The Effective Use of Franchisor Advisory Councils

Transcription

1 ANNUAL CFA LEGAL CONFERENCE Bridging Business and the Law The Effective Use of Franchisor Advisory Councils DEBI M. SUTIN Gowling Lafleur Henderson LLP JOEL LEVESQUE McDonald s Restaurants of Canada Limited DAVID N. KORNHAUSER Macdonald Sager Manis, LLP

2 The Nature of the Franchise Relationship Franchisor/Franchisee expectations Consumer assumptions/expectations Relationship is PERSONAL

3 3 Elements: Underlying Traits of the Franchise Relationship A) LEGAL the agreements B) BUSINESS the dollars and cents aspect C) PSYCHOLOGICAL how the parties feel towards each other Biggest single factor in ensuring success of item C) is COMMUNICATION

4 Franchisee Association Franchisee driven and controlled Completely independent of the franchisor

5 Provide Forum for free expression Franchisees determine issues Equalization of bargaining power Funded by franchisees

6 Franchise Advisory Council ( FAC ) Franchisor-driven organization Vehicle for franchisor-franchisee communication Useful for introducing products or services and system changes

7 Opportunity to obtain feedback from franchisees Forum for open discussion and team-building Duty of confidentiality of FAC meeting discussions

8 Not a substitute for one-to-one interaction Not the forum for the resolution of individual franchisee-specific issues

9 Structure of an FAC No one size fits all structure Generally composed of franchisor executives and a representative group of franchisees Chairperson and Secretary are usually officers of the franchisor

10 Franchisee members appointed/elected Franchisor formulates mandate and determines jurisdiction Franchisor has control

11 Organization of an FAC Financed by the franchisor Franchisor prepares constitutional documents By-laws establish, among other things:

12 Criteria for franchisee membership Term of office Rules and procedures for meetings How directors appointed/removed

13 Frequency of meetings Standing and ad-hoc committees

14 Advantages of FAC Facilitates franchisor-franchisee communications Improves relations and promotes satisfaction Provides franchisors a venue to market itself to franchisees

15 Greater franchisee buy-in for new goods or services, advertising and marketing campaigns, ongoing capital/reinvestment requirements etc.; Franchisors learn about the franchisee experiences and concerns including with respect to prior initiatives that have been adopted

16 Franchisor control Reduces likelihood of franchisee association Provides franchisees: Opportunity to participate A forum No upfront cost

17 Disadvantages of FAC Franchisor cedes control Financial burden Trust Representation issues Limited jurisdiction

18 Fairview Donut Inc. v. The TDL Group decision recognizes importance of communication and consultation between franchisor and franchisee evidentiary record was significant to the Court s decision on the claim for breach of good faith

19 There is a formal system in place for consultation with franchisees, consisting of an Advisory Board composed of seventeen franchisees, elected by franchisees across Canada and the United States. There are representatives on the Advisory Board from every region in Canada. Advisory Board members are expected to liaise with and report to franchisees in their own region. The board meets three times a year for a day and a half or two days. Senior management of Tim Hortons is typically present at these meetings and minutes are kept and made available to all franchisees. At the meetings, Tim Hortons provides information to Advisory Board members concerning the state of the business and new products or initiatives. The franchisee members raise issues of concern to franchisees. The discussions are frequently detailed.

20 Conclusion Well established that communication is fundamental to establishing and maintaining the franchisor/franchisee relationship Provided that it is properly established, operated and supported, an FAC can be an important vehicle in maintaining and supporting franchisor/franchisee communication Consultation engaged in by Tim Hortons with its franchisees to introduce proposed changes was judicially recognized by Justice Strathy in his decision dismissing the proposed class action proceedings.

21 ANY QUESTIONS? THANK YOU. DEBI M. SUTIN Gowling Lafleur Henderson LLP JOEL LEVESQUE McDonald s Restaurants of Canada Limited DAVID N. KORNHAUSER Macdonald Sager Manis, LLP