On the Weekly Fox Workplace Watch, associate Justin Schwam provides a detailed summary of the recent New Jersey legislation entitled the New Jersey Law Against Discrimination (NJLAD). This law prohibits non-disclosure provisions in employment contracts and the settlements of certain discrimination, harassment, and retaliation claims. Any agreements settling NJLAD claims must now include a bold, prominently placed notice stating that, even if the parties have agreed to keep the settlement terms confidential, if the employee publicly discloses enough details of a claim to make the employer reasonably identifiable, the employee cannot later try to enforce the non-disclosure provision against the employer. The law does not detail, however, what constitutes reasonably identifiable information. As Justin explains, employers are still permitted to protect other aspects of the settlement agreement, and the new law also includes an attorneys’ fees provision as well as a prohibition on retaliation.

We invite you to read Justin’s information-packed post addressing this recent legislation.

 

Fox Rothschild LLP congratulates Eleanor Vaida Gerhards, John R. Gotaskie, Jr., Elizabeth D. Sigety, Craig R. Tractenberg and Megan B. Center, who were featured among the 2019 “Legal Eagles” by Franchise Times magazine.

The list highlights attorneys who have made significant strides in franchise law and were selected from nominations by their clients and peers. This is the sixth consecutive year Franchise Times has named Gotaskie and Sigety to the list and the fourth time it has recognized Gerhards and Center. Tractenberg has been named since the list’s inception 16 years ago and is also a member of its Hall of Fame.

Led by Co-Chairs Gerhards and Tractenberg, Fox’s national Franchising & Distribution Practice is a dynamic team, well-equipped to meet the needs of franchise and distribution companies across every line of business – industrial, retail, food, entertainment, service, technology or home-based. With more than 40 attorneys, the award-winning group serves franchise clients in all 50 states and abroad.

Eleanor Vaida Gerhards, Associate, Fox Rothschild LLPGerhards concentrates her practice on commercial transactions and compliance matters representing primarily franchisors, area developers and master franchisees.  She also represents start-up franchisors in the establishment of franchise systems and, as a member of her firm’s insurance group and privacy and data security group, she often counsels franchise systems on insurance coverage matters and cyber security issues. She serves as chair of the IFA Philadelphia Women’s Franchise Network and is an IFA Certified Franchise Executive. Gerhards frequently writes and speaks on legal issues in the franchise industry and has presented at the ABA Forum on Franchising and IFA Legal Symposium. Her articles have appeared in the ABA Forum’s Franchise Lawyer newsletter, the Franchise Law Journal, Law360 and Property Casualty 360. Gerhards has also been recognized by International Who’s Who in Law-Franchising (2018). She earned her J.D., magna cum laude, from Duquesne University and her B.A., cum laude, from Bloomsburg University.

John R. Gotaskie, Jr., Partner, Fox Rothschild LLPGotaskie represents individuals, partnerships and companies in diverse legal matters, including complex commercial litigation, bankruptcy litigation and franchising issues. He serves as co- editor of this blog and has recorded numerous podcasts that address issues impacting franchisors and franchisees. Gotaskie represents both franchisors and franchisees in litigation and general corporate matters, including advice regarding Franchise Disclosure Documents, franchise agreements and related contracts. He earned his J.D., cum laude, from the University of Pittsburgh and his B.S., cum laude, from Georgetown University.

Elizabeth D. Sigety, Partner, Fox Rothschild LLPSigety, former co-chair of the firm’s Franchising & Distribution Practice Group, regularly advises clients on venture capital, angel financing and mergers and acquisitions as well as in franchising, securities, private placements, franchise regulatory matters and franchise agreements. Active with the International Franchise Association (IFA), she has been recognized as a Certified Franchise Executive by the IFA and serves on the Women’s Franchise Committee. In addition, she co-founded the IFA’s Philadelphia Chapter of the Women’s Franchise Network. Sigety earned her J.D. from the University of Chicago and her B.A., cum laude, from Yale College.

Craig R. Tractenberg, Partner, Fox Rothschild LLPTractenberg handles complex business disputes involving intellectual property, licenses, business torts and insolvency issues. His practice centers on developing and protecting the financial and brand equity of franchise companies. He regularly structures new franchise programs, many of which are international. In addition, Tractenberg defends and enforces franchise agreements and is a frequent writer and lecturer on the subject. He is recognized in Chambers USA for Franchising (Nationwide), Best Lawyers for Franchise Law (Lawyer of the Year-NY 2011) (Lawyer of the Year-PA 2017), International Who’s Who in Law-Franchising and Super Lawyers (Blue Ribbon-franchising). He earned his J.D. from Temple University, where he was an adjunct Professor of Franchise Law, and his B.A., cum laude, from La Salle University.

Megan B. Center, Associate, Fox Rothschild LLPCenter counsels both large and small franchisors in a variety of matters, including preparation of initial, renewal and amended franchise disclosure documents, incorporation of franchisor entities and maintaining compliance with state and federal regulations on registration, disclosure and potential exemption. She supports clients at every stage of the franchise relationship, such as negotiations of franchise agreements and addressing default and termination issues. Center also advises clients on the purchase of entire franchise systems. She earned both her J.D. and her B.A. from Case Western Reserve University.

*Franchise Times® is a national business publication and its methodology for selection of “Legal Eagles” and “Legal Eagles Hall of Fame” can be found here.

The Federal Trade Commission (“FTC”) has requested public comments on its Trade Regulation Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising” (the “Rule”). The Rule makes it an unfair or deceptive act or practice for franchisors to fail to give prospective franchisees a Franchise Disclosure Document, which is required to provide certain specific information about the franchisor, the franchise business, and the terms of the franchise agreement. The FTC is currently soliciting comments about the efficiency, costs, benefits, and regulatory impact of the Rule as part of its systematic review of all current Commission regulations and guides. Interested persons have the opportunity to submit written data, views, and arguments concerning the Rule to the FTC. The window for public comment is open until April 21, 2019.

The original Franchise Rule was issued in 1979. In 1995, the FTC decided to review the Rule, a process that took many years to complete. Finally, the review concluded that the Rule was still needed but could be improved, and amendments to the Rule were issued in 2007 (the “Amended Rule”), taking effect on July 1, 2008. The Amended Rule sought, among other changes, to reduce inconsistencies between federal and state pre-sale disclosure requirements and established a set of uniform disclosure requirements in a Franchise Disclosure Document (“FDD”). The Amended Rule is the one with which most practitioners are familiar, requiring franchisors to provide prospective franchisees with their FDD at least 14 calendar days before they make any payment or sign a binding agreement in connection with a proposed franchise sale. The FDD provides prospective franchise purchasers with 23 items of information material to their investment decision.

The FTC is now seeking comment on a number of issues, including the continuing need for the Amended Rule. Other questions from the FTC focus on whether the Amended Rule has been beneficial to franchisees and franchisors as well as the Amended Rule’s interaction with and impact on other regulations. Additionally, The FTC requests comments on whether the Amended Rule has been effective on preventing unfair and deceptive practices as well as the costs of compliance with the Amended Rule.

Members of the public may provide comments on the FTC’s questions, and public comments will be posted to the FTC’s website.

Last time we asked, given the high number of restaurant concept bankruptcies and money sloshing around in the sector, is there still more upside than downside in the restaurant franchising sector? We can find the answer by looking at where we have been. The U.S. economy is experiencing the second longest expansion in our lifetimes, after recovering from the greatest recession ever. We are still feeling the effects of economic stimulus, low interest rates, recent tax cuts and government deficit spending. This economic caffeine is about to be diluted. We can see it in the sales trends. We can see how to adjust to change by looking at the trends.

We are feeling good, and perhaps need to adjust to the rising headwinds. Top line revenues may appear to be rising, but that may be due to new delivery models. Some restaurants pay Grubhub and Doordash a high percentage of sales to deliver their products and increase volumes. Companies which build deliver and technology into their business increase their profits exponentially. The digital technology allow owners to gain knowledge regarding their customers by analyzing data coming from scan-to-pay systems, order-ahead applications, consumer facing technology and delivery arrangements. The better companies will know their customers better through the use of technology. They will use social influencers to drive customers from the internet to the store fronts.

Increased labor costs and management attention will also challenge restaurant growth, however, there are apps for this as well. Franchisee enterprise systems often can predict and manage labor schedules for franchisees. On resale and financing, technology is one of the strongest selling points, so it pays to invest in technology. Restaurants have even gone as far to provide platforms for their customers, that than relying on Facebook and LinkedIn. But even technology cannot hold back the tide of increased labor costs and responsibilities. Technology cannot eliminate competition through value meals, value pricing and giveaways.

The structural changes involve structuring how we invest in restaurant chains. Technology which educate the operators how to better cater to customers, and help adjust labor and menus will be in demand. Increases in efforts of the operators to improve the customer experience, as the internet has replaced word of mouth referrals. Finally, economic adjustment is needed, to build equity in the business to hedge against the overleveraging of hard assets.  You need that equity there when you need it, and you need to start building it now.

Imagine operating a single restaurant. The food keeps bringing them in, and prices are relatively stable. Consumer confidence is high, unemployment low, discretionary income rising, and people are going out more. Now multiply these variables as if we operated a chain of restaurants, and you will find small changes in any of these variables are multiplied exponentially and take a longer time to adjust for a restaurant chain. By looking across the industry, we can see that big changes may just be beginning, and we can join the change now.

Restaurants continue see investment money pouring in. Papa John’s and Jack in the Box are just two of many franchised restaurant chains undergoing due diligence for acquisition. Focus Brands, Inc., owner of Carvel, McAlister’s, Jamba Juice, Auntie Anne’s, Moe’s Southwest Grill, Schlotzkey’s and Cinnabon, bought Jamba Juice in September 2018 for approximately $200 million. On October 29, 2018, Focus Brands issued $300 million in additional bonds under it securitization facility with an interest rate of 5.184%.  The bonds are securitized by royalties and revenues from the other chains under the Focus Brands umbrella. Undoubtedly, unit economics support this financial engineering of debt, but it seems relatively easy to fund big spends for acquisitions. Is this special to the restaurant sector?

Big acquisition spends are not only prevalent for healthy companies but also distressed companies. Taco Bueno Restaurants, Inc. filed Chapter 11 on November 6, 2018 for its 140-unit company store and 29-unit franchised Mexican units. The reason it filed was because of falling earnings and underperforming restaurants. But Sun Holdings, a multi-concept franchisee listed as the 8th largest franchisee in the U.S., is the stalking horse bidder. Sun acquired the outstanding debt of $130.9 million for about half price and will inject $10 million into operations, and convert its debt claims into ownership of the company. Sun is doubling down on the franchised business.

Similarly, Papa Gino’s and D’Angelo’s filed Chapter 11 on November 6, 2018 for their 141 company owned branded locations, and was franchising 37 locations. It had once been as large at 370 units.  A stalking horse bidder, Wynnchurch Capital, acquired the senior debt of $18.5 million and the second lien position of $34.2 million. Wynnchurch has agreed to provide debtor in possession financing of $13.8 million. There is another $39.9 million in mezzanine financing held by Hartford Insurance Company and Brookside Mezzanine Fund.

Is there more capital available than good ideas and strong restaurant operators? Why are knowledgeable people placing bets on restaurant chains rather than home builders, car manufactures, and other industries? This abundance of capital has resulted and continues to result in the ongoing consolidation of Big Restaurant, franchisors and large franchisees able to leverage their assets and G & A costs. Family offices and private equity are increasing their investment in this sector because of the low barriers to entry and expansion. It allows retirees to buy franchises on credit, and consolidate their holdings to expand. Is there still more upside than downside?

We’ll answer that question in our next post.

To paraphrase Benjamin Franklin, “Those who fail to plan, plan to fail.” That is true in any business, but particularly so in franchising.  Planning is more important in franchising because franchising leverages a business–expanding the horizon of the brand more than a single owner or operator could. Decisions on branding need to balance the effects on employees, franchisees, prospective franchisees and customers. Without proper planning, the brand will grow randomly, without alignment, and will never achieve the momentum necessary to grow exponentially.

Is the Business Qualified to Franchise?

When asking whether a business is qualified to franchise, the question seeks to answer whether there is a sustainable business that could be operated by others through proper training. The business concept needs to be on an upward trend and projector. If the business is merely a fad, it is not worth the investment of time, money and opportunity costs to expand a novelty which will soon evaporate.

The business needs to be capable of being converted into a systematic and replicable business. A franchise business needs to be taught to others so that they can expand and replicate it. The know how needs to be recorded and encapsulated. It cannot be readily copied merely by someone looking at the business from the outside. The business operation needs to have a little mystery and magic. At the same time, the magic, secret sauce or formula for success needs to be carefully guarded from competitors and will require legal protection.

Does the business have operating units which are profitable?

The more profitable and the more units which are operating profitably, the better the franchise system will be. A single location can be franchised successfully, but multiple profitable locations demonstrate that, while location is a variable, the formula for success can work in multiple places, with multiple crews, and much of the problems–which exist in any system–have been identified and fixed. Moreover, the higher the number of successful locations, the higher the probability that franchises will be established without unexpected obstacles.

Does the company have the staff to launch a franchise system?

Running a franchise system requires a sales function to qualify and process prospective franchisees. The franchisees will need some handholding and will need training. Some may be investing their life savings and need franchisor leadership to make the investment. After the investment is made, the franchisee needs to be motivated. The franchisor needs to be a leader and must instill confidence. If the staff or people cannot fulfill these needs, then the franchisor needs to hire or contract for these people to run the franchise company.

Does the company have the money and energy to invest in franchising?

Franchising costs money, but the money is a good investment because franchising has so many positive attributes. Franchising allows franchisees to share in the brand success and provides rapid growth, faster brand recognition with less oversight over the franchisees. The legal foundation for the franchise business structure needs to be properly prepared and that requires an investment in legal work. But wholly aside of the monetary investment is management’s time commitment in establishing the franchise structure, qualifying, training and supporting the franchisees. It requires an investment in legal infrastructure and investment in the people necessary to support and grow the franchise system.

How Big is the Market?

Many franchised business do well by having a narrow niche, but the best companies find ways to broaden the interest. Think about how a mere name change can broaden the business. “Boston Chicken” changed to “Boston Market” to capture customers whose meal preferences did not include chicken.

Write and Test the Business Plan.

Answer all of the questions that someone critiquing your business might ask. Contemplate various sources of grants, investment and funding. Each has positives and negatives, but all should be considered because your franchised business will not be static. Consider various avenues of growth, and the effect of competition. Commit it to writing it down so that you are disciplined and deliberate about it. See if anyone else is doing it the same–or differently–in another geographic area.

Test the business concept with a feasibility study, formal or informal. You can hire a consultant inexpensively. Ask a variety of people what they would be concerned about if it were their company. Business schools often offer counselling or review by students of new concepts. As these students may be your customers, take the opportunity for feedback. One of the main questions to ask is how can your franchisees make a reasonable return on investment.

Planning means anticipating problems and solutions. Planning and feasibility testing can be the difference in a successful franchise system and a failed dream. Good counsel, good accounting and good foresight help to avoid bad outcomes.

On December 28, 2018, the D.C. Circuit Court of Appeals issued an opinion in the Browning-Ferris case. In this much anticipated decision, the Court of Appeals concluded that the National Labor Relations Board’s decision to enumerate a new joint employer test was a valid exercise of its authority. The Court of Appeals held, however, the NLRB failed to properly apply the newly created test. Consequently, while the Court of Appeals didn’t completely abrogate the NLRB’s ruling, the opinion frankly raises many questions respecting the future of the Browning-Ferris standard.

In the Browning-Ferris decision, the NLRB generally outlined a new joint employer test where two entities would be considered to be a joint employer if a common law employment relationship exists and if the joint employer possesses “sufficient control” over the “essential terms and conditions” of employment to permit “meaningful bargaining”. This test eliminated the long-standing precedent requiring an employer to have direct and immediate control over the subject employee. For a more detailed analysis of the original decision, and its various twists and turns, please see our previous blogs posts here, here and here.

The controversy surrounding what the Dickens the initial decision in Browning-Ferris means has festered since that time, with the concern from employers being particularly vocal. Specifically, employers have argued that the NLRB failed to establish what the “essential terms and conditions” of employment are, calling the language impermissibly vague and impractical. It didn’t help matters that the NLRB’s response to such concerns had been, essentially, “we’ll know an employment relationship when we see one.”

The Court of Appeals, in reviewing prior jurisprudence, concluded that the right-to-control standard is an established aspect of common-law interpretations of agency and that the analysis is not limited to the direct and immediate control an employer exerts over the employee. In analyzing this new standard versus long-held common-law agency decisions, the Court of Appeals found that cases of common-law agency focused not only on actual control over the employee but the “right to control” the employee as well. Thus, according to the Court of Appeals, the NLRB properly considered not only direct control but also control which is reserved and unexercised.

However, in remanding the case to the NLRB, the Court of Appeals held that the NLRB failed to reserve its application of the indirect control factor to those “essential terms and conditions” of employment. The Court of Appeals stated that the NLRB failed to differentiate between those aspects of indirect control relevant to status as an employer, and those aspects which are simply the by-product of common-law third-party contractual relationships.

The Court of Appeals further guided the NLRB in future actions by stating that, if it again finds Browning-Ferris to be a joint employer, it could “not neglect to (a) apply the second half of its announced test; (b) explain which terms and conditions are ‘essential’ to permit ‘meaningful collective bargaining’; and (c) clarify what ‘meaningful collective bargaining’ entails and how it works in this setting.” In the view of these commentators, the Court of Appeals’ guidance highlights the concerns raised by employer groups and provides hope that the NLRB will dedicate itself to further fleshing out the standards so as to provide meaningful guidance.

Unfortunately, one important question that the Court of Appeals failed to answer is whether indirect control, in and of itself, can establish joint employer liability. Given this continuing ambiguity, the franchise community will continue to be left with many questions as to whether franchisors will be considered the joint employer of their franchisees’ employees.

But this is not the only open question.

Perhaps the more important question is what will the NLRB do now? As is noted in our blog post here, the NLRB is currently in the midst of a rulemaking process to further develop and define the joint employer standard. The deadline for comments on this proposed rulemaking has been extended multiple times, suggesting both a large number of comments and disparate views. It is unclear whether the NLRB will rule on the remanded Browning-Ferris case prior to implementation of a new rule or wait for the completion of the rulemaking process. Either way, grab your popcorn, candy and pop, and settle in for more excitement and fireworks, NLRB-style.

Submitted by Odia Kagan, Partner & Chair of GDPR Compliance and International Privacy.

Does the EU General Data Protection Regulation (GDPR) apply to my brand? This is a question with which many U.S.-based franchisors have been grappling since the GDPR took effect on May 25th. Six months later, the European Data Protection Board (EDPB) has issued, for public comment, guidelines on the territorial scope of GDPR.

Below is a breakdown of the major questions and takeaways for US-based franchisors:

1. Do you have an ‘establishment in the Union’?

●  You could be deemed to have an establishment in the Union (and subject to GDPR) even if you do not have a branch, subsidiary or franchisee in an EU member state.
●  Any real and effective activity, even a minimal one, could satisfy the notion of establishment for the purpose of Article 3(1) jurisdiction, even, in some cases, the presence of a single employee.
●  However, just having a website accessible from Europe is not enough.

2. (If you have an EU establishment) Is your data processing carried out ‘in the context of its activities’?

●  GDPR will apply to your data processing if there is an inextricable link between the activities of an EU establishment and the processing of data carried out by you (a non-EU entity).
●  As non-EU controller, you will not become subject to GDPR simply because you chose to use a processor (a service provider carrying out the data controller’s instructions) in the Union.
●  If you are a controller subject to GDPR and you choose to use a processor located outside the Union and not subject to the GDPR, you will need to ensure by contract that the processor processes your data in accordance with the GDPR.

3. If you do not have an establishment in the EU ̶ do you offer products or services to individuals in the EU? (Art 3(2))?

a)  “In the EU” means physically located in the EU at the time of the offering of goods or services (or the monitoring of behavior, see below). Not citizenship. Not residence.
b)   Does the processing relate to (1) the offering of goods or services or (2) to the monitoring of data subjects’ behavior in the Union?

(1) Do you offer Goods or Services?

●  In order to fall in scope, you need to manifest your intention to establish commercial relations with consumers in the EU. For this, the EDPB uses the concept of “directing an activity” to the EU market, developed in case law by the Court of Justice of the EU (CJEU) with respect to jurisdictional matters. Payment for the services, however, is not required.
●  Some non-exhaustive factors, taken possibly in combination with one another, include:

 mentioning dedicated addresses or phone numbers to be reached from an EU country
 marketing and advertisement campaigns directed at an EU country audience
 using an EU or member state top-level domain name
 mentioning customers domiciled in various EU member states, including client testimonials
 using an EU language or a currency
 offering the delivery of goods in EU member states.

(2) Do you monitor behavior of individuals in the EU?

●  Monitoring can be done both on the internet and through other types of networks or technology involving personal data processing, for example through wearable and other smart devices.
●  Monitoring activities include:

 geo-localization activities, in particular for marketing purposes
 online tracking through the use of cookies or other tracking techniques such as fingerprinting
 personalized diet and health analytics services online
 CCTV
 market surveys and other behavioral studies based on individual profiles, including behavioral advertising
 monitoring or regular reporting on an individual’s health status

4. Do you need to appoint a representative in the Union?

If you are a non-EU controller or processor that is subject to GDPR, you are required to appoint a representative in the Union, unless an exception applies. Local representatives may be held liable for the non-EU entity’s breaches and may be subject to administrative fines and penalties.

If you are not a public authority, you would be obligated to appoint a representative unless your processing is “occasional” and “does not include, on a large scale, processing of special categories of data….or processing of personal data relating to criminal convictions and offences…”, and such processing “is unlikely to result in a risk to the rights and freedoms of natural persons.” The EDPB does not elaborate on these and refers to criteria listed in the WP29 guidance on DPOs for the definition of “large scale processing” (e.g. factors like the number of data subjects concerned; the volume of data and/or the range of different data items being processed; the duration, or permanence, of the data processing activity; the geographical extent of the processing activity.

The appointed representative should be established in one of the member states where the data subjects, whose personal data are processed in relation to the offering of goods or services to them, or whose behavior is monitored, are located.

To speak about whether GDPR applies to you and what are the next top steps you should take on your road to GDPR compliance, please contact Odia Kagan, Partner, Chair of GDPR Compliance and International Privacy at Fox Rothschild, okagan@foxrothschild.com; 215-444-7313.

Copyright: vician / 123RF Stock Photo

With apologies (and props) to the great Yogi Berra, it’s deja vu all over again at the National Labor Relations Board.  The Board has extended the commenting period on its proposed joint employer rulemaking for a second time. Comments to the proposed rule may now be submitted until January 14, 2019. And the Board will accept replies to comments submitted in the original comment period through January 22, 2019.

We have blogged about this important issue to the franchise community twice before. The new rule would overrule the Browning-Ferris decision that eliminated the “direct and immediate” control requirement before an entity could be considered to be an employer. We have also noted, in comments submitted by our own Tami McKnew, that the proposed rule needs to be clarified so that the valid policing of licensed trademark rights would not be considered to be the act of an employer.

We encourage you, if you have not already, to make your voice be heard on this important proposed rulemaking by the NLRB.

Out-of-state franchisors beware of opening a franchise in New Mexico due to the recent decision in A&W Restaurants, Inc. v. Taxation and Revenue Department of the State of New Mexico and the potential for tax liability. The Taxation and Revenue Department of the State of New Mexico (“Dept.”) assessed over $29,000 in unpaid taxes against A&W Restaurants, Inc. (“A&W”) arising from its collection of royalty fees from several New Mexico franchisees.

In 2007, the New Mexico legislature amended the definition of “gross receipts” subject to the state gross receipts tax to include any money or value received from the grant of a franchise employed in New Mexico. Additionally, it removed from the definition of “gross receipts” any money or value received in connection with a trademark license agreement. Based on these definitions, A&W filed a protest seeking abatement of the gross receipts tax. During the course of the tax proceeding, A&W argued that the royalty fees were paid in connection with the trademark license provisions of the franchise agreements, omitting it from inclusion in the gross receipts tax. The hearing officer disagreed and upheld the Dept.’s assessment. A&W appealed the hearing officer’s decision.

The Court of Appeals in this case completed a thorough review of the amendments made by the New Mexico legislature and noted that the intent behind such revisions was to include royalty fees received in connection with franchise agreements subject to the gross receipts tax. Further, the New Mexico legislature wanted to exclude trademark license agreements but not franchise agreements that contain a trademark licensing provision. The Court noted, and A&W admitted, that a franchise agreement would not be entirely complete without a trademark license. With that, the Court upheld the hearing officer’s decision and held that A&W cannot separate out the trademark licensing provisions of the franchise agreement in order to avoid the gross receipts tax.

This decision serves as a reminder to ensure that your franchise agreement adequately protects you in this situation. It is important to keep your eye on similar legislative efforts in the future to appropriately plan for a franchisor’s potential tax liability.