Andrae Marrocco co-authored, and Mervyn Allen co-presented, on the topic “Modernizing the Franchise Agreement to Address Legal and Business Realities” at the Ontario Bar Association 18th Annual Franchise Law Conference in Toronto – November 13, 2018.
3 Key Considerations (taken from the paper/presentation)
Franchising is continually evolving. It is subject to the influence of technological advancement and both social and political change.
In order to remain competitive in the market place, franchisors must treat updating franchise agreements as an ongoing priority. Here are three areas that franchisors should give special consideration to when revisiting their franchise agreement.
1. Integrating New Technology
Ongoing developments in technology affect virtually all aspects of franchising. New technology has revolutionized franchisors’ approach to things like advertising, territory, training and supervision. Arguably, the primary challenges franchisors face when it comes to technological innovation are related to implementation. System change provisions in franchise agreements must provide flexibility to implement technological advancements before existing technology becomes obsolete. To the extent possible, franchisors should expressly reserve the right to implement changes that they can reasonably foresee as being relevant to their franchise system.
2. Addressing Privacy Concerns
One of the most significant technological advancements in recent history has been the proliferation of data analysis. Franchisors are in the perfect position to aggregate and analyze consumer information. Large franchise networks can collect information on the behaviour of customers across vast geographic regions. While data collection and analysis can lead to substantial customer insights, its collection and use raises privacy concerns. Franchisors should ensure that franchisees comply with privacy legislation when collecting customer data, and consider whether limiting the ways in which franchisees can use customer data is appropriate. Moreover, the franchise agreement should include mechanisms to permit franchisors access to such data, and protect its use of such data.
3. Limited Supply Chain Freedom
By design, convention and necessity, franchise agreements are restrictive when it comes to what a franchisee can and cannot do. Franchisors often use restrictions to ensure uniformity across their franchise system and to derive benefits from achieving economies of scale. Increasingly, a general overly strict approach has become less desirable for some franchisors. One reason is that overly restrictive franchise agreements limit a franchisor’s ability to take advantage of local knowledge and experience. Franchisees are becoming more sophisticated and, in certain areas, such as procurement, may have expertise that rivals or surpasses that of the franchisor.
McMillan LinkedIn Post for the event.
McMillan LLP is proud to support the Ontario Bar Association and was represented by Brad Hanna, Bob Glass, Merv Allen and Adriana Rudensky at this year’s Franchise Law Day.
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