Franchising & Distribution Law Blog

Although the full impact of COVID-19 remains unknown, many franchisors are looking to the future and new opportunities for franchise sales. Some franchises may be dramatically affected, either temporarily or permanently, and may have to significantly alter their business model to remain profitable. Others might actually benefit from the pandemic.

As required every four years, adjustments to the FTC Franchise Rule’s monetary thresholds for certain exemptions are on the way.

The exemptions under the FTC Franchise Rule are intended to exclude franchise transactions in which the prospective franchisee doesn’t need the protection the rule is intended to provide. As several exemptions available under the FTC Franchise Rule are tied to dollar thresholds, they need to be adjusted from time to time to remain relevant. For example, when the current rule was adopted in 2007, a franchise sale was exempt from the FTC Franchise Rule’s disclosure requirements if the payments from the franchisee to the franchisor in the first six months of the franchisee’s operations did not exceed $500. Adjustment of the dollar threshold is necessary for this exemption not to become irrelevant with inflation.