Franchising & Distribution Law Blog

The FTC on March 10 posted a solicitation for public comments on several questions relating to the relationship between franchisors and franchisees, as well as to franchisors’ involvement in certain franchisee employment matters and the relationship with third-party suppliers to franchisees. 

Electric vehicle (EV) charging is now available at traditional motor fuel stations, as well as restaurants, parking garages, grocery chains, and banks.  With the increase of fully electric vehicles apparent in the news and on the streets and poised to grow exponentially, some franchisors are assessing incorporating EVs into their franchise systems.

As noted in Restaurant Dive, many restaurant chains have spent the last few years pushing for growth through multi-unit franchisees, but challenges could lie ahead, as franchisees will likely face challenges due to high costs and pressure to use new technologies.

No brand can be successful, or frankly, exist, without some form of advertising and marketing.  However, the myriad of regulations that apply to advertising and marketing can make that vital activity seem fraught with peril.

The Federal Trade Commission has recently been sending “Notices of Penalty Offenses Concerning Money-Making Opportunities and Endorsements and Testimonials” to franchisors and companies selling other types of business opportunities. These notices from the federal consumer protection agency are seemingly coming from out of the blue and being served on registered agents similar to a lawsuit, causing recipients a fair amount of concern. Although the FTC tells the recipient that it is not being singled out (see this list of businesses who received the notice in October), it warns in bold letters on the first page that the recipient is now on notice that engaging in certain conduct could subject the company to civil penalties up to $43,792 per violation. A sample of the letters being sent to businesses can be viewed here.

California’s governor recently vetoed legislation that had intended to make it easier for franchisors and franchisees to do business in the state. While the vetoes came as no surprise, they are disappointing from a franchise perspective.

AB 1782 (Limited Trade Show Exception) and AB 2637 (Negotiated Sales) — which the State Bar of California’s Franchise Law Committee, the International Franchise Association and the Coalition of Franchisee Associations each supported — were vetoed Sept. 22, 2016, by California Gov. Jerry Brown.

More and more franchise registration states are offering the option to submit franchise applications either electronically or in hard copy. As of June 30, 2016, Wisconsin franchise filers now find themselves required to e-file all future franchise applications. 

The American Bar Association has recognized a program co-presented by Greensfelder Officer Leonard D. Vines as the best of last fall’s ABA Forum on Franchising.

Today the Office of the General Counsel of the National Labor Relations Board (“NLRB”) took its next step in the investigation of labor practices within the McDonald’s franchise system and issued consolidated complaints against McDonald’s franchisees and the franchisor – McDonald’s USA, LLC on the theory that the franchisor is a joint employer with its franchisees. Consistent with General Counsel’s amicus brief in the Browning-Ferris matter that was filed this summer, the focus of the complaints appear to be on the use of technology and tools that allows franchisors insight and potential control over franchisee operations.

In a closely watched case with far-reaching implications, the California Supreme Court determined that Domino’s Pizza, the franchisor, should not be held liable for the alleged sexual harassment by an employee of one of its franchisees. The lengthy, well-reasoned decision gave great weight to the contemporary realities of the franchise business model and the unique nature of franchising. Noting how franchising has become such an important and thriving part of our economy, the Court followed the modern, enlightened view and rejected the reasoning of the old line of cases that found a franchisor vicariously liable for acts of its franchisees based on the degree of control they exercised over their franchisees.