Many businesses that would otherwise meet the definition of a “franchise” under the Federal Trade Commission (FTC) Franchise Rule may qualify for an exemption which would allow the business to avoid the cumbersome offer and disclosure requirements under the Franchise Rule. Many of these exemptions are monetary and the Franchise Rule requires the FTC to adjust the thresholds for inflation every four years based on the Consumer Price Index.
The FTC is adjusting three monetary exemption thresholds this year for inflation.
- Currently sales where the buyer pays less than $540 are exempt and that threshold will be raised to $570 for the franchise;
- Currently sales requiring a large investment where the franchisee pays at least $1,084,900 are exempt and that threshold will be raised to $1,143,100 for the franchise, excluding the cost of unimproved land and any franchisor (or affiliate) financing; and
- Currently sales to large entities, such as multi-unit franchisees, airports, hospitals, and universities that have been in business for at least five years and have a net worth of at least $5,424,500 are exempt and that threshold will be raised to $5,715,500.
The exemptions from compliance with the Rule which will take effect July 1, 2016.