Franchisor-Franchisee Independence and Joint Liability, Redux
As recently reported by BlueMauMau.org, the franchisor of the Tilted Kilt restaurant franchise system has recently been sued by several employees of its Chicago-based franchisee. The complaint arises out of alleged sexual harassment perpetrated by the franchisee himself.
Last year I wrote about franchisors being exposed to liability based on the conduct of their franchisees, but the issue is so important for all parties involved that several points bear repeating.
In the Tilted Kilt case, the franchisor allegedly published an “employee handbook” for franchisees to distribute to their staff, and exerted significant control over the operation of the franchised outlet in question. If true, these are two factors that typically weigh in favor of finding the franchisor to be a “joint employer” with its franchisee, thereby potentially subjecting it to liability for the alleged harassment.
Franchisors are supposed to provide support to their franchisees, and at its core, a franchise system is about building a cohesive, structured and predictable network of franchised outlets.
Even so, franchisors need to maintain an adequate degree of separation between themselves and their franchisees. Franchises are supposed to be “independently owned and operated,” and this is legally significant. Failure to maintain sufficient distinctions between the franchisor and the franchisee may result in the litigation situation presented in the Tilted Kilt case.
When preparing operations manuals, employment forms, and other documentation that you want your franchisees to use, do so in a way that requires franchisees to identify and maintain these distinctions. There are several effective ways to maintain uniformity and standards while also creating separation between franchisor and franchisee.
However, when a franchisor fails to impose adequate barriers between itself and the businesses carried on by its franchisees, customers, employees, and even the franchisees themselves may be able to make a colorable claim against the franchisor. If the franchisor doesn’t have documentation to back up its claim of independence (or worse, if there is documentation to the contrary), then it might just be faced with multi-party litigation.
Steps to Select and Protect a Valuable Trademark
The first thing to keep in mind when selecting a trademark is that not all words and names are capable of being protected as trademarks. No one business owner can claim exclusive rights in generic terms and logos, because all business owners need to be able to use these in order to identify their goods or services. Thus, a residential painting franchise likely could not claim exclusive rights in the name “Painting Pros”, because this is simply a generic description of the services that the business offers.
Leaving a Six Figure Salary and Moving Forward
FranchiseHelp.com interviews Right At Home franchisee Diane Fortner. While working as a commercial insurance broker with a six-figure salary, Fortner felt the entrepreneurial itch, and soon discovered her calling after underwriting a policy for a successful Right at Home franchisee.
Franchise Help Sits Down with Cleaning Franchise Oxi Fresh
Whenever we have a tough decision to make, we always look at our value statement and then make our decision. Every member of our team makes a point to follow our code of values in everything they do, whether they are scheduling appointments or in the field cleaning carpets. Our code of values is to be F.R.E.S.H.