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27 R.I. Bar J. 1 (1978-1979)

handle is hein.barjournals/ribj0027 and id is 1 raw text is: -IHODE ISLAND BAR I CHARLES H. DRUMMEY HONORED RESOLUTION OF THE RHODE ISLAND SUPREME COURT COMMENDING CHARLES H. DRUMMEY FOR HIS YEARS OF DISTINGUISHED SERVICE AS REPORTER OF DECISIONS AND AS A MEMBER OF THE BAR WHEREAS, Charles H. Drummy has been a distinguished member of the Bar for almost forty-three years, and during that time has served the Rhode Island Bar Association in numerous capacities, including Chairman of the Executive, Ethics and Legislative Com- mittees. And has also served as a member of the House of Delegates of that Association, and; WHEREAS, Charles H. Drummey has served a number of charitable causes, including the United Way, the Catholic Charity Appeal, and the Red Cross, and; WHEREAS, Charles H. Drummey has been active in his community through the Chambers of Commerce of the Cities of Providence and Warwick, having served as Chairman of the Legislative and National Affairs Com- mittees of the Providence Chamber, and; WHEREAS, Charles H. Drummey has served his country as a Naval Of- ficer in time of national emergency, and; (Continued on Page 4) OCTOBER 1978 VOLUME XXVII No. 1 'COUNSELLING PROSPECTIVE FRANCHISEES by WILLIAM BUCKLEY, ESQ. Franchising has had a spiraling up- ward thrust in the business-world of this country during, at least, the past twenty-five years. It has been a marketing phenomenon. Statistics keepers estimate that there are more than 1,000 franchisors and more than 600,000 franchisees operating nationwide. It is also estimated that 21% of every consumer's dollar is spent on food in restaurants and, I would surmise, that fast food franchisees, to use this one example, get a good piece of the action. Money has been quickly made and jobs have been created. That is the good news. Some of the bad news is that a so-called franchise fever has, from time to time, struck Wall Street. In some instances, it is reported, that traders in the stock market have so eagerly purchased securities of new franchisors that they have done so with little more facts than a name. The principal asset of some of these franchisors were fees in the form of notes payable from franchisees not yet operating. As would be expected, offer- ing prices plummeted as time went on and, in many cases, have not come back. That type of situation and various and sundry other abuses by some franchisors at the expense of some franchisees have created a furor on both the state and federal levels. As a result, state and federal agencies have responded and are more closely scrutinizing the activities of franchisors. The Securities and Exchange Commission is taking a longer look at registration statements; the Federal Trade Commission is now looking into deceptive, false, and mis- leading practices on the part of franchisors in their advertising and other sales techniques. In Rhode Island, our own legislature passed the Franchise and Distributorship Investment Regulations Act' re- quiring franchisors, with some excep- tions, to register with the Department of Business Regulations and has im- posed civil and criminal penalties for failure to file and other violations. This William Buckley, Esq. enactment is a local recognition of the dangers of sharp practices in this form of business enterprise. This, incidental- ly, is the kind of business legislation which is sorely needed in other areas affecting our small business communi- ty. It goes without saying that Counsel should in all cases check out a client's franchisor with our State Business Regulations Department. Because franchising has been so widely accepted as a way of getting quickly into the mainstream of the business world, it is important that we attorneys acquaint ourselves with some pros and cons and some of the more common pitfalls and problem areas of franchising so that we may better counsel and protect our clients, be they franchisors, franchisees, or lending institutions financing the respective venture. The franchise system has been aptly called a marriage of big and small business. That is well stated and very often the case. The Rhode Island (Continued on Page 4)

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