Among the many technological changes affecting today's franchise networks, we find the advent, rise and proliferation of online ordering and delivery platforms like Uber Eats, SkipTheDishes, Just Eat, Foodora and a growing number of similar operations.
Traditionally, each franchisor would decide whether or not to include delivery in its business model, as doing so required a relatively sizeable investment in human and material resources (like order intake systems and delivery vehicles). Delivery also involved more sophisticated management of each franchised establishment, leading many franchisors to forego delivery services.
Today, however, online ordering and delivery platforms have turned this situation on its head. Many major international franchisors that have never offered delivery (McDonald's, KFC, Subway, etc.) are now using, and even promoting, these online platforms.
While these platforms offer an interesting new business opportunity for franchisors, they also present significant challenges in managing franchise networks, complying with laws and regulations (food conservation, required temperature, etc.), and maintaining franchise reputation and brand image (one or more negative delivery experiences can tarnish the entire network's reputation).
They also present challenges for drafting franchise agreements, as the phenomenon is still fairly recent and many franchise agreements do not yet address it adequately.
As a result, in all business sectors that use, or will soon use, online ordering and delivery platforms (which are not limited to food delivery, but can be used throughout many retail sectors), franchisors and their legal advisers should review their franchise agreement to ensure that it adequately protects the network's interests and brand image and will prevent disputes with or among franchisees.
Your franchise agreement should clearly address the following questions:
- Are franchisees allowed to use online ordering and delivery platforms?
- Who may choose which online ordering and delivery platform(s) franchisees can use? When this decision is made by the franchisor, can it be imposed on the franchisees?
- Who may negotiate an agreement with online ordering and delivery platforms(s)?
- In what territory can delivery be offered through online ordering and delivery platforms(s)?
- Is every franchisee required to offer the services of online ordering and delivery platforms(s), or may they decline, given the potentially important costs involved?
- Which products can, and which cannot, be ordered and delivered through an online ordering and delivery platform?
- How will orders placed through an online ordering and delivery platform be distributed among franchisees?
- Who controls and negotiates the advertising and presentation of the network's establishments and products on various online ordering and delivery platforms?
- Who determines the price of the network's products on various online ordering and delivery platforms? If this decision is up to the franchisor, can uniform prices be imposed on franchisees?
- May a franchisee advertise and promote online ordering and delivery services in its local advertising? If so, in what territory?
- Who will monitor service quality and follow up on complaints and feedback from customers who have made purchases through an online ordering and delivery platform?
It is also important to review your franchise agreement's insurance provisions and to review the franchisor's and franchisees' insurance coverage for adequate protection over products delivered by non-employees.
Fasken has the expertise and necessary resources to help you draft comprehensive, adequate agreements that will protect your rights while avoiding potential pitfalls.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.