Franchisors should focus on the brand to mitigate risk.

The standards used to determine joint employer status and the proper identification of an individual as an independent contractor within franchise systems are changing.  In order for a franchisor to minimize liability associated with joint employer status, vicarious liability and misclassification of employees as independent contractors, franchise systems must focus on controls that relate primarily to the protection of a franchisor’s brand and the integrity of the product or services provided to the marketplace by its’ franchisees.  By focusing on these essential elements of a franchise system, rather than the day-to-day operation of a franchisees’ business, the franchisor may mitigate the risk associated with the on-going attack against the franchise business model.  Specifically, franchisors should avoid the following;

  • Imposing employment policies/practices upon the franchised business
  • training employees of the franchised business
  • imposing scheduling requirements and pricing controls upon the franchised business
  • securing contracts/customers on behalf of the franchised business
  • sub-leasing office/retail space to the franchised business
  • acting as a guarantor/surety of the franchised business

In order to mitigate risk, franchise systems should examine their franchise agreements, operating manuals and internal policies to determine where a system may step over the line of policing essential policies to ensure brand integrity and into the day-to-day business operations of its’ franchisees.

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Filed under Advertising & Franchise Law, Franchise Basics, Franchise Insight, Franchise Law, In The News

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