Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: FTC adjusts Franchise Rule monetary exemption thresholds, (May 16, 2016)

By Linda O’Brien, J.D., LL.M.

The FTC has adjusted the three monetary exemption thresholds for inflation in its Franchise Rule, the agency announced today. The thresholds are used to determine whether the sale of a franchise qualifies for an exemption from the Rule.

The Franchise Rule requires franchisors to disclose key information prospective buyers need to evaluate the risks and benefits of investing in a franchise. Specifically, the Rule requires franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise, its officers, and other franchisees.

The Rule requires the FTC to adjust the thresholds for inflation every four years based on the Consumer Price Index. The exemptions from compliance with the Rule, which will take effect July 1, 2016, are: (1) sales where the buyer pays less that $570 (currently $540) for the franchise; (2) sales requiring a large investment where the franchisee pays at least $1,143,100 (currently $1,084,900), excluding the cost of unimproved land and any franchisor (or affiliate) financing; and (3) sales to large entities, such as multi-unit franchisees, airports, hospitals, and universities that have been in business for at least five years and have a net worth of at least $5,715,500 (currently $5,424,500).

News: FranchisingDistribution FederalTradeCommissionNews