Franchisors who rely on exemptions from the pre-sale disclosure requirements of the Amended FTC Franchise Rule should be aware that effective July 12, 2024, the FTC has adjusted three monetary exemption thresholds for inflation, increasing the thresholds used to determine whether the sale of a franchise qualifies for an exemption under the agency’s Amended FTC Franchise Rule.
Sophisticated Franchisee Exemption
The net worth component of the sophisticated franchisee exemption increased from $6,165,500 to $7,348,000. However, the second component of this exemption requiring 5 years of business experience remained unchanged.
Large Investment Exemption
Likewise, the amount required to meet the large investment exemption increased from $1,233,000 to $1,469,600, excluding the cost of unimproved land and any franchisor or affiliate financing. As a reminder, there is a specific form the franchisee must sign to qualify for this exemption.
Required Payment Exemption
Last, and in a bit of good news for those franchisors who rely on the required payment exemption from the Amended FTC Franchise Rule, the amount of required payments increased from $615 to $735. Accordingly, any transaction where the amount of required payments or commitments to make a required payment before or within 6 months after the franchised business opens is less than $735 will be exempt from the disclosure requirements of the Amended FTC Franchise Rule.