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Franchisor Discretion

Several NYC outlets owned by franchisee of rat-infested Taco Bell closed

A franchisor empowered with the discretion to purge poor performing or non-compliant franchisees is critical to the brand. For example, most everyone by now has heard of the KFC that had rats. The same franchisee with the rats also owned other Yum Brand franchises (they own 350 in total). Yum promptly shut down a few others temporarily, most likely for violations of the franchise agreement. What would the impact have been to innocent franchisees if the franchisee with rats continued to tarnish the brand? The franchisor needs this type of discretion.

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Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.
2 comments
Paul Steinberg
Paul Steinberg

Franchisors have been known to use inspections as a pretext to push a franchisee out of the system, and that is a legitimate concern. But this is the opposite extreme, as Les points out. I should add that the Department of Health & Mental Hygeine (which inspects restaurants) was also asleep here, but they are normally fairly good about catching these things and the DoH inspector that gave this outlet a passing grade just a few days prior to the media uproar has been relieved.

Les Stewart
Les Stewart

Ryan, Yes indeed this is a very extreme example of a franchisor needing to have reasonable discretion within their incomplete contract. But where was the franchisor and their field staff in the months preceding the public videotaping of our rodent friends? There is even a quote in one of the articles indicating that the neighbors knew for some time how extremely filthy the location was kept. Again, where was the franchisor (in "valiantly protecting the franchisees' common brand-equity") before it showed up digitally? So you mean to say that there is insufficient margin to the franchisor to maintain even a cursory review of the sanitary conditions of its major market "partners"? Gee, when I was in McD's the annual full field consultation was a pretty big deal and the field consultants were pretty vigilant (in a preventative way) with deficient health inspections. To use this BREATHTAKING franchisor laxity in standards toward a threat to the common brand as an EXCUSE for knee-jerk opportunism, is simplifying a complex relationship unnecessarily in my opinion.