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We are franchise attorneys who help hard working people who have built up their business, legally expand that business into new markets, which allows them to improve their profits while making their business nationally known.
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Most franchisors host some form of Discovery Day or Join the Team day. This event is intended to be a show and tell day culminating with a celebration that the select franchisees in attendance are signing franchise agreements and becoming part of the franchise system.
As a franchisor, to get the most value from a Discovery Day, you should take care to select only the elite franchisee prospects to ensure that time is not wasted on people who are just fishing for information. Once these elite franchise prospects are determined, invite them to corporate headquarters or a company owned location and show them around. Let them see what they will experience in a ‘day in the life of a franchisee’ setting. Additionally, a Discovery Day should expose the franchisee to the management that they will be interacting with as a valued member of your franchise team. By the time someone gets to a Discovery Day you should be pretty sure of them as a prospect; however, still ensure during this time to evaluate the franchisee prospects so that you can make a judgment call as to whether you want to award them a franchise in your system. Note though that a good franchise prospect will take this opportunity to evaluate you, your management structure, your support staff, and your facilities as well to determine whether you can support their needs.
As a franchisee, you should see a Discovery Day as a sign that you have passed the initial qualification stage and that the franchisor is hopeful that you will be a good franchisee. When attending a discovery day, you should take care to carefully analyze everything going on and talk with the franchisor’s management and other staff to have all of your questions answered. Many times, this is where you will make your decision to sign the franchise agreement, so asking your questions now will allow you to make a more informed decision about the next 10 years or more of your career.
For both franchisors and franchisees, the end of a Discovery Day can be a very nervous time. Franchisors are hoping that franchisees will be ready to sign a franchise agreement and franchisees are nervous about whether they are ready to sign. Neither side should be hurt or confused if a request for time is made to consider everything learned about the other during this Discovery Day process. The key is to be open with each other and ask all of your questions so that there are not any nasty surprises after the franchise agreement has been signed.
If you would like help preparing for a Discovery Day, contact our franchise attorneys toll free at (866) 993-7262 now for a free consultation.
From time to time we meet with business owners, franchisors, franchisees, and employees to discuss issues involving verbal agreements. Although enforceable, verbal agreements for the most part are worth the paper they are printed on. This is because many times a verbal agreement is a he said, she said argument where neither side can be believed with 100% certainty.
But, we always get the argument that everyone uses verbal agreements and people do handshake deals all the time. Although this is true and many of the most powerful business and political leaders have done business over a handshake, most of these people have had written contracts prepared afterwards to seal the deal. Many times the handshake that you see on tv or read about the newspaper is for show.
Generally, every attorney will advise that you never depend on a verbal agreement. If the matter is important then take the time to write it down and have both people sign and date it. Remember, the devil is in the details and because most people do not have photographic memories, the details many times can be forgotten or changed slightly with time. If you have a written agreement which both sides have read and understand then you have a better chance of catching all of the details.
If you ever do find yourself in a conflict over a verbal agreement, make sure to talk with an attorney and show them as much documentation and proof as possible showing that you and the other person were following the verbal agreement. If you can prove that you and the other person were living up to the verbal agreement then you just might have a chance at success in a conflict.
Each verbal agreement is different as are the conflicts that arise over each verbal agreement. If you have a conflict then you should put together as much information as possible on the verbal agreement and talk with an attorney who can help you determine how best to proceed.
If you would like to schedule a free consultation with one of our franchise attorneys, please call us toll free at (866) 993-7262 or email us through our website by clicking HERE.
We recently spoke in one of our franchise blogs about the different ways to find a franchise business. One of the ways discussed was to attend different franchise trade shows across the country and meet the franchisors face to face. It just so happens that one of those events is taking place in Los Angeles, CA next weekend, September 7 & 8 at the Los Angeles Convention Center. Click HERE to get your tickets now.
If you are in the Los Angeles area and are interested in buying a franchise or franchising your business, then this is a great opportunity to visit with different franchise concepts and learn from experienced franchise professionals. One of our senior franchise attorneys, Lynne Shelton, will be giving a seminar to franchise purchasers about what to know before buying a franchise and the steps to take before committing to a purchase.
If you are interested in attending this event, please call us toll free at 866-993-7262 or email Lynne at Lynne@SheltonPower.com and to get more information.
Each year I have at least 100 different people come to me and ask “Where can I find a good franchise?” There is no simple answer to this question because every franchise has the potential to be good if the right people are involved, on both the franchisor and franchisee sides. Also, you must remember that what is “good” for you is not necessarily what is “good” for someone else. You have to know what you want from a business before you can determine whether a particular franchise will be good for you.
During the upcoming West Coast Franchise Expo in Anaheim, CA on October 24 – 26, I will have the pleasure of talking to entrepreneurs who are looking to buy a franchise. This is a passion of mine as I love talking with people about their business goals, but when this question comes up during my seminars I have to admit that I do not have an answer because I cannot know what someone is looking for in a business. My recommendation normally is that the person review the franchise disclosure document and talk with qualified advisers, which includes a franchise attorney, as well as analyzing the franchise and having all questions answered before committing.
There are places to go to learn about different franchises and request more information such as the International Franchise Association, Franchise Gator, World Franchising, and Franchise Direct just to name a few. Working with different franchise brokers or consultants as well will help give more information about a particular franchise. All of these are great resources, but maybe one of the best places to learn about a particular franchise face to face is at one of the many franchise trade shows put on across the country during the year by different groups such as MFV Expositions and The National Franchise & Business Opportunities Expo.
Buying a franchise is a life changing event that can be one of the best decisions you will make if you do your research and find the franchise that is “good” for you.
If I can help you in any way with your franchise purchase or give you names of people that can help direct you in the right direction, please feel free to contact me at Jason@SheltonPower.com or call my office toll free at 866-993-7262.
In our last BLOG, Lynne Shelton discussed the first 3 Best Practices to Protect Trade Secrets. In this issue, she will cover points 4 – 9 for you.
4. Record Keeping, Document Retention and Destruction Policies
Companies should have record keeping, document retention and destruction policies in place for a variety of reasons, including trade secret protection. As with all policies and internal procedures, the company must be vigilant in making certain that its employees comply with the policies. Unfortunately, these policies are most often vetted during litigation, when discovering the strengths, weaknesses, and compliance with them is sometimes too late.
5. Document Classification
Practitioners often advise companies to adopt a policy that requires documents containing or reflecting trade secret information be labeled “Confidential.” The policy has more impact if it contains more details about a series of potential classifications and access, and employees are furnished instructions and provided detailed training, with concrete examples of information to be and not to be labeled. Over‐labeling will make it more difficult for a company to prove in litigation that its own designation has meaning, while under‐labeling could mean the critical trade secret document is not properly labeled.
Limit access to trade secrets to a need to know basis only. If you have the secret formula for Coca‐Cola for example, how many people should be given access?
Agreements are ubiquitous in trade secrets litigation and are often the best ammunition a company has in its arsenal to protect its trade secrets. In fact, this topic could easily stand alone as an article. Like laws related to trade secrets, contract laws are governed by state law.
Trade secret protection begins prior to employment. Offers for employment should be made contingent on an employee executing a proprietary information and invention assignment [and non‐compete] agreement (a “PIIA”). In developing its PIIA, a company should determine whether or not it will include restrictive covenants not to compete, not to solicit customers, not to hire, not to raid and/or not to solicit employees and, if they are to be included, the parameters of the covenants based on the controlling state law.
b. Independent Contractors
It is arguably more important that independent contractors sign agreements similar to a PIIA. Unlike employees, independent contractors do not necessarily owe a duty of trust, duty of loyalty or other common law duty to the company and, as such, no common law duty to keep information secret. Moreover, there is no work for hire theory, so independent contractors own their copyrights unless they are assigned to the company. Equally, even if an independent contractor were hired to invent something, an independent contractor is not presumed to have assigned such inventions to the company. As such, PIIA type contracts should be executed by independent contractors and subcontractors alike.
8. Third Parties
In contracts with outside vendors, customers, suppliers, purchasers, business partners and other entities, companies should ensure that strict confidentiality provisions protect any trade secret information disclosed as part of the relationship. Potential joint‐venturers and potential acquirers must also be required to maintain confidentiality. We see numerous times a potential suitor will look under the hood of a company, only to quickly thereafter begin to compete with the company. A potential business partnership relationship should be entered into cautiously and certainly pursuant to a non‐disclosure or other detailed confidentiality agreement.
9. Conduct exit interviews
Trade secrets most often walk out the door with employees. The last opportunity a company may have to either try to learn if it should be concerned with IP misappropriation and/or to provide guidance to an employee of his or her continuing obligations to the company is in an exit interview. Based on the person’s position leaving the company, an HR, IPR or legal person, or a combination, might conduct the interview. Traditionally, these interviews were used strictly as a human resources tool to understand the attrition and, if possible, discover looming HR problems within the organization. With the increase in IP litigation, especially trade secrets litigation, the exit interview has become increasingly important to protect a company from losing its IP.
If possible, during the interview, it should be determined where the person is going to work (competitor or not) and what the person will be doing at the new position, for a potential inevitable disclosure argument. Another copy of the PIIA should be provided to the exiting employee and, in a non‐threatening manner, the employee should be reminded of his or her various continuing obligations, including the non‐disclosure provision and any restrictive covenants.
With the increased mobility of employees as well as information itself, it is critical for a company to gear its culture towards protection of it’s intellectual property and to establish practices to protect its trade secrets.
For more information about this topic, please contact me at Lynne@SheltonPower.com or call our offices toll free at 866-993-7262.
To protect its Intellectual Property Rights (“IPR”) by demonstrating that certain information qualifies as a trade secret, companies should consider the following:
1. Develop and Implement an Overall Intellectual Property Rights Protection Program.
Whether you are just starting out or are a multinational company with enormous revenues, an effective IPR protection strategy or program (“Program”) is critical to a competitive advantage. The four intellectual property rights: patent, copyright, trademark and trade secrets, need to be considered in developing, implementing and maintaining a Program.
One important detail of a Program is to assign an employee as the initial IPR Officer of the company. We have seen employees from any number of areas be appointed to this position (e.g. legal, finance, IT, human resources). All employees are to be informed of the appointment, and the IPR team, if the needs of the company demand a team. Our experience shows that the most effective IPR team draws from various disciplines within a company, based, among other factors, upon the business of the company, number of employees, size of the IP portfolio, types of IP and jurisdictions in which business is conducted. The team members whom companies most often fail to include are persons experienced in the full‐range of human capital issues, i.e. understanding and guiding company culture, compensation and benefits, issues of motivation and morale, legal issues as well as internal contracts, policies and procedures. Such a person will add significant value to the IPR team.
2. Conduct a Trade Secrets Audit
Conduct a trade secrets audit to identify information that can be classified as trade secrets. It has been our experience that audits are expensive and audits without a plan and timeline for completion are the most expensive and time‐consuming and can become a waste of resources producing little benefit. First plan the audit, then successfully conduct the audit.
Questions to be answered to assist trade secret identification include the following:
Is the information known outside the company? To what extent?
Is the information known inside the company? By whom, categorically? To what extent?
What steps have been taken to keep the information secret?
What is the value and/or competitive advantage in keeping the information secret?
What has been the cost (time, resources, expenses) in developing the information?
How would such information be properly (i.e. without misappropriation) obtained or duplicated? How difficult would this be?
Could such information be properly developed or duplicated? How difficult would this be?
It is important to note that a company should not identify all its potential confidential information as trade secrets because being over‐inclusive could potentially trivialize the trade secret portfolio.
3. Employee Policies, Procedures and Training
The importance of employee policies, procedures and training cannot be over‐emphasized in the development of the IPR Program. In addition to the policies that are discussed in detail below, a company should also consider adopting the following policies to assist in protecting its trade secrets: external communications policy, electronic mail policy, internet usage policy, new confidential information notification policy, new inventions notification policy, lab and engineering notebooks policy, information classification policy and a computer usage policy. Policies should be drafted to work with other policies and, as always, considering the business, IP portfolio, types of IP, size and culture of the company. Initial and ongoing training on the policies and procedures is a crucial piece of a successful Program. Drafting and implementing policies is only the beginning. The key to an effective program is continued compliance with all policies as well as updating policies as necessary.
Stay tuned for our next blog where we will cover items 4-9 about the Best Practices to Protect Trade Secrets.
For more information about this topic, please contact me at Lynne@SheltonPower.com or call our offices toll free at 866-993-7262.
Face it, every franchisor wants to sell franchises, but are they following all of the rules when doing so?
The Federal Trade Commission and various states have laws that relate to the sale of franchise opportunities. Although the FTC does not require registration of the FDD or franchise sellers, in registration states a franchisor must give a list of the franchise sellers along with their contact information. Each franchise seller then must comply with those state and federal laws governing the franchise sales process. Failure to abide by these rules can result in severe punishment by the states and the FTC. Some punishments have included fees paid to the state, requiring the franchisor to rescind the franchise agreement with the franchisee and repay all amounts paid, damages paid to franchisees, attorneys’ fees, court costs, and even criminal sanctions against the franchise seller or franchisor who breaks the laws. Any franchisor can attest that an FTC or state violation can be detrimental, if not fatal, to any franchise system.
The laws pertaining to franchise sales compliance are not difficult to learn and follow. Newer franchisors should talk with experienced franchise professionals about franchise sales compliance and even ask for training and role playing to review various scenarios that could occur. Additionally, all franchisors should work closely with their franchise attorneys to update the franchise disclosure document quarterly or as necessary to make sure that all aspects of state and federal laws are complied with. Franchisors should also ensure that they are receiving signed FDD receipts from all franchisee prospects before moving forward with serious discussions, make sure that their franchise sellers are not violating the mandated waiting period that every franchisee prospect must be given, and that they provide prospective franchisees with any material changes that are made to the FDD and if necessary give additional waiting periods. Being aware of the laws that pertain to franchise sales is a necessary evil in this industry, you should work with your franchise attorney to properly educate your franchise sellers which will help to make your franchise all the more successful.
To learn more about franchise sales compliance, you can contact our attorneys at franchising@SheltonPower.com or call us toll free at 866-993-7262.
If you are in the Austin, TX area and would like to learn more about franchise sales compliance, our firm will be hosting a lunch and learn session with the Austin Franchise Association on October 8 where we will have panelists who will host round table discussions and provide a panel discussion on franchise sales compliance. For more information about attending this event, email me at Jason@SheltonPower.com.
When was the last time you took a good hard look at your operations manual?
If you are like most franchisors, you may not be able to remember the last time. You should be reviewing your operations manual throughout the year to incorporate new products, services, policies, and procedures that impact the franchise system. Because franchise systems grow and change regularly, you should have a list of items within the manuals that need to be updated or modified to reflect the improvements that have been made to your system, changes in the industry, and to answer any operational or procedural questions that have arisen.
Remember that in almost every franchise system that your franchise agreement is directly linked to your manuals. If one of your franchisees is not in compliance with the manual, then that can result in a default of their franchise agreement. Therefore, you should ensure that your manuals are as up to date as possible to keep franchisees abreast of their obligations.
Remember that a weak or outdated manual has a direct impact on the quality and happiness of your system and with the advanced technology available to you today, you should take action now to update your manuals and get your franchise system on the right track.
The problem: Franchise professionals are very busy, but they know that they are missing important information that is crucial to their business. The biggest problem has been that there is a lack of convenient meeting places for these franchise professionals to discuss solutions with their colleagues on a regular, reliable and consistent basis.
The solution: The Austin Franchise Association. The AFA was created by the efforts of our attorneys and other elite franchise industry professionals to create a forum meeting every two months which gives franchisors, franchisees, and franchise suppliers the opportunity to meet for a couple hours and discuss solutions to their franchise issues.
The Austin Franchise Association is scheduled to have its first meeting in September. We are inviting industry professionals from Austin, TX and the surrounding areas to join the AFA group on LinkedIn and join us in September for the first meeting covering the following topic:
~FRANCHISE SALES AND COMPLIANCE~
Membership opportunities: If you are interested in reaching out to other franchise professionals, please connect with our attorney Jason Power either through email at Jason@SheltonPower.com or through his LinkedIn profile by clicking HERE to obtain an invitation to become a member.
For Sponsorship Availability: If you would like to claim one of the limited sponsorship opportunities, please send an email to Erin@SheltonPower.com and we will send you information about Austin Franchise Association sponsorship opportunities.
Email us at info@SheltonPower.com and we will register you to attend the Dallas Franchise Expo on May 18 & 19 where one of our senior attorneys, Jason Power, will be speaking about how to buy a franchise and the questions you should be asking when you are evaluating a franchise.
Jason Power is a franchisee attorney with Shelton & Power. Jason splits his time as a franchise attorney between Shelton & Power’s Texas and Florida offices while maintaining a nationwide coverage helping both franchisors and franchisees draft and review all franchise legal documents.