FTC Increases Monetary Thresholds for Three Franchise Rule Exemptions
As provided for in the Amended Federal Trade Commission franchise rule, the FTC adjusts the monetary thresholds for three types of exemptions every four years based upon changes in the Consumer Price Index. Effective July 1, 2016, the exemptions amounts adjusted as follows:
- Sales where the buyer pays less than $570 (previously $540) within the first 6 months of operation of the franchise.
- Sales requiring a large investment where the prospect pays at least $1,143,100 (excluding unimproved land) and any franchisor financing (previously $1,084,900).
- Sales to large franchisees that have been in business for at least 5 years and have a net worth of at least $5,715,500 (previously $5,425,500)
These exemptions can provide planning opportunities for businesses who want to structure business relationships to avoid the preview of federal franchise regulation. However, guidance from an experienced franchise attorney is critical to ensure compliance with all of the legal requirements and state franchise and business opportunity laws that may apply.
Our franchise attorneys are experienced in helping clients expand through franchising as well as structuring compliant exempt relationships. We also work with clients who are converting their existing licensing program to franchising.