The New Rule The National Labor Relations Board (NLRB) issued a groundbreaking joint-employer rule on Oct. 26, 2023. This rule, slated to redefine joint-employer relationships, carries substantial implications for franchisors. The new rule, effective February 26, 2024, changes the definition of a joint employer. Previously, joint employer status was established when an entity had  direct and immediate control over employment terms.  Under the new rule, joint employer status can also be established when an entity has the mere ability to control employment terms, regardless of whether ..read more

Cracking the code of your Franchise Disclosure Document (FDD) may feel a bit like you’ve been thrust into a high-school math test. But fear not! We’re here to turn those numbers from daunting to doable. When a franchisor has a large number of franchised units, the use of averages may be the best way to show financial information in your Item 19 financial performance representation.   This blog is tackling averages and medians for Item 19 – you know, the item about the money stuff. The Rule of Averages, Medians, and More If you decide to use averages in your Item 19, you’re required ..read more

Every franchise agreement has an expiration date.  Accordingly, franchisors need to know how to properly handle franchise renewals and accompanying successor agreements. Although a franchisee’s right to renew is usually subject to them meeting certain requirements, there is a legitimate litigation risk from franchisees who are not renewed against their wishes.  The good news – your friends here at Drumm Law have crafted the following guide for franchisors to utilize when dealing with renewals and nonrenewal of franchise agreements. Determine if Franchisee Has a Right to Renew Under ..read more

The receipt page is the last page of the FDD and serves as the prospective franchisee’s acknowledgement of having received the document. Once signed, it provides evidence that the franchisor has fulfilled its obligation of providing the FDD in accordance with the law. The receipt page is a simple note at the end that the franchisee signs to say, “Yep, I got this book and I’ve read it.” It’s like the franchisee saying, “Okay, I know what I’m getting into.” Why Does the Receipt Page Matter? Legal Compliance: The Federal Trade Commission (FTC) mandates that you provide the FDD to prospective fran ..read more

When you’re planning to grow your brand, the Area Development model (or Multi-Unit model) is a strategic path for rapid growth. Why Multi-Unit Franchising? An area developer (or multi-unit franchise owner) is a single person or group runs several outlets of your brand in a certain area. Multi-unit franchising can help your brand grow fast. It lets you cover larger areas quickly, giving your brand more exposure. Also, it lets you work with people who are dedicated, know your brand well, and have shown they can run your franchise successfully. They benefit from their knowledge of your system and ..read more

As a business owner, protecting your company’s intellectual property is of paramount importance. Trademarking your names and logos can go a long way in safeguarding your brand identity. In a perfect world, we would all have the resources to immediately file applications for each and every brand-identifying element right at the launch of any business venture. Unfortunately, we live in the real world, where resources are not always available all at once and prioritizing is key. The question this very real set of circumstances often brings with it is “do I file for my name or logo first?” While ..read more

With certain phase-in exceptions, federal and state franchise disclosure laws require that the FDD include an audited financial statement.  Some regulators have started to verify an auditor’s professional qualifications as part of the FDD review process.  Essentially, the regulators are checking to see whether the “certified public accountant” is actually certified, meaning currently licensed.  States laws require that persons holding themselves out as CPAs actually have licenses.  These laws typically have professional responsibility and continuing education requirements ..read more

So you’ve just been told that you may not be able to register your trademark because it is “descriptive.” What does that even mean? It’s my mark, why am I not allowed to register it? The best place to start is with a quick overview of trademarks. A trademark can be classified into five different categories based on their distinctiveness: (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; and (5) fanciful. Generic marks lack the means of identifying the source of a particular good, and therefore cannot be protected as a trademark (e.g. trying to trademark the name “PEN” for selling pe ..read more

Franchisors expect franchisees to remain in their system. The franchise relationship is built through significant effort by both franchisors and franchisees over a long period of time. Franchise relationships often last 30+ years. However, at some point, that relationship has to end in some fashion. The franchised business can close, the system can shut down, the relationship could be terminated, etc. One common ending is when the franchisee exits via transfer. There are any number of reasons a franchisee may wish to transfer their business. They could have viewed the franchise from the beginn ..read more

Sounds simple enough right? Just wipe down the bar, turn on the TV, and watch your beloved craft patrons flow in while your taps flow out. Like most things in life, it isn’t that simple and there are legal issues that may come into play (pun intended). Copyright Issues? The NFL owns the copyright to the Super Bowl. Think about it – how many times have you heard or read “Any other use of this telecast or any pictures, descriptions, or accounts of the game without the NFL’s consent is prohibited” when watching a football game? So many times that it’s permanently engraved into your brain? Yeah, u ..read more