WASHINGTON (Legal Newsline) — The Federal Trade Commission (FTC) has announced it has adjusted three monetary exemption thresholds for inflation in its Franchise Rule.
The Franchise Rule mandates that franchisors disclose key information to prospective buyers as it relates to the risks and benefits of investing. The FTC uses thresholds to decide whether the sale of a franchise qualifies for exemptions from the rule.
Every four years, the FTC adjusts the threshold level to deal with inflation based on the Consumer Price Index. As of July 1 of this year, the new thresholds for exemption will take place.
If a buyer pays less than $570 for the franchise, the sale will be eligible for exemption. On the other end of the spectrum, if the sale requires a large investment where the franchisee pays at least $1,143,100, the sale will be eligible for exemption. The final exemption comes when a sale is made to large entities, such as multi-unit franchisees, airports, hospital and universities. These entities must have been in business for at least five years and have a net worth of at least $5,715,500.
The FTC voted 3-0 to approve the Federal Register Notice. The notice is available on the FTC's website.