The Federal Trade Commission (FTC) announced today that it is amending the FTC Franchise Rule (FTC Rule) to increase the monetary thresholds of three different exemptions used to determine whether a franchisor must disclose under the FTC Rule.
The FTC Rule provide three exemptions based on a monetary threshold. Under these new thresholds, a franchisor is exempt from disclosure:
- where the purchaser's initial payment is less that $540 (currently $500).
- 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
- where a franchisor sells 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).
Under the FTC Rule, the FTC must make adjustments to these thresholds every four years based on the Consumer Price Index to account for inflation. The increases will take effect July 1, 2012.