Disclosure Requirements and Prohibitions Concerning Franchising

AGENCY:

Federal Trade Commission.

ACTION:

Final rule.

SUMMARY:

The Federal Trade Commission (“FTC” or “Commission”) announces revised monetary thresholds for three exemptions from the Franchise Rule. The FTC is required to adjust the size of the monetary thresholds every fourth year based upon changes in the Consumer Price Index for All Urban Consumers (“CPI-U”) published by the Department of Labor.

DATES:

This final rule is effective July 12, 2024.

FOR FURTHER INFORMATION CONTACT:

Christine M. Todaro, Attorney, Division of Marketing Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580, phone: 202-326-3711, email: ctodaro@ftc.gov.

SUPPLEMENTARY INFORMATION:

The FTC's Trade Regulation Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising” (“Franchise Rule” or “Rule”) provides three exemptions based on a monetary threshold: The “minimum payment exemption,” the “large franchise investment exemption” and the “large franchisee exemption.” The Rule requires the Commission to “adjust the size of the monetary thresholds every fourth year based upon the . . . Consumer Price Index for all urban consumers [CPI-U] published by the Department of Labor.” This requirement, added by the 2007 amendments to the Rule, took effect on July 1, 2007, so that franchisors would have a one-year phase-in period within which to comply with the amended Rule's revised disclosure requirements before the July 1, 2008, final compliance deadline.

As required by the Rule, the Commission previously revised the three monetary thresholds to reflect inflation in the CPI-U in 2012, 2016, and 2020. The Commission bases the exemption monetary thresholds that will take effect on July 12, 2024, on the increase in the CPI-U between 2007 and 2023. During this period, the annual average value of the Consumer Price Index for all urban consumers and all items increased by 46.96%—from an index value of 207.342 to a value of 304.702. Applying the percentage increase to the three monetary thresholds increases the thresholds as follows:

Because the calculation of these thresholds is purely ministerial in nature and implements the Rule's mandatory adjustment mechanism, these adjustments are exempt from the rulemaking procedures specified in section 18 of the FTC Act. In addition, the Commission has determined that notice and comment are unnecessary under the Administrative Procedure Act (“APA”) for the same reason. The Commission, therefore, has omitted notice and comment for “good cause” as provided by section 553(b)(B) of the APA. For this reason, the requirements of the Regulatory Flexibility Act also do not apply. Accordingly, the adjusted thresholds will take effect on July 12, 2024. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as not a “major rule,” as defined by 5 U.S.C. 804(2).

List of Subjects for 16 CFR Part 436

• Advertising
• Business and industry
• Franchising
• Trade practices

For the reasons set forth in the preamble, the Federal Trade Commission amends 16 CFR part 436 as follows:

PART 436—DISCLOSURE REQUIREMENTS AND PROHIBITIONS CONCERNING FRANCHISING

1. The authority citation for part 436 continues to read as follows:

Authority: 15 U.S.C. 41-58.

2. Amend § 436.8 as follows:

a. In paragraph (a)(1), remove “$615” and, in its place, add “$735”;

b. In paragraph (a)(5)(i), remove both references to “$1,233,000” and, in their place, add “$1,469,600”; and

c. In paragraph (a)(5)(ii), remove “$6,165,000” and, in its place, add “$7,348,000.”