Minimum Payment Exemption
Exempt from the Franchise Rule are franchise sales where “the total of the required
payments, or commitments to make a required payment, to the franchisor or an affiliate that are
made any time from before to within six months after commencing operations of the franchisee’s
business is less than $500.” A franchisee commences operation when it first makes goods or
services available for sale. A commitment entered into during the first six months that requires a
payment later than six months after commencing operation (such as a promissory note or that
portion of lease payments made after six months) is not counted toward the $500 minimum.
CREDIT: The content of this post has been taken from the Federal Trade Commission’s document, Franchise Rule Compliance Guide.