Our foundation is deep, so it is not restrictive.
It has allowed us to expand our practice to benefit our clients’ strategic, technological, and business needs.

  1. Home
  2.  » 
  3. Franchise Law
  4.  » 5 FAQs about buying a business franchise in Rhode Island

5 FAQs about buying a business franchise in Rhode Island

On Behalf of | Jun 20, 2023 | Franchise Law

Purchasing a franchise can be an attractive option for entrepreneurs in Rhode Island and around the world. Naturally, potential franchisees often have questions about the process.

Here are the answers to five of the most common questions regarding buying a franchise in Rhode Island.

1. What are the benefits of buying a franchise?

Buying a franchise comes with many benefits. Franchisees get access to a proven business model, ongoing support from the franchisor and an established brand. These factors can help reduce the risks commonly associated with starting a business from scratch.

2. What should a potential franchisee consider before buying?

Before investing in a franchise, potential franchisees should thoroughly research the franchisor, the market, and the franchise agreement. They should understand the costs involved, including the franchise fee, ongoing royalties and other expenses. They should also consider their fit with the franchisor’s culture and business model.  Potential franchisees should be sure they understand the franchisor’s obligations and expectations.

3. What regulations govern franchising in Rhode Island?

Franchising in Rhode Island falls under both federal and state regulations. At the federal level, the Federal Trade Commission’s Franchise Rule requires franchisors to provide a detailed disclosure document to potential franchisees. Rhode Island also has both a franchise registration and disclosure statute, the Rhode Island Franchise Investment Act, and a franchise relationship statute, the Rhode Island Fair Dealership Act.  In addition Rhode Island has general business laws that may also apply to the purchase of a franchise or the franchise relationship.

4. What kind of support can a franchisee expect from a franchisor?

It is also important for prospective franchisees to understand what operational support to expect from the franchisor. This can come from reviewing the franchisor’s disclosure document and from speaking with current and former franchisees.  Franchisors typically help franchisees with site selection, training, marketing support and ongoing operational support.  An experienced franchise attorney can help a prospective franchisee analyze the franchise disclosure document and franchise agreement.  Certain requirements that franchisors can place on franchisees are very expensive and it is important that franchisees understand these requirements before investing in a franchise business. The franchise agreement should specify the duties and obligations of the franchisor and the franchisee.

5. What is the role of the franchise agreement?

The franchise agreement is a legally binding document that sets out the relationship between the franchisor and the franchisee. It covers key aspects such as the franchisee’s obligations, the obligations of the franchisor to provide support, how long the franchise agreement lasts, and what happens if either party wants to end the agreement.

Buying a franchise in Rhode Island can be a rewarding endeavor. Potential franchisees should ensure they have a comprehensive understanding of what this process entails so they can make an informed decision when considering this investment.