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FDD & Operations Manual Updates that Could Result from the Joint-Employer Issue

Changes Ahead Word Cloud


Any change to the requirements written within Franchise Disclosure Documents is of importance to franchisees, and changes may very well be on the horizon if regulation intensifies concerning the identification of franchisors as “joint-employers” alongside franchise partners.


What are some changes that franchisees, either incoming or ongoing in a franchise network, may see in FDDs? Whether a first-time agreement or a renewal, these potential changes in terms could alter how franchise systems operate and who is responsible for what.


Franchisors may be facing a situation where maintaining influence over the brand image and the customer experience must be juggled simultaneously with maximizing franchisee liberties concerning employment matters to thus reduce franchisor liability.


As a result, clarifying that franchisees are responsible for adhering to local or federal employment or labor laws when organizing their teams of employees may become a critical part of creating new and updating existing FDDs. Additionally, FDDs may appear with clarified language concerning the franchisee’s complete responsibility for making decisions concerning employment.


Agreements may more clearly define the various responsibilities of franchisees, thus eliminating liabilities on the part of the franchisor, in such cases as employee training, the complete handling of official procedures and guidelines for employees, and ensuring employee adherence to laws and certain policies of the franchise system, be they related to social media, data privacy, or operations procedures.


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Recent highly publicized accusations of violations of federal or state laws concerning labor or employment, as well as complaints from franchisees that escalate to legal claims, could result in FDDs that clarify an obligation on the franchisee’s part to make financial reparations should costly legal issues arise concerning employment and employees—two areas for which franchisees would become completely responsible. 


Another important tool used in franchising, the operations manual, could also receive updates which reflect the clarified language throughout the FDD concerning franchisee obligations. This would ensure that the manual is in complete accordance with the FDD and that franchisee adherence obligations concerning the operations manual are not overstepping principles laid out in the FDD that clearly highlight the responsibilities of the franchisee in regards to employees and employment matters.


With such changes potentially on the agenda of franchisors, it is even more important for pending franchisees or those interested in starting a franchise to seek the legal advice of a qualified franchise attorney who can best guide decisions and provide clear insight concerning franchisee obligations, especially those franchisees who may or will seek employees for their business.
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