Check whether a franchise sale is exempt under 16 CFR 436.8
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Extract the payments, the initial investment excluding franchisor financing and unimproved land, any large-investment acknowledgment, the buyer's years in business and net worth, and any insider-purchaser facts. Do not decide that an exemption applies, and do not draft the acknowledgment.
- What the lawyer must review
- 16 CFR 436.8(a) lists the exemptions. The minimum-payment exemption is required payments to the franchisor or an affiliate, from before commencing operation to within six months after, of less than $735. The large-investment exemption requires an initial investment of at least $1,469,600, excluding financing from the franchisor or an affiliate and excluding unimproved land, plus a signed acknowledgment in the words the section prescribes. Footnote 11 limits that exemption to a case in which at least one individual prospective franchisee in an investor group invests at that threshold. A separate exemption covers a franchisee, or its parent or any affiliate, that has been in business for at least five years and has a net worth of at least $7,348,000. The section also names a fractional franchise, a leased department, a relationship covered by the Petroleum Marketing Practices Act (15 U.S.C. 2801), specified insiders who buy at least 50 percent, and a relationship with no written document describing any material term. The Commission adjusts the monetary thresholds every fourth year using the Consumer Price Index for all urban consumers. The lawyer applies the definitions in 16 CFR 436.1, which this task does not restate, and checks the acknowledgment against the prescribed sentence. ABA Model Rules 1.1 and 5.3 and Formal Opinion 512 leave that review with the lawyer.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes extracting and organising information and preparing preliminary structure or wording. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.
Related tasks
Draft or review a franchise disclosure document against the prescribed headingsCheck the franchisor's disclosure and any registration the jurisdiction requiresDraft or review a franchise agreement from the disclosure and the term sheetBuild a franchisee due-diligence issues list from the disclosure pack