FTC’s Revised Disclosure Rules Make More Information Readily Available

The Wall Street Journal:

The Federal Trade Commission’s new disclosure rules for franchisers should help would-be franchisees make more-informed investment decisions.

The revisions, which took effect July 1, bring the regulations into the electronic age. Now franchisers can file disclosure documents online, eliminating the need for an in-person meeting.

Franchisers will have to list any lawsuits they’ve filed against franchisees in the past year. Previously, only franchisee-initiated litigation had to be reported. That means, for example, that a franchiser suing to collect late royalties from franchisees — a possible indicator of a financially troubled chain — would have to make that public.

Also, a potential franchisee “wants to know if he or she is getting into business with someone who’s just litigious,” says Lois Greisman, the director of the FTC’s Division of Marketing Practices, who oversees franchising for the agency.

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