This gift keeps on giving

CREDIT DUE: Deb Norman, center, owner of Rue de L'Espoir, with employees Casandra Robinson, left, and Alycyn Bouckaert. Norman will close her restaurant in August. Gift certificates will be honored by the new restaurant that will occupy the space. / PBN FILE PHOTO/JAIME LOWE
CREDIT DUE: Deb Norman, center, owner of Rue de L'Espoir, with employees Casandra Robinson, left, and Alycyn Bouckaert. Norman will close her restaurant in August. Gift certificates will be honored by the new restaurant that will occupy the space. / PBN FILE PHOTO/JAIME LOWE

With the current controversy swirling around the abrupt closing of two Faial restaurant locations, in Smithfield and North Smithfield, and the resulting outcry from holders of gift certificates to the eatery, it is a good time to revisit what state law says about gift cards and certificates.

The attorney general’s office is looking into the Faial situation. What can the law do? I wrote about it in Providence Business News some years ago.

There is truth to the old saying about “the gift that keeps on giving” because in Rhode Island gift cards and gift certificates never expire.

“It shall be unlawful for any person, firm, or corporation of any kind … to limit the time for the redemption of a gift certificate or to place an expiration date upon the gift certificate,” the law states.

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This bit of legalese makes us part of a very small number of states – only seven – that do not allow expiration dates on gift certificates and cards. According to the National Association of State Legislatures, Connecticut does not either. Massachusetts allows expiration dates on gift certificates of no less than seven years from the date of issue.

The matter of what happens to gift certificates or cards when the restaurant changes hands is not so clearly defined in the law. Retail consultants and one restaurant group owner I spoke to stated that generally speaking, gift certificates remain on a business’ books as a liability to be negotiated between buyer and seller. However, there is a greater issue of goodwill.

Another restaurant closing which made the news recently has a different story to tell. Actually it is a more common story and circumstance. Basically, gift certificates are a line item on an accounting spreadsheet of assets and liabilities. The Rue de L’Espoir in Providence announced it will close its doors on Aug. 9. Longtime proprietor Deb Norman has been negotiating with the new owners since May. One of the points they are likely to have discussed was how to settle up outstanding gift certificates and cards after the sale is finalized. Norman told me that once the new restaurant opens – a casual Italian concept that will be operated by the DeQuattro family who owns Pane e Vino on Providence’s Federal Hill – gift cards or certificates issued by the Rue will be honored by what she called “the next restaurant.”

If we return to the law for a moment – and I am no one’s attorney – one could observe that the law may in fact be too simple. It does not specifically address so-called third-party certificates, issued in exchange for promotional consideration by websites and media outlets who then may resell or simply give away the certificates.

As far as getting change back, the law says it is perfectly all right. However, the law states, this does not apply to a promotional or loyalty gift certificate or discount coupon that was not paid for, such as one from an advertisement or so-called frequent shopper program. Can the restaurant put restrictions on its certificates or cards? Yes, as long as they are disclosed at the time the certificate is purchased.

In the restaurant business as in a few other businesses, the complications arise not from the certificate itself, but from redeeming the certificate. The law addresses some of these issues but the concern among some in the industry is whether there is the need for more specific legislation. •

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