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Thursday
Nov162017

Restaurant Industry Gets Another Chance to Chime in on Menu Labeling

CalBar Certified Franchise & Distribution Law Specialist

by Barry Kurtz

818-907-3006

 

Franchisors in the food service industry have until January 18, 2018 to comment on the latest version of the Food & Drug Administration’s Menu Labeling Guidance. The FDA released the draft November 7th. This version includes pictorial suggestions for how consumer information might be displayed under certain circumstances.

The currently non-binding recommendations aim to clarify options for menu labeling compliance and will eventually affect any food and beverage retailer, including those selling self-service foods and buffet operators.

 

Special Orders: The ABCs of Menu Labeling

 

Caloric information is the key ingredient in menu labeling requirements. But the FDA is now taking a more cooperative approach to handling special situations:

All You Can Eat: In the current draft, signage regarding serving size and calories are not required next to every food item offered on a buffet. However, the info must be available to consumers in other forms, i.e. gel window-clings on sneeze guards or on menu boards.

Speaking of menu boards, restaurant owners need not provide one at their businesses if they do not already display a menu.

On the other hand, if a menu board is available on site, it must be updated to include nutrition information. Digital kiosks or other devices, hand-held menus, etc., may also be used to convey consumer info about nutrition.

By the Bucket or Bowl: Family style restaurants like Maggiano’s will be required to provide caloric info for the whole (multiple serving) menu item sold. However, family-style restaurants may relay additional information, such as the suggested number of individual servings and calories per serving of that item. The FDA offers this example:

Family-Style Salad: 1,200 Cal: 150 Cal/serving, 8 servings

Beer, Wine, Cocktails: If the choices are listed on a menu or menu board, nutrition should also be displayed. “Display” foods are not subject to the labeling requirements. These include beers served on tap.

Seasonal beers (pumpkin spiced ale, anyone?) on the menu are also exempt from labeling requirements provided they are not available for more than 60 days per year.

Customer Crafted Menu Items: The FDA now offers “build-your-own” restaurants like Chipotle or PizzaRev a bit of flexibility. The Administration suggests this type of restaurant group customer options, i.e. pizza crusts, sauce choices and toppings so that consumers can quickly calculate which options provide the most and least amount of calories per slice or serving. 

Chef’s Choice: Food selections based on seasonal produce or other items that change on a daily basis are not subject to the nutrition labeling guidance, UNLESS, these selections appear regularly. So a restaurant that serves clam chowder every third Friday will have to provide nutrition information.

Self Service Foods: Food and beverages in soda machines; grab and go donut cases, sandwich or salad coolers; rotisserie chicken warming carts and similar displays and dispensers all fall under the self-service or food-on-display categories.

Pre-packaged foods like sandwiches prepared on site but already wrapped for customer convenience should display an FOP, or “front of pack” label with calorie information.

Donut cases and beverage dispensers found in grocery or convenience stores contain unpackaged foods. A label can be affixed to the dispenser or display case detailing information for each choice available, or displayed on signage nearby.

 

To Lab Test, or Not To Lab Test?

 

 

The FDA will not require restaurants to submit menu items to food labs to determine nutrition information. But legitimate options for determining calorie and other data are required. The Administration recommends using one of the following:

  • Laboratory Analysis
  • USDA National Nutrient Database
  • Trade Association or Industry Databases
  • Alcohol and Tobacco Tax and Trade Bureau Methods for Analysis
  • Cookbook Listings
  • Other reasonable means

If opting for other reasonable means, records must be maintained at corporate headquarters or the restaurant’s main office in case the FDA requests the data and method used to substantiate the information.

 

Chain Stores and Co-Ops

 

Independent franchises, cooperatives, grocery chains and similar businesses not selling substantially similar foods from location to location are not considered “covered establishments” as far as the FDA Menu Labeling Guidance is concerned. “Covered Establishments” include businesses that:

  • Have 20 or more locations
  • Do business under the same name
  • Sell substantially same menu items
  • Sell food eaten on premises or food that may be taken away

So a gasoline franchisee of a major chain that also operates an independently owned mini-mart under a different name would not be considered a “covered establishment”.

 

The Wrap Up

 

Again, the Administration decided to take a more flexible approach in their rules regarding nutrition labeling, and work more cooperatively with covered establishments:

. . . our typical approach following an inspection would be to raise any compliance concerns with the most responsible person (e.g., the manager or owner) at a covered establishment during a close-out inspection meeting or in regulatory meetings with that establishment. If post-inspection issues remain, we may send a letter to the establishment asking for the firm to come into compliance. Any enforcement activities we pursue will be consistent with our public health priorities. . .

All in all, this seems like a much more feasible plan than the 2014 Final Rule previously published.

Barry Kurtz is the Chair of Lewitt Hackman's Franchise & Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Friday
Oct272017

Beep: Your Hamburger is Ready

CalBar Certified Franchise & Distribution Law Specialist

by Barry Kurtz

818-907-3006

 

Analysts predict robots may take nearly 40 percent of U.S. jobs – particularly the ones that require lower education levels – in the next 15-20 years. The study was released by PricewaterhouseCoopers, and was based on anticipated technological progress, which leaves a lot of room for error.

Not all jobs can be staffed with tech though, as Microsoft cofounder Bill Gates illustrates when talking about the fast-rising trend.

He supports a robot tax on businesses that use Artificial Intelligence (AI) to replace human employees. The revenues could be used to train people to fulfill other jobs, like those in teaching or elder-care, where a human component is much more important. It would also help slow the rush to acquire AI.

Gates told Quartz news outlet:

So if you can take the labor that used to do the thing automation replaces, and financially and training-wise and fulfillment-wise have that person go off and do these other things, then you’re net ahead. But you can’t just give up that income tax, because that’s part of how you’ve been funding that level of human workers...

Taxing questions aside, many hospitality franchisors find themselves facing a dilemma: Invest in people, or invest in tech?

Some Franchises Bet Heavily on Tech

Drone Delivery RoboticsReplacing humans with AI is still relatively expensive today, and not exactly a guarantee of larger profits at this time. But some franchises are throwing down a lot of chips on AI development. Why?

For one thing, restaurant jobs, particularly those around a hot grill or spitting fryer can be dangerous. And it’s hard work that not everyone wants.

Burger bot “Flippy” developed by Pasadena-based Miso Robotics with franchisor CaliBurger can cost upwards of $60k, according to TechCrunch. But it will never report to work tired, hungover, or in any state that may result in workers’ comp claims. It also won’t demand higher wages.

Domino’s delivers, as we all know. But food delivery can also be dangerous, which is one reason the chain invests heavily in tech.

The pizza franchisor developed Domino’s Robotic Unit (DRU), a four-wheeled autonomous delivery vehicle. Though DRU will be able to navigate the best route to a customer’s door, it has not yet been activated to serve, as the robot vehicle is still being tested. The DRU Drone is also in development, and may lift off for first deliveries in New Zealand in February.

Restaurant chain (not a franchise) Shake Shack opened a high traffic location in New York’s East Village. The restaurant features kiosk-only ordering and cashless transactions. When the food is ready, the diner can opt to receive a text message to pick up a tray, or go with the old school shout out.

Shake Shack still employs humans to provide customer assistance, cook, and expedite the food at this restaurant location.

Hoteliers are also embracing a new wave in AI services. AURA is the first robot in Asia to provide room services – delivering towels, water and more. And a Marriott in Belgium deployed a bot that addresses vacationers and business travelers in 19 different languages.

What Should Franchisors Know About AI?

Hi Tech Burger

As always, when considering upgraded tech for a chain, consider the needs of individual locations. Right now there are more questions than answers:

  • Will a loyal, profitable franchisee balk at having to deploy AI?

  • Will the leased or owned property of the franchisee accommodate robot workers?

  • Will the costs for AI create substantial reductions in comparison with employee-related expenses, and more profits for the operators?

  • Will the public accept AI as a substitute for smiling wait staff and cashiers?

  • Will ordering kiosks and robotic workers be a turn-off (in locales where unemployment rates might be very high), or a draw (like the hotel mentioned above attracting millennial clientele)?

But also remember that some AI can be used behind the scenes, e.g. in certain food prep tasks, to analyze marketing trends, fold hotel linens, etc.).

Whatever the industry, don’t be afraid to embrace the tech. Just be sure to look both ways before crossing fully into the digital realm.

Barry Kurtz is the Chair of Lewitt Hackman's Franchise & Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Oct122017

California Employers: Governor Brown Signs Important New Legislation re Parental Leave and Hiring

Lawyer for EmployersEmployment Defense

by Tal Burnovski Yeyni

818-907-3224

 

You can like it. You can hate it. But one thing is certain: California is a trend-setter when it comes to employees’ rights. Maintaining that tradition, Governor Brown just signed Senate Bill 63 and Assembly Bill 168 into law.

California Parental Bonding Leave

Here is the gist:

Senate Bill 63: Parental Leave 

The new legislation provides eligible employees up to 12 weeks parental leave to bond with a new child. Parents may take this leave within one year of the child’s birth, adoption or foster care placement.

An employee is eligible for the leave if s/he has at least 12 months of service with the employer, has at least 1,250 hours of service with the employer during the previous 12-month period, and works at a worksite in which the employer employs at least 20 employees within 75 miles. 

Senator Hannah-Beth Jackson, SB 63’s author, defined the governor’s endorsement as:

...a great victory for working parents and children in California [...] With more women in the workforce, and more parents struggling to balance work and family responsibilities, our policies must catch up to the realities of our economy and the daily lives of working families. No one should have to choose between caring for their newborn and keeping their job.

The bill specifies it will be an unlawful employment practice for an employer to:  

  • Refuse to allow an eligible employee to take up to 12 weeks of the bonding leave;  

  • Refuse to provide a guarantee of employment in the same or a comparable position before the start of the leave;

  • Refuse to maintain and pay for coverage for an eligible employee during the leave (if applicable);

  • Refuse to hire, or to discharge, fine, suspend, expel, or discriminate against an individual because:
    • An individual’s exercise of the right to bonding leave;
    • An individual’s giving information or testimony as to his or her own bonding leave, or another person’s bonding leave, in an inquiry or proceeding concerning the bonding leave.
  • Interfere with, restrain, or deny the exercise of, or the attempt to exercise any right provided with respect to the bonding leave.  

The new law does not apply to employees who work for large employers (50+ employees) and are otherwise eligible for protected leave under the federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA).      

If an employer covered by SB 63 employs both parents that are entitled to the leave – that employer is not required to grant bonding leave that would allow the parents leave totaling more than 12 weeks.

There’s more  the legislature also seeks to create a parental leave mediation pilot program.

Under the program, if an employer receives notice regarding an employee’s claim of violation of the parental leave law, the employer may request to mediate the dispute in a special Mediation Division Program.  An employee may not pursue any civil action concerning the parental leave until the mediation is complete. The pilot program will be in effect until January 1, 2020. 

Employers should be mindful that the new bonding leave is provided in addition to pregnancy disability leave. Thus, an employee who works for a covered employer and is disabled by pregnancy, childbirth, or a related medical condition is eligible for up to four months of pregnancy disability leave and up to 12 weeks of bonding leave.  

Assembly Bill 168: Salary Information

Employers may not ask for salary history

AB 168 prohibits all employers from: 

  • Relying on the salary history information of an applicant as a factor in determining whether to offer employment to an applicant or what salary to offer; and

  • Seeking salary history information, including compensation and benefits, about an applicant for employment;

Furthermore, the legislation requires employers to provide, upon reasonable request, the pay scale for a position to an applicant applying for employment.  

As the bill’s author Assemblymember Susan Eggman explained:

The practice of seeking or requiring the salary history of job applicants helps perpetuate wage inequality that has spanned generations of women in the workforce. AB 168 is a needed step to ensure that my 9-year-old daughter, and all women, can be confident that their pay will be based on their abilities and not their gender.

Note, however, that if an applicant, voluntarily and without prompting, discloses salary history information to a prospective employer, the employer may consider or rely on that voluntarily disclosed information in determining the salary for the applicant.  

Employers, update your company policies – both new laws go into effect January 1, 2018. As always, seek experienced employment counsel if confused about state and federal laws regarding leave of absence or hiring and firing practices.

Tal Burnovski Yeyni is an Employment Defense Attorney

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Oct042017

Accidental Franchise = Potential Lawsuits, Fines + Other Penalties

CalBar Certified Franchise & Distribution Law Specialist

 

by Barry Kurtz

818-907-3006

 

Business owners looking to expand may leave themselves vulnerable to several obvious losses, including those related to finance, brand identity, and customer loyalty. Resources, including exemplary human resources, are sometimes spread too thin.

But there is another risk that should be considered, one that is not quite so obvious – that of accidentally franchising the business. This pitfall could lead to potential litigation, not to mention years of scrutiny and torment by government regulating agencies.

But how does a business owner inadvertently franchise a company, without specifically setting out to do so? It helps to first understand what a franchise is, and where the business operates.

For example, under California law a business relationship is a “franchise” if: 

  1. The business will be substantially associated with the franchisor’s trademark;

  2. The franchisee will directly or indirectly pay a fee to the franchisor for the right to engage in the business and use the franchisor’s trademark; and,

  3. The franchisee will operate the business under a marketing plan or system prescribed in substantial part by the franchisor.

The Federal Trade Commission and several other states use similar characteristics to determine the difference between franchises and other business opportunities.

Then there are states that incorporate different elements in their franchise definitions. In Hawaii for example, the three elements that constitute a franchise are trademark license, required fee, and “community of interest”, or the mutual interest of the franchise company and the purchasing business to market goods and services.

Franchise Trademarks

If a business uses another company’s trademark to identify itself, or uses it in its advertising, the business may likely be found to be “substantially associated” with the enterprise company’s, or franchisor’s, trademark.

Licensing agreements may be a bit challenging when trying to avoid becoming a franchise, as they usually grant rights to the purchaser to use intellectual property, and payments or royalties are definitely made in return. Pay particular attention to state and federal regulations to walk the line between franchising and licensing.

Franchise Fees

Just about any payment can be interpreted as satisfying the “fee” element, regardless of whether the parties call it something else. And fees are generally involved no matter which path to expansion a business owner chooses, because the goal of growth is profit.

Franchise Controls & Marketing

The third element, sometimes referred to as the “control” element, requires the franchisee to operate the business under a specific method or system – it’s the “recipe for success” so to speak

  • A franchisor will typically provide its franchisees with an operations manual containing a system of operations and closely monitor its franchisees for compliance to protect the integrity of its system.

  • Franchisors usually mandate the use of specific suppliers, and in some cases, act as the exclusive supplier of certain products or services sold by their franchisees.

  • Franchisees rely on their franchisors for advice, training, advertising, increased purchasing power and marketing assistance.

Differences Between Franchise, License and Distribution Agreements

Under a typical licensing arrangement, one company permits another to sell its products or services in exchange for a percentage of the proceeds without any other involvement on the part of the licensor.

In dealership and distributorship arrangements, independent businesses operate under their own trade names. The dealers or distributors usually buy products or services from the other party at wholesale prices and then resell them to the public. Neither party is substantially involved in the business affairs of the other. 

Franchises have many advantages for both franchisors and franchisees. Creating a franchise system allows franchisors to expand already successful business concepts, achieve greater brand recognition and diversify risk through the investments of its franchisees. Franchisees generally enjoy access to a proven business system and a wider customer base, greater brand name recognition, a stronger market presence, group purchasing discounts, professional marketing, research and development benefits, and continuing education and training. However, business owners and their advisors must be able to spot the telltale signs of a franchise to avoid unwittingly becoming or contracting with accidental franchisors.

Keeping with the California example, true licensing, distributorship and dealership arrangements lack at least one of the three elements of a franchise defined under state law.

But they also lack the level of scrutiny and regulation of a franchise. Business owners should decide if they’re ready for that level of commitment. The rewards are great, but franchising requires a certain “upping of the game”, if you will.

Business owners who suspect they may have inadvertently sold franchises when they really wanted to just expand operations, should seek legal counsel immediately.

Barry Kurtz is the Chair of our Franchise & Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Sep282017

Executives Behaving Badly: Can CEO be Fired for Kathy Griffin Hate Speech?

Wrongful Termination Defense

by Amy I. Huberman

818-907-3014

 

Neighbors don’t always get along – not even affluent neighbors living in exclusive gated communities in Bel-Air.

Disciplining Executive EmployeesThis was proven most recently, when the Huffington Post released security camera audio of Jeffrey Mezger yelling profanities at his neighbor Kathy Griffin and her partner Randy Bick. Warning: the audio is definitely NSFW – keep the speakers on low so as not to offend colleagues.

Mezger is the Chief Executive Officer of KB Home which is one of the largest home builders in the nation, and a publicly traded company.

Griffin, of course, is a well-known and somewhat controversial comedienne. In July she shaved her head to show support for her sister who was dying of cancer. In August she was fired by CNN for posting a photo in which she held a mask of President Donald Trump covered in fake blood. In mid-September, Griffin’s sister passed away, and more recently, she was the target of Mezger’s rant.

Mezger called Griffin, among other things, a “bald f-ing dyke” – not just obscene, but truly insensitive to Griffin’s recent loss.

The reason for Mezger’s rant?  He was upset that Griffin and Bick called the police with a noise complaint between 8 and 9 p.m. on a Saturday night. The alleged noisemakers were Mezger’s young grandchildren who were playing in the pool – supervised by the children’s mother and grandmother.

Mezger’s anger may or may not be justified, but how he expressed his anger was not. His employer acted quickly to minimize damage.

An Employer’s Right to Terminate

Some may believe what an employee does outside of the workplace is strictly the employee’s business. That’s mostly true, but only to a certain extent. And what about free speech rights?

These concerns were addressed recently, just after the Charlottesville “Alt-Right” march last August. 

Photos from Charlottesville featured individuals who were later identified by the public in social media, and tagged by Twitter user @YesYoureRacist. There was a very public call to action via social media for employers to fire the Alt-Right participants, particularly those brandishing swastikas.

Here are some legal clarifications:

First, the Bill of Rights protects citizens from our government’s attempts to quash speech – the Bill doesn’t protect employee speech from employers. There are other laws for that, as seen below.

Second, most California employees are “at will”, and can be terminated for any reason or no reason at all, provided the decision is not based on race, age, religion, gender, gender identification, marital status, or other protected categories defined by state and federal laws.

California’s Labor Code section 1101-1106  prohibits employers from discriminating against employees for expressing political views. Discriminatory or adverse acts could include firing, or refusing to consider the employee for promotions, bonuses, professional training, or other opportunities. However, there are exceptions. 

For instance, if an employee’s political activity creates a conflict of interest, or if the activities interfere with work duties.  In Mezger’s case, there is some evidence KB Home’s stock prices dropped about three percent following release of the meltdown audio. As CEO, Mezger has a fiduciary duty to protect the company.

How Can Employers Reduce Risk of Wrongful Termination Claims?

Separation Agreement to Reduce Claims Risk

Mezger’s expletive-ridden rant created a public perception problem for KB Home. But the employer in this case reacted quickly and we think, effectively.  

Here’s what employers in this position should consider: 

  1. The home builder chose to slash Mezger’s year-end bonus by 25 percent. There is some question as to whether or not the CEO will even earn a bonus this year, but Mezger is on notice that his behavior affects his income.

  2. KB Home created a written record expressing that the CEO’s “personal dealings with a neighbor is unacceptable….” The record is a public filing with the securities exchange, but most other employers can just send a troublesome employee an email or memo. Either way, the employee should be informed in writing, and a copy added to the personnel file.

  3. The employer protected its interests. Though KB Home states it has full confidence in Mezger’s abilities (this may cause a problem if Mezger ever files a wrongful termination suit against KB Home in the future), the builder also states outright that Mezger will be terminated should similar incidents occur later. 

The lessons for employers?

First and foremost, make expectations clear. If those expectations are not met, consider a separation agreement as a means to offer the employee a bit of transition assistance in return for a waiver of future claims.

Amy I. Huberman is an Employment Defense Attorney.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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