Franchise Registration Exemptions: CA, MN, WA, NY + Federal

An exemption from franchise registration is not automatically an exemption from disclosure. California Corporations Code 31101 removes a qualifying franchisor’s registration and review requirement, but requires written disclosure “at least 14 days prior to the execution” of the franchise agreement as a condition of the exemption.

This page covers four states’ statutes (California, Minnesota, Washington, New York) and the federal rule; other states’ exemptions differ and are not summarized here. The statutes and federal thresholds below were re-verified October 14, 2026. Conditions depend on the particular exemption, not simply on whether the offering is called exempt.

Exemption	Jurisdiction	Threshold or condition (quoted)	Disclosure still required?	Citation
Large franchisor	California	“not less than five million dollars ($5,000,000)”; alternative “one million dollars ($1,000,000)” with qualifying parent; “at least 25 franchisees” and experience conditions	Yes, written disclosure at least 14 days before execution	31101
Experienced owners, insiders, or existing franchisee	California	“Any of the following conditions apply”; three qualifying routes detailed below	No disclosure condition stated; franchisor must file notice and pay fee within 15 calendar days after sale	31106
Franchisee resale	California	“if the sale is not effected by or through a franchisor”	None stated in this section	31102
Fractional franchise	Minnesota	“the offer or sale of a fractional franchise”	Not stated in the quoted subsection	80C.03(f)
Single sale in 12 months	Minnesota	“no person shall make more than one sale during any period of 12 consecutive months”	Not stated in the quoted subsection	80C.03(a)
Small system	Washington	“Has no outstanding franchises granted for businesses located or to be located outside the state of Washington”; “Has granted and grants no more than three franchises for franchise businesses to be situated within the state of Washington”; additional conditions below	Yes, written disclosure at least 14 calendar days before agreement or consideration, whichever occurs first	19.100.030(4)
Franchisee resale	Washington	“if the franchisee’s entire franchise is sold and the sale is not effected by or through the franchisor”; seller must not be a franchisor affiliate	None stated in this subsection	19.100.030(1)
Franchisee resale	New York	“The sale is an isolated sale and not part of a plan of distribution of franchises”; “The sale is not effected by or through a franchisor”	Yes, currently registered prospectus at least one week before contract or consideration, whichever occurs first	684(5)
De minimis	Federal	“is less than $735”; required payments or commitments during the specified period	Federal Rule does not apply	436.8(a)(1)
Large investment	Federal	“totals at least $1,469,600”; exclusions and signed acknowledgment apply	Federal Rule does not apply	436.8(a)(5)(i)
Large franchisee	Federal	“in business for at least five years and has a net worth of at least $7,348,000”	Federal Rule does not apply	436.8(a)(5)(ii)
Fractional franchise	Federal	“The franchise relationship is a fractional franchise.”	Federal Rule does not apply	436.8(a)(2)
Leased department	Federal	“The franchise relationship is a leased department.”	Federal Rule does not apply	436.8(a)(3)
PMPA	Federal	“The franchise relationship is covered by the Petroleum Marketing Practices Act, 15 U.S.C. 2801.”	Federal Rule does not apply	436.8(a)(4)
Insider purchasers	Federal	“One or more purchasers of at least a 50% ownership interest in the franchise”; role, ownership, and timing conditions below	Federal Rule does not apply	436.8(a)(6)
No written document	Federal	“There is no written document that describes any material term or aspect of the relationship or arrangement.”	Federal Rule does not apply	436.8(a)(7)

The table summarizes the cited provisions; the conditions below matter. A state subsection’s silence about disclosure does not establish an exemption from the federal Rule.

State exemptions do not touch federal law

A state exemption changes what that state requires. The FTC Franchise Rule still applies unless a federal exemption at 16 CFR 436.8 independently applies to the same transaction. For the underlying filing distinction, see registration versus filing states; for the disclosure document itself, see how to read an FDD.

California’s large-franchisor and purchaser exemptions

The large-franchisor exemption, Corp. Code 31101. A qualifying franchisor needs a net worth “not less than five million dollars ($5,000,000),” or a net worth of $1,000,000 where the franchisor has a parent with a net worth of at least $5,000,000, plus five years of relevant experience offering franchises that includes “at least 25 franchisees.” The exemption removes the state registration and review requirement but retains the statute’s 14-day written disclosure condition.

The experienced-owner, insider, and existing-franchisee exemption, Corp. Code 31106. Section 31106 exempts an offer, sale, or other transfer from Chapter 2 when one of three routes in subdivision (a) and the filing requirement in subdivision (b) are met. The section states no disclosure condition. The three routes are:

1. Experienced owners, (a)(1). “One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following: (A) The owner or owners have had, within the seven years before the date of the sale or other transaction, at least 24 months’ experience being responsible for the financial and operational aspects of a business offering products or services substantially similar to those offered by the franchised business. (B) The owner or owners are not controlled by the franchisor.”
2. Franchisor insiders, (a)(2). “One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following: (A) The owner or owners are, or have been within 60 days prior to the sale or other transaction, an officer, director, managing agent, or an owner of at least a 25 percent interest in the franchisor for at least 24 months. (B) The owner or owners are not controlled by the franchisor.”
3. Additional franchise to an existing franchisee, (a)(3). “The offer, sale, or other transfer is of an additional franchise to an existing franchisee of the franchisor, or to an entity, one or more of the officers, directors, managing agents or owners of at least a 25 percent interest of which is an existing franchisee of the franchisor; provided that, in either case, for 24 months or more the franchisee, or the qualifying person, has been engaged in a business offering products or services substantially similar to those to be offered by the franchise being sold, or otherwise transferred.”

Notice and fee, (b). “The franchisor files with the commissioner a notice of exemption and pays the fee prescribed in subdivision (f) of Section 31500 no later than 15 calendar days after the sale of a franchise in this state pursuant to this section.”

Minnesota’s fractional-franchise and single-sale exemptions

Minnesota Statutes 80C.03(f) exempts “the offer or sale of a fractional franchise” from registration. Section 80C.03(a) includes the condition that “no person shall make more than one sale during any period of 12 consecutive months of a franchise or area franchise granted by a single franchisor.” Neither quoted subsection states a disclosure requirement. These are distinct categories; the single-sale limitation should not be treated as the definition of a fractional franchise.

Washington’s small-system exemption

RCW 19.100.030(4) covers a franchisor that “Has no outstanding franchises granted for businesses located or to be located outside the state of Washington” and “Has granted and grants no more than three franchises for franchise businesses to be situated within the state of Washington,” with no public advertising and a buyer represented by independent counsel or a CPA.

The exemption requires a franchisor “Who has delivered in writing to each prospective franchisee, at least fourteen calendar days prior to the execution by the prospective franchisee of any binding franchise or other agreement, or at least fourteen calendar days prior to the receipt of any consideration, whichever occurs first” to provide the required disclosure. Compare that deadline with the federal timing explained in FDD Item 23 and the 14-day waiting period.

California 31101 and Washington 19.100.030(4) both attach disclosure conditions to registration exemptions. That pattern does not extend to every exemption, including the resale provisions below.

Franchisee-resale exemptions: California, Washington, and New York

California Corporations Code 31102 states: “The offer or sale of a franchise by a franchisee for his own account or the offer or sale of the entire area franchise owned by a subfranchisor for his own account, is exempted from the provisions of Section 31110 if the sale is not effected by or through a franchisor. A sale is not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove a different franchisee.” This section states no disclosure condition.

Washington RCW 19.100.030(1) covers “the offer or sale or transfer of a franchise by a franchisee who is not an affiliate of the franchisor for the franchisee’s own account if the franchisee’s entire franchise is sold and the sale is not effected by or through the franchisor,” and provides that “a sale is not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove the sale or requires payment of a reasonable transfer fee.” This subsection states no disclosure condition. The franchise transfer approval process is a separate part of evaluating a resale.

New York General Business Law 684(5) retains a prospectus condition. Its text states:

5. The offer or sale of a franchise by a franchisee for his own account or the offer and sale of an entire area franchise owned by a subfranchisor for his own account is exempted from the registration provisions of section six hundred eighty-three of this article if: (a) The sale is an isolated sale and not part of a plan of distribution of franchises; and (b) The sale is not effected by or through a franchisor; and (c) The franchisee furnishes to the prospective purchaser, at least one week prior to the execution of any binding contract or purchase agreement, or at least one week prior to the receipt of any consideration, whichever occurs first, a copy of the offering prospectus of the franchisor (including amendments, if any) currently registered with the department of law.

Separately, 684(2) allows the department of law, on application and in its discretion, to exempt a large franchisor from registration with net worth “of not less than five million dollars” (or one million dollars and at least eighty percent ownership by a corporation with five million dollars), subject to further conditions.

California and Washington’s cited resale provisions state no disclosure condition; New York’s does. For a buyer evaluating a distressed franchise, the applicable exemption and the seller’s role belong alongside the other transaction questions.

Federal exemptions under 16 CFR 436.8

16 CFR 436.8 in the eCFR, current as of October 9, 2026 and retrieved October 14, 2026, states that the provisions of part 436 do not apply if the franchisor can establish any of the following. The monetary thresholds reflect the 2024 adjustment, 89 FR 57078, July 12, 2024, cited in the rule’s amendment history. Cornell’s text is a mirror.

• De minimis, (a)(1). The total required payments, or commitments to make a required payment, to the franchisor or an affiliate made any time from before to within six months after the franchisee’s business begins operating “is less than $735.” A separate discussion of PizzaForno’s license model and public fee statements is in the PizzaForno license-versus-franchise guide.
• Fractional franchise, (a)(2). “The franchise relationship is a fractional franchise.”
• Leased department, (a)(3). “The franchise relationship is a leased department.”
• Petroleum Marketing Practices Act, (a)(4). “The franchise relationship is covered by the Petroleum Marketing Practices Act, 15 U.S.C. 2801.”
• Large investment, (a)(5)(i). The franchisee’s initial investment, excluding financing received from the franchisor or an affiliate and the cost of unimproved land, “totals at least $1,469,600” and the prospective franchisee must sign an acknowledgment verifying the grounds for the exemption. The rule prescribes the acknowledgment’s wording. Footnote 11 states: “The large franchise exemption applies only if at least one individual prospective franchisee in an investor-group qualifies for the exemption by investing at the threshold level stated in this section.”
• Large franchisee, (a)(5)(ii). “The franchisee (or its parent or any affiliates) is an entity that has been in business for at least five years and has a net worth of at least $7,348,000.”
• Insider purchasers, (a)(6). One or more purchasers of at least a 50% ownership interest in the franchise must, within 60 days of the sale, have been for at least two years an officer, director, general partner, individual with management responsibility for the offer and sale of the franchisor’s franchises, or administrator of the franchised network; alternatively, within 60 days of the sale, they must have been for at least two years an owner of at least a 25% interest in the franchisor.
• No written document, (a)(7). “There is no written document that describes any material term or aspect of the relationship or arrangement.”

Section 436.8(b) provides that the Commission “shall adjust the size of the monetary thresholds every fourth year based upon the Consumer Price Index.” The rule defines that index as the Consumer Price Index for all urban consumers published by the Department of Labor.

What this means if you are looking at an exempt offering

An exemption removes a particular registration or disclosure requirement when its conditions are met. It does not mean every requirement disappears. Ask which statutory provision applies, what disclosure it still requires, and whether a separate federal exemption applies to the transaction.

Bring those answers to a franchise attorney before signing. If an intermediary describes an offering as exempt, the distinction between a franchise broker and consultant helps frame questions about that intermediary’s role; the claimed exemption still needs its own statutory basis.

Exempt doesn't mean checked

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Questions to ask your franchise attorney

• Which specific state or federal exemption applies to this offer?
• What disclosure, form, and deadline remain under that exemption?
• If a state registration exemption applies, does the federal Rule still require disclosure?
• For California 31106, which qualifying route applies, and how will the notice and fee requirement be satisfied?
• What documentation should the buyer obtain before signing or paying?