A franchise or business opportunity seller must give the prospective buyer a detailed disclosure document at least ten (10) business days before the buyer pays any money or legally commit himself to a purchase. The disclosure document includes:
" Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to the buyer;
" A fully audited financial statement of the seller;
" Background and experience of the business's key executives;
" Cost of starting and maintaining the business; and
" The responsibilities buyer and the seller will have to each other once the buyer has invested in the opportunity.
Franchise sellers also must tell a prospective buyer in writing the number and percentage of owners who have failed.
Rhode Island Checklist Regarding Matters that must be Disclosed to Prospective Franchisee in Accordance with FTC Franchise and Business Opportunity Rule The Rhode Island state law requires franchisors to disclose specific information to prospective franchisees, as mandated by the FTC Franchise and Business Opportunity Rule. This checklist outlines the matters that must be disclosed to prospective franchisees in Rhode Island to ensure transparency and protection for both parties involved. 1. Franchisor Information: — The legal name, address, and telephone number of the franchisor. — The franchisor's business experience, including its affiliates and predecessors. — Bankruptcy history, if applicable— - Any ongoing litigation involving the franchisor or its key personnel. 2. Franchise Fee and Other Payments: — The initial franchise fee amount and breakdown. — Detailed information on any recurring fees or royalties, including the calculation method. — Explanation of any other monetary obligations, such as advertising fees or technology charges. — Refund policy for the franchise fee and recurring fees, if applicable. 3. Territory: — Description of the geographic area the franchisee will serve. — Limitations or exclusivity rights within the territory. — Any territorial restrictions or modifications that may occur. 4. Franchise Agreement: — A copy of the current franchise agreement and any related contracts. — Explanation of any terms, conditions, or restrictions contained within the agreement. — Duration and renewal options available to the franchisee. 5. Initial and Ongoing Training and Assistance: — Description of the initial training program, including its duration and location. — Ongoing training and educational opportunities provided by the franchisor. — Support and assistance available to the franchisee in areas such as marketing, operations, and employee training. 6. Intellectual Property: — Information regarding any trademarks, patents, or copyrights affiliated with the franchise. — Details on the franchisor's control and use of the intellectual property. — Any restrictions on the franchisee's use of the intellectual property. 7. Financial Performance Representations: — If the franchisor provides a financial performance representation, a clear statement disclosing its nature, details, and supporting data. — Explanation of any conditions or assumptions related to the representation. 8. Restricted Goods or Services: — If the franchisee is restricted from offering certain goods or services, a detailed list of these restrictions. It is crucial for prospective franchisees in Rhode Island to review and understand the information provided in this checklist. This ensures transparency and allows them to make informed decisions before entering into a franchise agreement. Compliance with the FTC Franchise and Business Opportunity Rule safeguards the interests of franchisors and franchisees alike. Please note that this checklist is intended for informational purposes only and should not substitute legal advice. It is always recommended consulting with a qualified attorney familiar with Rhode Island's franchise laws for specific guidance. Keywords: Rhode Island, checklist, prospective franchisee, FTC Franchise and Business Opportunity Rule, disclosure, transparent, franchisor information, franchise fee, royalties, territory, franchise agreement, training, assistance, intellectual property, financial performance representation, restricted goods or services, compliance, legal advice
