Posts Tagged franchise

Concerns Over Franchisors’ Use of Surveillance Video

Franchisors have utilized technology for many years to build and maintain their brands. Franchisors have used point-of-sale technology to track their customers’ buying trends, banking technology to streamline their franchisees’ payment of royalties, and social media to maximize their marketing efforts.  Most, if not all, of these uses have proven to be successful and have benefitted everyone in the franchise system, including the franchisor, franchisees and their customers.  However, a recent trend of using video surveillance is causing some to ask whether franchisors are going too far. Specifically, franchisors in recent years have started requesting that surveillance cameras be installed in their franchisees’ places of business so they can monitor the actions of employees and customers.  While there are certain potential benefits that can be derived from this use of surveillance, there are also many concerns that should be considered and addressed before any surveillance plan is implemented. Basis for Surveillance Requests Franchisors are making these requests for surveillance pursuant to provisions commonly found in franchise agreements that require the franchisees to conduct their business in accordance with the then-current standards set forth by the franchisor.  These standards are usually found in the operations manual that can modified as often as the franchisor deems necessary.  These provisions allow for franchisors to continually improve their brand and the operations of their franchisees while maintaining the necessary continuity between locations. These provisions are, or should be, concerning to franchisees because they are requiring compliance with standards that are unknown to the franchisee at the time the franchise agreement is executed.  Franchisees commonly oppose new requirements to the extent they constitute material changes and/or are costly to implement.  However, these provisions are generally enforceable to the extent the franchisor can demonstrate a reasonable basis for the new standard and the change furthers a


Franchisor Liability As a Joint-Employer

Franchisors have a valid interest in protecting the brand they have worked hard to create. they accomplish this by requiring uniformity from their franchisees and exercising control over certain aspects of their franchisees’ operations. This includes control over the location and look of their franchisees’ places of business, the products and services offered by their franchisees and how intellectual property is utilized and protected by their franchisees. Franchisors also exercise control over their franchisees’ “employees by dictating minimum employment standards, the type of training that is required for employees and the clothing or uniforms employees must wear. Unfortunately, this control over their franchisees’ employees can sometimes create liability for franchisors when employees sue the franchisees for violations of Title VII, the Fair Labor Standards Act or other labor laws. It is becoming increasingly common that employees are also suing the franchisor claiming the franchisor is liable because they acted as a joint-employer based upon the amount of control they exercised over their franchisees’ employees. This joint-employer claim creates a second, deep pocket for them to pursue. Background of Joint-Employer Liability The current standard for determining whether an individual or entity is a joint-employer was set forth in the National Labor Relations Board (the “NLRB”)’s 2015 decision in the Browning-Ferris Industries matter. Specifically, the NLRB held the primary inquiry for determining joint-employer status is whether the purported joint-employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the control is in fact ever exercised. In December 2017, the NLRB established a more employer-friendly standard in the Hy-Brand Industrial Contractors, Ltd. matter that required the purported joint-employer to actually exercise joint control over essential employment terms, rather than just reserving the right to exercise such control. This control had to be “direct and immediate”


Papa John’s–Franchise Lessons To Be Learned

By now everyone has heard about the public feud between Papa John’s Pizza and the company’s famous founder and former CEO and Chairman, John Schnatter. The problems started in November 2017 when Schnatter blamed the NFL and how it was handling the players’ National Anthem protests for declining pizza sales. Two months later Schnatter voluntarily stepped down as CEO, but remained as the company’s Chairman. Then in May 2018, Schnatter reportedly used a racial slur during a conference call which resulted in Schnatter stepping down as Chairman. In July 2018, Papa John’s announced it was removing Schnatter and his likeness from all marketing efforts, including commercials, pizza boxes and the company’s logo. That same month, Papa John’s evicted Schnatter from the company’s headquarters and requested that he stop making any media appearances on behalf of the company. In response, Schnatter stated that he regretted resigning as CEO in 2017 and that his alleged racial slur was taken out of context. Schnatter further stated that Papa John’s new management was trying to push him out of the company and he sued Papa John’s to obtain documents relating to his ousting. Schnatter then took out a full-page ad in the company’s hometown newspaper in Louisville, Kentucky, directing employees to a website he launched called where he criticized the company’s new leadership. Schnatter wrote on his website that “the Board wants to silence me…so this is my website and my way to talk to you.” He added “Papa John’s is our life work and we will all get through this together somehow, some way.” Schnatter even posted many of the legal documents from his legal fight with the company on his site. Schnatter claims that employees and they accomplish this by requiring uniformity from their franchisees are rallying around him. However, other