IFA s 45 th Annual LEGAL SYMPOSIUM

Transcription

1 LEGAL SYMPOSIUM

2 Out With The Old And In With The New: Making Major Changes In Your System Within The Bounds Of Your Franchise Agreement Peter J. Klarfeld Principal, Gray Plant Mooty Washington, DC Amy K. Reynolds Deputy General Counsel, Driven Brands, Inc. Charlotte, North Carolina William R. Werner General Counsel, Hardee s Food Systems, Inc. St. Louis, Missouri Lyndon S. Johnson Multi-Unit Franchisee, Church s Chicken Dallas, Texas

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4 Licensee shall have the right to terminate this license at any time on sixty (60) day s notice in writing, provided that at the time notice is given, and at the time of termination, Licensee is not in default of this Agreement.

5 New, Stronger Franchise Agreements Identify Target Customer: Young Hungry Guys Focused Menu; Premium Products Remodel consistent with new image Memorable Advertising

6 Franchisor Can: Control Advertising Change Operating Manual Modify System Require Extensive Remodeling Approve/Disapprove Transfer Franchisee Cannot: Close Unit without Franchisor Consent Transfer to a Competitor (In-term and Postterm covenants)

7 The record established that HFS had made a strategic marketing decision and approved the advertisement at issue in what it believed was the best interest of the Hardee s brand, which is what the Agreement with the [franchisees] contemplated that HFS would do.» Hardee s Food Systems, Inc. v. Hallbeck, et. al. (Feb 28, 2012) emphasis added

8 A franchisee may rely on a franchisor s good faith, fairness, exercise of due care, and performance including the administration of advertising, rewards programs, marketing funds, and franchise or development agreements.» Proposed Universal Franchisee Bill of Rights

9 The distinguishing characteristics of the System include, without limitation, uniform and distinctive building designs, interior and exterior layout and trade dress; standards and specifications for equipment, equipment layouts, supplies and menus (including food and beverage designations, special recipes and quality and quantity standards); operating procedures for sanitation, maintenance, and food and beverage storage, preparation and service; and methods and techniques for inventory and cost controls, recordkeeping and reporting, personnel management, purchasing, sales, promotion, and advertising. The System and its components may be changed, improved, and further developed by HFS from time to time. HFS identifies the System by means of certain names, marks, logos, insignias, slogans, emblems, symbols and designs (collectively Proprietary Marks ) which HFS has designated or may in the future designate for use with the System. The Proprietary Marks used to identify the System, including the principal Proprietary Marks, may be modified by HFS and/or its affiliates from time to time.

10 HFS, in its sole discretion, shall be entitled from time to time to change or modify the System, including modifications to the Manual, the menu and menu formats, the required equipment, the signage, the building and premises of the Franchised Restaurant (including the trade dress, decor and color schemes), the presentation of the Proprietary Marks, the adoption of new administrative forms and methods of reporting and of payment of any monies owed to HFS (including electronic means of reporting and payment) and the adoption and use of new or modified Proprietary Marks or copyrighted materials. Franchisee shall accept and use or display in the Franchised Restaurant any such changes or modifications in the System as if they were a part of the System at the time this Agreement was executed, and Franchisee will make such expenditures as the changes or modifications in the System may reasonably require.

11 Notice of significant change to the franchise system shall be given in a reasonable time prior to required changes. A franchisee may terminate without penalty, or liquidated damages, if a change to the franchise system would cause substantial negative impact or if the franchisee is experiencing substantial financial hardship. Under such termination any noncompetition covenant shall be void.» Proposed Universal Franchisee Bill of Rights

12 Old Meineke logo

13 New Meineke logo

14 Still of neighbors and white picket fence

15 Still of pets

16 Picture of Myspace page

17 You could win free oil changes

18 Econo Lube logo

19 Maaco logo

20 Promote a collaborative/inclusive Brand Culture Engage Franchisee Advisory Associations Solicit Franchisee involvement in the development stage Enlist Franchisees to participate in the testing process Provide regular communication updates on test results