Business Tools for Franchise Success · Business Tools for Franchise Success Kansas City, Missouri...
Transcript of Business Tools for Franchise Success · Business Tools for Franchise Success Kansas City, Missouri...
Business Tools for Franchise Success Kansas City, Missouri September 20, 2016
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Employment Issues to Watch
Franchise Joint Employer and Vicarious Liability Threats:
Practical Steps to Minimize Risk By: Terry Potter and Willie Ramirez
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Overview Joint Employer Developments Items to Review
– Documents– Practices– Franchisor Staff Training
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Joint Employer Developments New Day
– Agency focus – NLRB, DOL, State Attorney General– Plaintiff awareness – Class Action– State legislation – Pre-emption
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Joint Employer Developments Joint Employer Factors (vary by context):
– Power to hire, fire, and discipline employees– Authority to supervise and control employee work
schedules and employment conditions– Maintenance of employment records– Ability to determine the rate and method of pay– Ownership of equipment and facilities– Assignment of tasks and direction of employees– Authority to promulgate work rules
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Joint Employer Developments NLRB General Counsel
– Browning Ferris NLRB GC advocating a broader standard An entity could be a joint employer if it –
– Exercised direct or indirect control over working conditions;
– Had the unexercised potential to control working conditions; or
– Where “industrial realities” otherwise made the entity essential to meaningful collective bargaining
– McDonald’s complaints
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Joint Employer Developments NLRB – McDonald’s Complaints
– Charged franchisor with liability for unfair labor practices committed by franchisees under a joint employer theory
– Alleged McDonald’s “possessed and/or exercised control over the labor relations policies” of the franchisees
– “McDonald’s, USA, LLC, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees . . .”
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Items to Review – Documents Franchise Agreement
– Relationship/independent contractor Explicit regarding employment decisions and
controls Franchisee responsible for all employment
decisions Franchisor not responsible for franchisee’s
employment decisions
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Items to Review - Documents Franchise Agreement (cont.)
– Duties of franchisor/what we provide Eliminate training of franchisee’s non-Manager
employees Eliminate unnecessary controls Eliminate employment forms or handbooks
– Duties of franchisee Exclusive control of all employment decisions Comply with all manuals – careful what they say
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Items to Review - Documents Franchise Agreement (cont.)
– Indemnification Clause – claims relating to: All state and federal employment and labor laws Data Privacy laws Acts of franchisee’s employees
– Insurance Clause Mandate EPLI coverage?
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Items to Review - Documents Operations Manuals
– Biggest source of major risks– Determine scope Paper manuals On-line – often a graveyard of outdated material Flyers, updates, programs, policies,
announcements – What is mandatory vs. suggested guideline?
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Items to Review - Documents Operations Manuals (cont.)
– Courts say control over trademark, product and brand should not result in vicarious liability – employment or otherwise Trademark is relatively easy to identify How do you decide what is control over “The
Brand”?– Answer: The concept of the “Deliverable” Conceptual filter for reviewing franchisor content Flexible approach for any system Use when reviewing franchisee controls in any
form
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Items to Review – Documents Deliverable – What is it?
– Put yourself in the place of the customer– What comprises their experience and perception
when interacting wit the franchisee’s product or service offering? Holistic viewpoint
– Anything directly impacting the “Deliverable,” you can control via mandatory operational standards
– Anything not directly impacting the “Deliverable,” should be deleted or “suggested” only
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Items to Review - Documents Deliverables
– Examples Easy: food safety, service standards, store layout,
menu, uniforms, signage, trademark use and display, approved products, vehicle signage Harder: cash controls, drug testing, grooming
standards, background checks, mobile devise use, drug and alochol policies, bookkeeping systems, closing procedures If you can tie it directly to the customer experience
(Deliverable), then you can control it
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Items to Review - Documents Why is the Deliverable concept important?
– When sued as a joint employer or claimed to be vicariously liable, you can articulate how your mandatory franchisee controls directly relate to your efforts to protect the “Brand,” which established case law says should not subject you to vicarious liability Patterson v. Domino’s Kerl v. Rasmussen
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Items to Review - Practices Review/Minimize Franchisor Interaction with
Franchisee’s Non-Management Employees– Training/coaching– Auditing/inspections– Recruiting, interviewing, hiring, certifying– Setting compensation– Discipline– Handling complaints
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Items to Review –Franchisor Staff Training Training Franchisor Field Support Staff
– Educate on joint employer and vicarious liability law –Deliverable concept
– Treat franchisee employee complaints as potential breach of Franchise Agreement
– Provide staff with checklists for inspections and QC purposes Checklist should primarily cover Deliverables Verify compliance with contractual independence
obligations/insurance coverage– Caveat: area representative/master franchisee
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Advertising Programs:Options and Legalities
By: John Moore and Arkadia Olson
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Common Components of Advertising Programs in a Franchise System
Advertising/Marketing/Branding Fund Advertising Cooperatives Minimum Advertising Spend
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Advertising Fund Characteristics Promote brand Pool resources Require franchisee contributions on periodic basis
(weekly or monthly) based on percentage of revenue Franchisor administers fund and determines
expenditures – sometimes after consulting with Franchisee Advertising Council
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Advertising Cooperatives Subset of franchise outlets in specific geographic area
with common interests Pool advertising for mutual benefit of members Members often benefit more directly from coop ads than
from ads by fund Ability to tailor content to local markets Member participation and governance can be problem
areas for coops
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Minimum Advertising Spend Most franchise systems require franchisee to spend
certain minimum amounts above contributions to fund and/or coop
Contributions to fund and/or coop are often credited against minimum requirement
Franchisor regulates manner of advertising conducted by franchisee and is often source of content
On-line advertising has taken larger share of advertising spend in most franchise systems
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Basic Franchise Disclosure Requirements for Funds / Coops
Which outlets must contribute Amount contributed and whether all outlets contribute
same amount Administration/governance Financial statements/audits Expenditures in past year Ability of franchisor to form, change, dissolve coop
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Advertising and Social Media
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Overview
General Advertising Principals
Conducting Promotions and Contests
Other ways to engage: “Cause Marketing” and direct customer communications
Substance of Ads: Right of Publicity and IP
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Advertising
To avoid claims from consumers, the government, or competitors…
Tell the truth in advertisements
Clear and conspicuous disclosures
Have evidence to back up claims
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Promotions
Contests (legal)
Sweepstakes /Giveaways (legal)
Lotteries (NOT LEGAL)
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What Is An Illegal Lottery?
Prize
Chance
Consideration – In some states, not clearly defined
Gray Areas: if in doubt, add a “Free Alternative Method of Entry”
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Also Beware Of…
Sweepstakes/contest laws– Disclosure requirements
User generated content – IP Issues: Asking for tweets, photos, etc.– Photos of your product/Consideration?
Social media platform rules and TOS
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Social Media Promotions
– FB Rules: Have an Official Rules document that
provides complete release of FBEffective 11/5/2014, no more like-gating
– Twitter Rules: Do not encourage multiple tweets to enter
– Pinterest: Don’t call it “Pin it to Win it”Don’t only give pre-selected choice of pins
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Endorsements
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Endorsements
March 20, 2014 - FTC Letter on Wandering Sole:
“We believe that participants featuring Cole Haan products were endorsements of the Cole Haan products, and the fact that the pins were incentivized by the opportunity to win a $1000 shopping spree would not reasonably be expected by consumers who saw the pins.”
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Endorsements
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Bottom Line:
Tailor Official Rules for each promotion and platform
Be mindful of “consideration” and third party IP issues
Register in certain states if needed
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Text Messaging
92% of Americans own some kind of mobile phone.
Be wary of TCPA rules– Commercial text messages need “prior
express written consent”– Required disclosures– Stiff Penalties ($500/incident or actual
damages)
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E-mails and Privacy
Email marketing laws– CAN-SPAM– International Issues
Privacy issues – Policies should be up to date, accurate
regarding how you will collect and use information
– COPPA
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Cause Related Marketing
Marketing + Social Cause– State Commercial Co-venturer (CCV) lawsWritten contract with the charityDisclosure of the donation amount Id the beneficiaryRegistration and bonding in some states
– General Advertising ConcernsBe truthful about donations
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IP Issues in Advertising
Don’t use creative works without permission
Don’t use others’ brands without permission
Monitor your own brands
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Permission via TOS?
Agence France Presse v. Morel, 106 USPQ2d 1192 (S.D.N.Y. 2013)– Court: Photos subject to Twitter TOS,
but no further license to others to take photos from Twitter and license to third parties
– $1.2 M infringement judgment
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Right of Publicity issues in Advertising
The Basics:
State laws protect a person’s ability to control use of his/her own image in a commercial manner
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Right of Publicity
Right of publicity is separate and distinct from copyright
Be wary of references to celebrities
Non-celebrities may also have a claim – signed release for all persons that will be featured is best practice
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Tools and Processes to Drive Franchisee Profitability
By: Dave Banark and Travis Sill
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Why Does Franchisee Profitability Matter?
Failing Franchisees cost more to support
Successful Franchisees help validate the concept
Failing Franchisees often stray from brand standards
Successful Franchisees pay more royalties and contribute more ideas
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4 Key Areas of Focus
Increase Franchise Revenue
Improve Gross
Margins
Reduce Expenditures on Products and Services
Improve Efficiency –Revenue per Dollar of Payroll
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How to Measure Franchisee Success?
Identify Key Performance Indicators (KPIs)
Understand and communicate how KPIs drive profitability
Develop measurement tools for KPIs
Help Franchisees implement changes to improve KPIs
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Case Study
Focus on profitability and success of Franchise Owners
Process for identifying KPIs
Test markets for new client strategy
Communicate and roll-out strategy to franchise system
Dave Banark, Chief Operating Officer
Profitability Case Study
September 20, 2016
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It’s all about the data, ‘bout the data…
Start with the Hedgehog
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Busting myths all over the place
We can be everything to everyone
We can't say no to business
What we saw
P R O D U C T L O S T
5 HOURSA S S I G N E D
3 HOURSAVA I L A B I L I T Y
8 HOURS
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Profitability recommendations
EXECUTE
MEASURE
rinse and
REPEAT
Getting the word out
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Profitability Case StudyQuestions
?
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Identify KPIs
Develop measurement tools to validate KPIs
Communicate KPIs to franchisees
Implement changes and measure performance
Case Study