Tag Archives: franchisors

Government announces franchise inquiry – what does this mean for franchisors?

In response to highly publicised failings of franchisors, the Senate has resolved to commence a Parliamentary inquiry into the Australian franchising sector.

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When Franchisees Innovate: Discussing The “Big Mac” Provision

photo-1428660386617-8d277e7deaf2During the life of a franchise system, franchisees are often the source of new product and service offering ideas. Franchisors often find that some of the best-selling products are created by franchisees.  For example, some of the most popular sandwiches (including the Big Mac, Filet-o-Fish, and Egg McMuffin) at McDonald’s were created by franchisees.  Indeed, the Big Mac is one of the all-time innovation success stories, having been created by franchisee Jim Delligatti in the 1960s and finally adopted by McDonalds in 1968 (the sandwich quickly became one of the chain’s best sellers, accounting for 19 percent of all sales). These success stories encourage franchising companies to carefully consider permitting franchisees to create new or different products.

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Franchises Alert: Ohio franchisors — Is your liquidated damages clause enforceable?

On October 31, 2012, the United States District Court for the Southern District of Ohio denied a franchisor’s demand for liquidated damages against two franchisees. The case, Leisure Systems, Inc. v. Roundup LLC, provides guidelines for determining whether liquidated damages clauses are reasonably correlated to potential actual damages that could result from a breach of the franchise agreement or whether such provisions constitute an unenforceable penalty.

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Franchises Alert: Attention franchisors and multi-unit franchisees

Since the Affordable Care Act (ACA) was signed into law in March 2010, small business owners, particularly franchisors and multi-unit franchisees, have been wary of the effects of its implementation on their businesses. One major concern has been the economic effect of the so-called “Employer Mandate,” otherwise known as the “Pay or Play Mandate,” which requires all employers with 50 or more full-time employees to either offer a certain level of health care benefit coverage or pay non-deductible penalties. Typically, small business owners have less bargaining power than large companies and generally pay higher prices for insurance. Therefore, small business owners often decline to provide their employees with health benefit coverage. As of January 1, 2014, these companies may be subject to penalties under the ACA if they do not offer health coverage. In defense of the legislation, proponents of the ACA argued that small businesses would not be placed at a competitive disadvantage because they would have the option to purchase coverage through Small Business Health Options Program exchanges (SHOP exchanges). Unfortunately, on April 1, 2013, the Obama administration announced that due to “operational challenges,” the SHOP exchanges will not be fully operational in 2014, but may open in 2015.

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An expensive lesson for a large franchisor operating in Quebec was learned earlier this year. In the decision Bertico Inc. et al v. Dunkin’ Brands Canada Ltd. (2012 QCCS 2809), the Superior Court of Quebec emphasized some of the consequences that might be faced by a franchisor which let its brand “slide” or failed to protect and enhance it.

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