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On September 14, 2014, the North American Securities Administrators Association formally adopted a Multi-Unit Commentary that provides guidance on how multi-unit franchise arrangements are to be disclosed. Existing franchisors with fiscal years ending on December 31, 2014, must comply with the new guidelines with their next franchise renewal. For new franchisors, the Commentary will not be effective until mid-March 2015, but practitioners should expect regulators to rely on the Commentary immediately as they review new filings. The full text of the Multi-Unit Commentary appears in the online version of THE FRANCHISE LAWYER. Read more . . .
Lawsuits and administrative actions seeking to hold franchisors liable as joint employers of their franchisees’ employees are on the rise. Asserting claims based on wage and hour laws, the ability to unionize, and workplace conditions, employees of franchised businesses increasingly have turned to franchisors for relief. The California Supreme Court dealt a setback to such efforts on August 28, however, when it refused to find franchisor Domino’s Pizza LLC liable as a joint employer in a sexual harassment case, Patterson v. Domino’s Pizza LLC. Read more . . .
A recent dispute among joint venture partners who own TGI Friday’s, Inc. restaurants at the Dallas / Fort Worth International Airport illustrates some of the special challenges that arise for franchises operating in non-traditional venues, such as airports. Read more . . .
Recent high profile data breaches are constant reminders of the vulnerability of customer payment information in the retail sector. Key franchise industries are especially vulnerable. To make matters worse for franchisors, potential liability for breaches seems to be expanding. The Federal Trade Commission has provided little specific guidance to help franchisors proactively determine what standards are reasonable for a given system. This article attempts to fill that gap by applying to the franchise industry the assessment tools and standards that credit card companies use to help businesses protect their sensitive customer information. Read more . . .
Canada’s anti-spam legislation came into force on July 1, 2014. To date, most businesses have focused on ensuring that they have the requisite consent to be able to send commercial electronic messages. But an effective compliance program must address other elements as well, including meeting content and opt-out requirements, effectively tracking and documenting compliance, and providing internal training and auditing. Failure to comply can be costly. Read more . . .
Many franchise agreements provide that the agreement terminates if a bankruptcy petition is filed by or against the franchisee or if the franchisee becomes insolvent. In some circuits, such as the First and Fifth Circuits, these provisions – called ipso facto or termination-on-bankruptcy clauses – are generally not enforceable because they result in the forfeiture of contractual rights that may be valuable or necessary to a franchisee's efforts to reorganize or to maximize value through an orderly liquidation. In other circuits, however, such ipso facto clauses may be enforceable. These include the Third, Fourth, Ninth, and Eleventh Circuits, which apply a "hypothetical test," described below, and the Second and Seventh Circuits, which have not yet addressed the issue at the circuit level. Read more . . .
Franchisors of concepts that provide services in the health care realm likely already disclose in their Franchise Disclosure Documents that their franchised businesses must comply with the privacy and security requirements of the Health Insurance Portability & Accountability Act (HIPAA). Some of these franchisors may count on being exempt from such requirements themselves, based on the standard fallback provision in their franchise agreements that “It is solely the franchisee’s obligation and responsibility to operate the Franchised Business in compliance with any and all applicable laws.” But in fact, the franchise relationship and franchise mandates and practices may make it necessary for franchisors and franchise vendors to comply with HIPAA’s obligations as well. Read more . . .
The editors of THE FRANCHISE LAWYER recently asked corporate counsel from a variety of franchise systems to tell us their favorite and not-so-favorite things about attending the annual meeting of the Forum on Franchising. Read more . . .
Two years ago, under Joe Fittante’s leadership and with the support of the Forum’s Past Chairs, the Governing Committee prepared a five-year strategic investment plan designed to ensure that the Forum continues to uphold its mission and goals while using its resources to benefit its members. I am updating our progress in this column. Read more . . .
In this issue, “hot off the presses,” THE FRANCHISE LAWYER brings you a summary of the Multi-Unit Commentary formally adopted by the North American Securities Administrators Association on September 16, giving guidance on how area development, sub-franchise, and area representative franchise arrangements are to be disclosed. On the litigation front, you will read about the California Supreme Court’s rejection of joint employer liability for franchisor Domino’s Pizza in a closely watched sexual harassment case. An article on a case tried this summer involving TGI Friday’s franchises at the Dallas / Fort Worth Airport illustrates the unique challenges posed by operating in non-traditional venues. Read more . . .