The Law and Entrepreneurship blog has a post on the importance of franchisors identifying the control line in employment issues and the trend for franchisors to have more say in employment decisions. The front-line employees, after all, are the face of the franchise brand and often create an impression of the brand for customers. As a result, many franchisors want to control the employment practices of its franchisees, including the right to approve managers or directors. These decisions and controls, however, can get franchisors into some trouble when they are later sued for a franchisee's alleged violation of employment laws or even unrelated personal injury matters relating to the franchisee's operations.
As the article from HR Magazine (that was the basis of the L&E blog post) discusses, liability for some franchisors can turn on an agency theory as defined by the level of control a franchisor exercises over its franchisees. With this in mind, franchisors need to balance concern over the quality of the product and service provided under their marks with an understanding that they cannot operate businesses for the franchisee. Generally, courts recognize a franchisor's right to protect its trademarks but franchisors need to exercise restraint and figure out what controls are absolutely necessary to accomplish this goal. As Joe Schumacher, a Wiggin and Dana lawyer featured in the article, says, "courts have let franchisors enforce specific standards that help achieve and maintain quality systemwide—as long as they do not control 'the time, manner and method of performing daily operations.'"
Posted by franchiselawblog at September 3, 2004 11:08 AM