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Index adjustments under the FTC Franchise Rule affect available exemptions
By Beata Krakus on June 15, 2016 at 2:34 PM

Several of the exemptions available under the FTC Franchise Rule are tied to dollar thresholds. For example, when the current FTC Franchise Rule was adopted in 2007, a franchise sale was exempt from the disclosure requirements of the rule if the payments from the franchisee to the franchisor in the first six months of the franchisee’s operations did not exceed $500. Wary of inflation, the FTC Franchise Rule requires the FTC to adjust the nominal fee exemption and others every four years. The first such adjustment occurred in 2012, and the fees are being adjusted again effective July 1, 2016. 

Come July, the following fees are being adjusted:

  • The nominal fee exemption threshold will be $570.
  • The large investment exemption threshold will be $1,143,100.
  • The large franchisee exemption threshold will be $5,715,500.

Each of these exemptions is multi-faceted and complex, and franchisors should carefully consider the specific facts of any sale before relying on an exemption. They should also be mindful that state franchise laws have different exemptions and compliance with both federal and state laws may be required. Please contact Greensfelder’s Franchising & Distribution group for more information on exemption-based franchising.

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