Rhode Island Franchise Law and Registration

Classification: Registration State

Registration Fee: $600

Renewal Fee: $300

Registration Expiration: 1 year from registration date

Rhode Island franchise law and registration requirements are administered by the state’s Department of Business Regulation. Franchisors who are planning to sell a franchise in Rhode Island must register with the Securities Division of the Department before they are allowed to offer their franchise for sale. Failure to comply with registration and other legal requirements might result in civil liability.

Franchisors must also work to ensure compliance with laws governing the relationship between franchisors and franchisees. Many franchisors choose to work with a knowledgeable franchise attorney during the registration process and beyond to protect their business and new revenue stream.

Exemption from Franchise Registration Requirements

In some very specific cases, franchisors may not need to register a franchise before selling to franchisees, although they will need to file a notice of exemption. The transactions that are exempt from registration requirements are described in R.I. Gen. Laws §19-28.1-6. Some franchise sales are exempt because the franchisor has substantial assets and at least 25 franchises in current operation. If a franchisor with numerous franchises has a net worth of ten million dollars or an owner that unconditionally guarantees the franchisor’s performance, then registration is not required so long as the franchisor provides disclosure documents at least 14 days prior to a sale.

Other situations where franchise registration may not be required include:

• Sale to a person who has been an officer, partner, or affiliate of the franchisor for at least two years
• Sale of an additional similar franchise to an existing franchisee
• Sale involving renewal or amendment of an existing franchise agreement if there is no interruption or material relationship changes
• Sale of a franchise by an executor, trustee, guardian or other on behalf of someone other than the franchisor
• Sale to a buyer with sufficient experience and assets
• Sale of rights to sell goods or services as a department or division of a retail establishment
• Sale by a franchisee not affiliated with the franchisor
• Sale during pending renewal of a franchise registration if the prospective franchisee has received the new franchise disclosure document at least 14 days before the execution of a franchise agreement or payment of a franchise fee

In addition, the Director of the Department of Business Regulation may also determine that it is in the public interest to exempt other transactions from the registration requirement.

Franchise Registration Procedures

The Securities Division of the Rhode Island Department of Business Regulation no longer accepts paper filings of franchise registrations. Franchisors may use the Department’s e-licensing procedures or may submit information on USB flash drive or CD-ROM. The Franchise Section of the Securities Division is located at 1511 Pontiac Avenue, Building 69-2, Cranston, RI, 02920. Along with their initial registration and fee, franchisors should also submit:

• Uniform Franchise Registration Application
• Uniform Consent to Service of Process form
• Franchise Disclosure Document (FDD)
• Franchise seller disclosure forms
• Consent of Accountant

Franchisors must submit an initial registration fee of $600. The fee for a post-effective amendment is $120. On the Department website, franchisors can access required forms including the Application for Franchise Registration, Consent to Service of Process, Franchise Seller Disclosure Form, and Guarantee of Performance. A critical part of the registration filing is the FDD or Franchise Disclosure Document.

Rhode Island Renewal Regulations

The franchise registration renewal fee is $300. Renewals should be filed at least 30 days before expiration of the registration. If a renewal is not completed within the given amount of time and to the guidelines, franchisors may need to register their franchise as if it was a new franchise relationship. This may require them to pay the higher initial filing fee.

Help with Rhode Island Franchise Law and Registration

Federal laws dictate many of the provisions that must be included in the FDD submitted to the Securities Division and provided to prospective franchisees. Failure to include the required information or to provide the FDD to franchise buyers can subject a franchisor to civil liability, including fines.

Guidance from a franchise attorney can prevent many problems in franchise sales and help avert disputes between franchisors and franchisees.  Rhode Island franchise law and registration obligations are complex, and franchisors need to be certain they understand how to comply with requirements. Call today to start franchising your business.