Under the FTC Rule, an important FDD disclosure exemption exists respecting "fractional franchises". A "fractional franchise" typically exists where the franchised operation is not operated from its own independent franchise location but, rather, is operated as a satellite within the business premises of another franchise or an independent business. Examples include a satellite franchise located within a large box discount retailer or a sandwich shop located within a large convenience store.
The fractional franchise exemption is one of the four exemptions provided by the Franchise Rule and is defined in 16 C.F.R. § 436.2(d). The fractional franchise exemption may be available to franchisors that satisfy the following criteria:
The franchisee with which it enters into a relationship has been "in the business represented by the franchise more than 2 years" and
The "sales arising from the relationship represent no more than 20 percent of the sales in dollar volume of the franchisee"
Under the Franchise Rule, franchisors of a fractional franchise may obtain an exemption from FDD registration requirements.
IMPORTANT DISCLAIMER: The information contained on this website is provided for general educational purposes only, should not be relied on as legal advice and does not serve to create an attorney client relationship. In utilizing this website you acknowledge that there is no attorney client relationship between you
and Charles N. Internicola, Esq. and that the information contained on this site does not and cannot serve as a replacement for the competent legal advice of a licensed attorney in your state. Further you acknowledge that any and all citations to cases and statutes must be independently verified by competent legal counsel to confirm the validity and accuracy of such information. The content of this site is subject to the Copyright of its author and owner, Charles N. Internicola, Esq.
