FTC Adjusts Monetary Thresholds for Three Exemptions in Franchise Rule
On June 3, 2020, the Federal Trade Commission (“FTC”) announced adjustments to three monetary exemption thresholds in its Franchise Rule, reflecting inflation and based on the Consumer Price Index. These thresholds help determine whether a franchise sale qualifies for an exemption from the Rule, which mandates that franchisors disclose important information to prospective buyers regarding the risks and benefits of investing in a franchise.
Effective July 1, 2020, the updated thresholds include a reduction in the amount a buyer must pay to qualify for an exemption, increasing from $570 to $615. Additionally, the threshold for large investments rises from $1,143,100 to $1,233,000, excluding costs for unimproved land and any financing from the franchisor or affiliates. Lastly, the exemption for sales to large entities, such as multi-unit franchisees and established institutions, now requires a net worth of at least $6,165,500, up from $5,715,500. These changes aim to ensure that the thresholds remain relevant and reflective of current economic conditions.
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For more information, see here: https://www.ftc.gov/news-events/press-releases/2020/06/ftc-adjusts-monetary-thresholds-three-exemptions-franchise-rule
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