significant considerations for effective franchise systems · considerations for effective...
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Significant Considerations for Effective Franchise Systems
Kansas City, Missouri September 16, 2015
© 2015 Husch Blackwell LLP. All Rights Reserved. 1
Latest Developments on Franchisor “Employer” Status: What Franchisors and Franchisees Should Know
Michaelle Baumert
NLRB Changes to the “Joint Employer” Standard
Browning-Ferris Decision
Freshii/Nutritionality Advice Memo
McDonald’s cases
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Browning-Ferris – A Closer Look
Factual Basis – Staffing Agency/Teamsters’ Election
What the Decision Means for Browning-Ferris
The Impact of the Decision on Franchising
Change in the Joint Employer StandardPre-BF Joint Employer Standard Businesses are joint employers
only when they share “direct and immediate” control over matters governing the essential terms and conditions of employment (hiring, firing, discipline, supervision, direction).
Post-BF Joint Employer Standard Two-part test that looks at direct,
indirect, and potential control reserved by contract (even where never exercised). Fact-specific analysis that has to be decided case-by-case. Standard is potentially unlimited in scope. Dissent says this fundamentally alters business relationships, including franchising.
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Immediate Potential Impact on Franchise Labor Relations
Neutrality Agreements
Joint Employer Petitions to Test
Concept
Joint Bargaining with Franchisee and
Franchisor?
Secondary Boycott
Potential
Other NLRB Activity
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David Weil, DOL Wage and Hour Division Administrator
“Fissured Employment Relationships”
Impact on Franchising Other
Agencies?
Controlling the Risk
Eliminate appearance of control
Review agreement language
Training for operations personnel with contact with franchisees
Review insurance coverage
Union prevention strategies and training
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Questions?
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Lessons Learned in 20 years of Franchising
Jeff Huber, President & CEO, Home Instead, Inc.
Franchise Owner Relations
Active Listening
Focus on WHY
Establish FEC before you need it and on your own terms
Transparency and clarity
Control expectations
Deal in facts
Communicate, communicate, communicate
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The Importance of Planning
Needs to be a discipline
Inclusive and exclusive
Get it down to one page
Set really big compelling goals
“Law of Unintended Consequences”
Focus on the front line, not the top line
Assets, not cost centers
“The Happy Continuum”
Invest in people – especially the Home Office
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Cohesive senior leadership team
“The Five Dysfunctions of a Team”
“Robust dialogue”
Disagree and commit
Being in the “foxhole”
Retreats
Culture is everything
Organic at first
“Living Home Instead”
Moving to the right
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Change IS your job
Intellectually easy, emotionally hard
From “here” to “there”
20-60-20 rule
Starts with the leader
Invest in Government Affairs
Husch Blackwell
IFA
Industry association
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Some random lessons
International sounds great but is really hard
Be really selective in awarding franchises
Focus as much on owners’ bottom line as their top line
Final Thoughts
This stuff is hard
Always competing interests
Be guided by principles
Keep it fun
Grow yourself
© 2015 Husch Blackwell LLP. All Rights Reserved. 6
My Influences
Jim Collins
Patrick Lencioni
Bill Hybels
St. Ignatius
Questions?
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Get Results:Effective Franchise Communication
Jami Hahnpresident
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Myth of Effective Communication
It’s done.
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Feedback Loop
ACTIONstrategy
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Effective Franchise Communication
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There is noEND GAMEwithout a CLEARPLAN
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A Clear Plan
+ >Right strategy Right tactics Good process
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WhyWhatWho
HowWhen
Evaluate
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4 PRINCIPLESFor Effective Franchise Communication
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DemonstrationEmotion & Sincerity
Gaining interest
DetailReference
Clarity & Direction
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Talking Headsgreat band; lousy video
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3 Rules for Good Video Have a point that is clear and easily
articulated
Demonstrate; don’t tell.
Make it stick! (Simple, profound,
unexpected)
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Communicating Personalityis NOT a cardinal sin
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3 Rules for Message EngagementBuild your
communications around your style
Bring company to life in your messages
Connect with your audiences’ hearts
and minds
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It takes a Villageto communicate effectively
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3 Rules for Involving Others Expert knowledge doesn’t make expert
communicators
Provide resources to be resourceful
Authenticity is key!
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Take your topics seriouslynot yourself
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3 Rules in Getting Results Clearly articulate done through
business objectives
Measure what matters to the objective owner
Define communication success by your
objective’s success
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Right strategy
Right tactics
Good process
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Questions
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Thank you!Get Results: Effective Franchise Communication
Jami Hahnpresident
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Franchisor Considerations When The Franchise Relationship EndsMike Norton
AGENDA
Transition Planning
Nuts and Bolts of Transition
Covenant Enforcement
Internet and Social Media Considerations
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TRANSITION PLANNING
Preparation Starts at the Beginning of the Relationship and Continues Through the Life of the Relationship Ensure agreements, covenants, guarantees, leases and
other documentation formalizing rights and obligations of the relationship are formalized and complete
Conduct periodic reviews of key franchisee documents including financial statements, leases, corporate organization documents, etc.
Consistently enforce franchise agreement regarding documentation provisions in franchise agreements
TRANSITION PLANNING
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Understand the Source and Scope of Transition Rights/Obligations Contract rights and obligations Regulatory rights and obligations
Develop Goals for Transition What will happen with the physical location? What will happen with the former franchisees? What will happen with the intangible property?
Understand Notice/Decision Requirements and Timeline
TRANSITION PLANNING
TERMINATE THE FRANCHISE AGREEMENT?
Recent case law is mixed on how termination affects the franchisor’s right to recover lost future royalties.
TRANSITION PLANNING
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LOST FUTURE ROYALTIES AS A REMEDY Sealy and courts following it’s analysis are skeptical in
awarding lost future royalties for termination involving non-payment of fees
Lost future royalty claims are much stronger in cases where franchisee has abandoned location
Courts will often award only “net profits” so franchisor must be able to show the relationship between franchisor operating expenses and the royalties from the particular franchisee
Mitigation of damages should also be considered and proven
TRANSITION PLANNING
NUTS AND BOLTS OF TRANSITION
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Physical De-identification Signage Trade Dress Inventory, Equipment, and Supplies
Protection of Proprietary Materials Operations Manuals Recipes, Systems, Forms
Tangibles and Intangibles for Continued Operation Customer Lists Phone Numbers
NUTS AND BOLTS OF TRANSITION
Real Property Rights Lease assignments
Leasehold improvements
Establishing Value of Repurchased Assets Contract requirements
Statutory requirements
Establishing fair market or book value
NUTS AND BOLTS OF TRANSITION
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COVENANT ENFORCEMENT
Defining the Scope of an Enforceable Noncompete Must be able to articulate a legitimate/protectable interest Length of Covenant How long can it last? When do you start to count?
Geography of an Enforceable Noncompete How many miles is too many miles? Miles from where?
Scope of Protection What activities are prohibited? What is a competitive business?
COVENANT ENFORCEMENT
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Enforcement Against Nonsignatories Courts are looking for cooperative conduct between
signatories and nonsignatories Nonsignatories benefiting from the franchise agreement
and its terms Former close relationship with the franchise that confers
a continuing benefit to nonsignatories Franchisors have had recent success in these types of
cases
COVENANT ENFORCEMENT
Golden Krust Patties, Inc. v. Bullock – Covenant enforced against franchisee’s son
H&R Block Tax Services, LLC v. Strauss – Covenant enforced against former franchisee employees
Tantopia Franchising Co., LLC v. West Coast Tans of PA, LLC – Covenant enforced against “straw-man” owner
Winmark Corp. v. Brenoby Sports, Inc. – Covenant not enforced against new owner who purchased in an arm’s length transaction
COVENANT ENFORCEMENT
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INTERNET AND SOCIAL MEDIA CONSIDERATIONS
INTERNET AND SOCIAL MEDIA CONSIDERATIONS
Scrubbing the Internet of the Franchise Relationship Start with company controlled websites Develop a plan with the cooperative franchisee to identify
and correct web material Takes steps with popular sites that allow visitors to
report updated information Consider prohibiting franchisee independent websites Address other social media sites such as Facebook and
Twiter
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Questions?