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Log In / Register | Apr 25, 2014

Rhode Island Fair Franchise Revision Becomes Law

PROVIDENCE, R.I. (Blue MauMau) - An amendment to the Rhode Island Fair Dealership Act has become law as of 12:01 a.m. on July 4. Rhode Island's Law Review Office for the General Assembly has informed Blue MauMau this morning that Governor Carcieri has not vetoed S2592 (pdf) and H8150 (pdf), the senate and house bill that slightly amends the original Fair Dealership Act. At press time it was yet uncertain if the governor had actually signed the bill, but whether Carcieri signed the bill or not, once six days had passed from June 27, not including Sunday, the bill automatically became law.

Rhode Island is the first state to enact franchise relationship legislation since Iowa did so in 1992. Franchise relationship laws govern existing franchisees as opposed to disclosure laws that focus on registration and disclosure documents for buyers.

Franchisee attorney Michael Garner of Dady & Garner, P.A. elaborates. "Franchise relationship laws protect a franchise from arbitrary termination or non-renewal. If a franchisor terminates, then a franchise owner's investment in things like McDonald's golden arches is sunk. That is different than disclosure laws, which protect prospective franchisees from making uninformed investment decisions."

Terry Hill, Vice President of Communication for the International Franchise Association, told Blue MauMau last year, "Since there are literally thousands of bills introduced in state legislatures each year (more than 2,300 last year) that have a potential impact on commercial contractual relationships of the distribution / dealer/ licensee/ franchise variety, we didn't detect the application to franchises in this particular bill."

The original act passed quickly and unexpectedly.

This year the IFA and Dunkin' Brands had lobbied vigorously for the elimination of last year's Rhode Island Fair Dealership Act. What they were able to negotiate was a compromise in which franchisors would be required to give 60 days written notice for termination instead of the original 90. Franchisors are also required to give 30 days advance notice to cure any nonconformance issues instead of 60.

Despite lobbying efforts and the successful passing of the amendment, the Rhode Island Dealership Act remains largely intact.

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