FTC Amends Franchise Rule to Revise Monetary Thresholds for Three Exemptions

The Federal Trade Commission announced it is amending its Franchise Rule to adjust the monetary thresholds used to determine when the sale of a franchise business is exempt from the Rule, which requires franchise sellers to disclose certain information to help prospective buyers weigh risks and benefits before they invest.

The 2007 amendments to the Rule, which took effect July 1, 2008, provide three exemptions based on a monetary threshold. The Rule requires the FTC to adjust the thresholds every four years based on the Consumer Price Index. The inflation adjustments, which will take effect July 1, 2012, will exempt:

• Sales where the buyer's initial payment is less that $540 (currently $500).
• Sales where the initial investment is at least $1,084,900 (now $1 million), excluding the cost of unimproved land and any franchisor (or affiliate) financing; and
• Sales to large entities, such as 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 (now $5 million).

The Commission vote approving the Federal Register Notice was 5-0. The Notice is available on the FTC's website and as a link to this press release and will be published in the Federal Register soon. (FTC File No. P094400; the staff contact is Craig Tregillus, Bureau of Consumer Protection, 202-326-2970)

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(Franchise Rule)
(FTC File No. P094400)