise" exemption to a franchisor of an "affiliation" franchise covered by the Rule and otherwise subject to its disclosure requirements. (08/12/98)

• Opinion 98-7
  Apparent applicability of Rule to a sale of assets by owners of a laundry and dry cleaning plant and 13 satellite facilities, where purchasers would acquire three or more locations, have the option to use the seller's trademark and be required to comply with the seller's pricing restrictions. (12/10/98)

• Opinion 98-8
  Determines that the Rule does not prevent a franchisor from amending its disclosure document and franchise agreement after the tender of a signed contract and payment from a prospective franchisee, and that the question of whether a contract was formed by the tender is a matter of state law. (12/29/98)

1997

• Opinion 97-1
  Applicability of the fractional franchise exemption to a rehabilitative services franchise licensed to two types of medical providers. (02/07/97)

• Opinion 97-2
  Discusses the conditions under which disclosures required by the Franchise Rule may be provided to prospective franchisees on a computer diskette. (02/07/97)

• Opinion 97-3
  Discusses the circumstances under which, in providing earnings information to loan processing officials at lending institutions to assist prospective franchisees in obtaining loans, franchisors may not be obligated to provide earnings claim disclosures. (03/04/97)

• Opinion 97-4
  Inappplicability of the Franchise Rule to possible co-branding relationship in which a licensor's system is to be sub-licensed by a third party franchisor to its franchesees, even though the license to the franchisor is covered by the Rule. (07/30/97)

• Opinion 97-5
  Applicability of Rule's earnings claim dicosure requirements to general media claims made in news stories and elsewhere if copies are given to prospective franchesees by the franchisor. (07/31/97)

• Opinion 97-6
  Apparent applicability of Franchise Rule to distributorships for the sale of print advertising in regional or national publications. (08/15/97)

• Opinion 97-7
  Apparent applicability of Franchise Rule to licensing to hospitals of a Travel Health Program, discussing whether the program's assistance is "significant" to the hospital's "entire method of operation." (08/18/97)

• Opinion 97-8
  Apparent inapplicability of Franchise Rule disclosure requirements to grant of additional franchises to existing franchisee where there are no material charges. (12/08/97)

• Opinion 97-9
  Apparent inapplicablity of Franchise Rule to manufacturer's dealership program in which sole arguable payment to the manufacturer would occur, if at all, as a result of manufacturer's right to share in the proceeds of any sale of dealership assets. (12/18/97)

1996

• Opinion 96-1
  Apparent applicability of the Franchise Rule to a log cabin distributorship. Discusses the criteria for coverage of product franchises, including the required payment element, and the fractional franchise exemption. (04/12/96)

• Opinion 96-2
  Apparent applicability of the Franchise Rule to a commercial real estate affiliation program. Discusses in detail the likely availability of the fractional franchise exemption to the affiliation arrangement. (05/20/96)

• Opinion 96-3
  Apparent applicability of the Franchise Rule to mobile food and soft drink trucks identified by a common name. Discusses significant control and required payment elements. (07/19/96)

• Opinion 96-4
  Apparent applicability of the Franchise Rule to a joint venture and license agreement. Discusses the ineffectiveness of transfers to affiliated companies of ownership of the mark and of franchisee waivers to avoid coverage or compliance obligations. (11/15/96)

• Opinion 96-5
  Inapplicability of the Franchise Rule retroactively where the parties anticipated at the time of the purchase that the Rule would not apply because the only required payments were deferred until at least six months after the business opened. Concludes that the result does not change if the franchisor sues the franchisee for breach of contract for failure to open on schedule. (11/15/96)

1995

• Opinion 95-1
  Applicability of the Franchise Rule to computer software distributorship enabling health care providers to order medical and office supplies. Discusses applicability of the Rule to "distributorships" and the "significant control or assistance" coverage element. (01/31/95)

• Opinion 95-2
  Applicability of the Franchise Rule to a home-care services sub-contracting arrangement. Discusses "significant control or assistance" and "required payment" coverage elements, and "fractional franchise" exemption. (02/14/95)

• Opinion 95-3
  Applicability of the Franchise Rule to a not-for-profit education program. Discusses the lack of a "continuing commercial relationship." (04/04/95)

• Opinion 95-4
  Adequacy of predecessor company's unaudited financial statements to comply with required disclosure of the financial statements of a newly formed franchisor, and to provide substantiation for earnings claims by the new franchisor. (04/04/95)

• Opinion 95-5
  Applicability of the Franchise Rule to a turn-key dry cleaning franchise. Discusses "significant assistance" coverage element. (04/04/95)

• Opinion 95-6
  Applicability of the Franchise Rule to a sub-agency licensing arrangement for cellular phone services. Discusses the "required payment" coverage element and the "minimum investment" exclusion from the Rule's disclosure obligation. (06/29/95)

• Opinion 95-7
  Compliance obligation of franchisor and area sub-franchisor to prepare annual update of joint disclosure statement within 90 days of the close of different fiscal years. (08/28/95)

• Opinion 95-8
  Applicability of the Franchise Rule to a hotel management arrangement. Discusses the "significant assistance" coverage element. (08/29/95)

• Opinion 95-9
  Compliance obligation of franchisors to include, in required disclosures about contractual provisions regarding termination of the franchise, information about actual policies and practices of the franchisor. Discusses obligation to disclose such policies as permitting franchisees to terminate the relationship voluntarily where the contract does not provide that right, and requiring franchisees to execute a release of claims as a precondition for terminating the relationship. (09/06/95)

• Opinion 95-10
  Applicability of the Franchise Rule to vending machine manufacturers and independent marketing companies. An exhaustive discussion of the coverage issues arising in the sale of business opportunity ventures. (12/08/95)