Updating Your Franchise Documents
Updating Your Franchise Documents
In the Courts - Timothy’s Coffees v. Frank Switt
This recent Ontario decision will be of interest to franchisors whose franchise agreement contains provisions for renewal which require the franchisee to “execute the form of franchise agreement then in use by the franchisor”. In the Switt case, the franchisee exercised his right of renewal. The renewal agreement contained terms that were different from the original franchise agreement, including an increase in the royalty rate from 6% to 9%.
The court found that the franchisee had an obligation to carefully review the franchise agreement to satisfy himself that it contained the terms that the franchisee thought it did. Even though the franchise agreement was drafted by the franchisor and provided very little flexibility to the franchisee, the court said that “this, of course, is the very nature of a franchise operation where uniformity, conformity and standardization go to the heart of the operation, and where individuality plays no part”.
The court confirmed that the franchisee, in order to effectively exercise its right of renewal, was required to sign the form of agreement being used by the franchisor at the time of renewal. The court ordered that the franchisee pay additional royalty fees owing as a result of the difference in royalty fees between those provided for in the original agreement and those provided for in the renewal agreement, from the effective date of renewal.
We advise franchisors to carefully review the wording of their renewal clauses to specifically allow for different financial terms to be contained in the renewal agreement. The clearer the terms with respect to this matter, the less likelihood that a franchisee will be able to avoid the requirement to live by the terms of the renewal agreement.
Trademarks, Etc. - What can be trademarked?
In any franchise or distribution systems, there will be a number of valuable assets that may need protection under the law of trademarks. In this report, we look at three registrable items.
Logo. It is common for business owners to invest a considerable amount of money and time to develop a memorable graphic design, and to spend even more money on various forms of advertising to create an association in the public’s mind between that logo and their business or products. Having invested all of this money and time, it is well worth gaining the advantages of formal trademark registration.
Slogan. A series of words such as “we never cut corners” or “clean, fresh, friendly” are slogans that may be registered as trademarks. A purely “laudatory” phrase, such as the expression “your dog will love it” in connection with pet food, is not permitted for registration.
Numbers. Pizza Pizza’s well known phone number “967-11-11”, in which Pizza Pizza invested heavily, was registered as a trademark. This was at some expense to Pizza Pizza, since the Registrar of Trademarks had originally taken the position that a telephone number, being purely functional, was not subject to registration. The matter was finally determined by the Federal Court of Appeal, who held in favour of Pizza Pizza.
More information.
For more information on franchising in Canada, the United States and internationally, please contact Peter Macrae Dillon, head of Siskinds Franchise Law Group. Peter is recognized expert in franchising. He is the author of the annotated Ontario Franchise Disclosure Act and the annotated Alberta Franchises Act and over 40 other publications on the subjects of franchising, licensing and distribution. He is licensed in Ontario and New York. Peter can be contacted at 800-816-9596 ext. 389 or by email at peter.dillon@siskinds.com. The information contained in this note is for general reference only, and should not be relied upon as constituting legal advice.
Disclaimer.
This article does not constitute legal advice. If you require assistance with the issues raised in this article, either to determine whether your business constitutes a franchise, to establish a franchise, or to avoid a finding that your business constitutes a franchise, you must obtain competent legal advice. Siskinds would be pleased to assist you in this regard.
Updating Your Franchise Documents - To learn more about this author, visit Peter Macrae Dillon's Website.
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Any franchisor updating its franchise agreement should consider a requirement that its franchisees create and maintain a home page on the Internet. The cost of home page design may be shared amongst participating franchisees, much like yellow page advertisement. The agreement should also require the franchisee to insert a “hot key” or hyperlink between the franchisee’s home page and that of the franchisor and other franchisees.
In the Courts - Timothy’s Coffees v. Frank Switt
This recent Ontario decision will be of interest to franchisors whose franchise agreement contains provisions for renewal which require the franchisee to “execute the form of franchise agreement then in use by the franchisor”. In the Switt case, the franchisee exercised his right of renewal. The renewal agreement contained terms that were different from the original franchise agreement, including an increase in the royalty rate from 6% to 9%.
The court found that the franchisee had an obligation to carefully review the franchise agreement to satisfy himself that it contained the terms that the franchisee thought it did. Even though the franchise agreement was drafted by the franchisor and provided very little flexibility to the franchisee, the court said that “this, of course, is the very nature of a franchise operation where uniformity, conformity and standardization go to the heart of the operation, and where individuality plays no part”.
The court confirmed that the franchisee, in order to effectively exercise its right of renewal, was required to sign the form of agreement being used by the franchisor at the time of renewal. The court ordered that the franchisee pay additional royalty fees owing as a result of the difference in royalty fees between those provided for in the original agreement and those provided for in the renewal agreement, from the effective date of renewal.
We advise franchisors to carefully review the wording of their renewal clauses to specifically allow for different financial terms to be contained in the renewal agreement. The clearer the terms with respect to this matter, the less likelihood that a franchisee will be able to avoid the requirement to live by the terms of the renewal agreement.
Trademarks, Etc. - What can be trademarked?
In any franchise or distribution systems, there will be a number of valuable assets that may need protection under the law of trademarks. In this report, we look at three registrable items.
Logo. It is common for business owners to invest a considerable amount of money and time to develop a memorable graphic design, and to spend even more money on various forms of advertising to create an association in the public’s mind between that logo and their business or products. Having invested all of this money and time, it is well worth gaining the advantages of formal trademark registration.
Slogan. A series of words such as “we never cut corners” or “clean, fresh, friendly” are slogans that may be registered as trademarks. A purely “laudatory” phrase, such as the expression “your dog will love it” in connection with pet food, is not permitted for registration.
Numbers. Pizza Pizza’s well known phone number “967-11-11”, in which Pizza Pizza invested heavily, was registered as a trademark. This was at some expense to Pizza Pizza, since the Registrar of Trademarks had originally taken the position that a telephone number, being purely functional, was not subject to registration. The matter was finally determined by the Federal Court of Appeal, who held in favour of Pizza Pizza.
More information.
For more information on franchising in Canada, the United States and internationally, please contact Peter Macrae Dillon, head of Siskinds Franchise Law Group. Peter is recognized expert in franchising. He is the author of the annotated Ontario Franchise Disclosure Act and the annotated Alberta Franchises Act and over 40 other publications on the subjects of franchising, licensing and distribution. He is licensed in Ontario and New York. Peter can be contacted at 800-816-9596 ext. 389 or by email at peter.dillon@siskinds.com. The information contained in this note is for general reference only, and should not be relied upon as constituting legal advice.
Disclaimer.
This article does not constitute legal advice. If you require assistance with the issues raised in this article, either to determine whether your business constitutes a franchise, to establish a franchise, or to avoid a finding that your business constitutes a franchise, you must obtain competent legal advice. Siskinds would be pleased to assist you in this regard.
Updating Your Franchise Documents - To learn more about this author, visit Peter Macrae Dillon's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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