Apr 18, 2018
In a wide-ranging article in a recent issue of Lexpert Magazine, legal writer Julius Melnitzer discusses the latest issues in franchise law, including the decision in Raibex Canada v. ASWR Franchising, the increasing prevalence of ‘encroachment’ as franchisors resort to alternative distribution channels and the impact that Ontario’s new minimum wage legislation is having on franchise relationships. To gain insight into these topics, Melnitzer consults a number of franchise law experts, including Osler’s Jennifer Dolman, a partner in the firm’s Toronto office whose practice focuses on franchise litigation. In particular, Jennifer weighs in on the effect employment law changes are having on franchisees and, to a lesser extent, franchisors.
“The industry may have been caught up in some of the relief that followed on the fact that the Ontario government’s recent employment law reforms did not include provisions deeming franchisors to be joint employers – as many franchisors had feared,” she says.
Standard clauses in franchise contracts make it even harder for franchisees to look to franchisors to share the burden of conforming to the new legislation: “Typically, a franchise agreement has lengthy provisions making it clear that the franchisee is solely responsible for hiring and firing and complying with all labour and employment laws,” Jennifer explains.
The article goes on to explore various changes that franchise systems can make to enable franchisees to better cope with additional labour costs, including increasing automation to reduce franchisees’ reliance on employees. Jennifer points out that this approach can breed friction.
“There can be a tension between franchisors that need to make systemic changes to keep their market share and stay competitive and franchisees who may be resisting that,” she says. “For example, when franchisors look to get their brands out by means of online apps or other types of online presence, they may be taking away franchisees’ bread and butter.
“The more consumers buy online, the less they’re going to buy at the store,” she continues. “And that means encroachment may become the next legal battlefield.”
Read Julius Melnitzer’s full article “Talking politics in the coffee shops” in the March/April 2018 issue of Lexpert Magazine.