Franchisees are Independent

In an article published in Franchise Times, Charles Modell, an attorney with the law firm of Larkin Hoffman Daly & Lindgren, in Minneapolis, wrote, "Liability (for franchisee's actions), known as 'apparent control,' is easily avoided, by making it clear to consumers that the franchisor does not own the business they are patronizing.  Signage should be placed in prominent view of the customer, at the site of the franchised business, advising customers that the business is owned by an independent franchisee."  He went on to state that you should also impose minimum standards regarding such things as health and safety issues.

If your business is of a restaurant or retail nature, you should consider requiring your franchisees to give notice to customers that the business is owned and operated by the franchisee.  This can be done by posting a small sign like the example shown below.  Perhaps you should even provide such a sign, which can be made as a plaque at a trophy shop.

"This _________ (franchisor brand) _________(type of business) is independently owned and operated by _______(name of franchisee), a franchisee of _______(legal name of franchisor).

The phrase "independently owned and operated" should appear in all marketing materials, invoices, and agreements signed between the franchisee and customers.  Franchisees should be licensed do business under your name, and should not use your name as part of their legal business name.  A napkin in a SubWay franchise stated, "Each Subway restaurant is franchisee owned and operated.  For franchise information and comments call....."

A statement similar to this should be included in the Human Resources Section of the Confidential Operations Manual:

"Franchisee is solely and exclusively responsible for the hiring, supervision, work direction, discipline, and compensation of Franchisee's employees, for the payment and withholding of all payroll and other taxes required or determined by wages and salaries of Franchisee's employees, and for complying with all applicable laws relating to worker's and unemployment compensation, proof of employability, safety, disability, worker's compensation insurance, non-discrimination and anti-harassment, and all other laws relating to labor and employment.  Franchisee acknowledges that ________________________(franchisor name) has no control over Franchisee's labor policies and no control over Franchisee's employees, including but not limited to, the terms and conditions of their employment."

Ask yourself, "Does it appear that I am actually running my franchisee's business?"  Be sure that the public knows that the business is a franchise.  You should seek legal counsel for additional information if necessary.

More information can be found at:  www.biltmorefranchise.com