What is New York's "Net Worth" Franchise Registration Exemption?

A: Under New York's franchise law one exemption to the FDD "registration" mandate applies to franchisors who clearly meet minimum "net worth" criteria. If applicable, the exemption only applies to "registration" of the franchisor's FDD with the State. The franchisor is still required to disclose and deliver a current FDD to its prospective franchisees in accordance to New York's Franchise Laws - so this is an exemption to FDD "registration" not FDD "disclosure".

Under the rule a franchisor may be exempt from New York registration obligations, if:
(a)(i) The franchisor has a net worth on a consolidated basis - according to its most recent financial statement - of not less than fifteen million dollars; or the franchisor has a net worth - according to its most recent audited financial statement - of not less than three million dollars and is at least eighty percent owned by a corportation which has a net worth on a consolidated basis of not less than fifteen million dollars.

There are other exemptions to New York's FDD registration regulations. Before relying on any exemption franchisors must carefully review the application of the exemption with franchise counsel.

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