In August 2021, the Franchise Times reported that about 30 percent of McDonald’s dining rooms in the United States remained closed as a result of the pandemic. However, the article also quoted McDonald’s CEO Chris Kempczinski as stating that, “By Labor Day, barring resurgences, [the number of restaurants with open dining rooms] will be nearly 100 percent.”
Notably, the Franchise Times also reports that McDonald’s leaves the decision of whether (and when) to open dining rooms to its franchisees. However, as franchise lawyer Jeffrey M. Goldstein recently discussed, not all franchisors are taking this approach. So, if your franchisor is forcing you to close your dining room (or if your franchisor is forcing you to open your dining room before you are comfortable), what options do you have available?
Franchisors Can Mandate Compliance with Modified System Standards
In general, franchisors can mandate compliance with modified system standards. Franchisors impose system standards through their operations manuals, and they reserve the right to modify their operations manuals in their franchise agreements. Since franchisees must comply with their franchisors’ system standards “as modified from time to time,” non-compliance with pandemic-related modifications will present a risk for default and termination in most cases.
Franchisors Cannot Mandate Non-Compliance with Statutes, Regulations, or Executive Orders
However, franchisors cannot require their franchisees to violate the law. In fact, most franchise agreements require franchisees to maintain legal compliance. To the extent that franchisees cannot legally comply with a modified requirement, franchisees’ obligation to maintain legal compliance will generally control. So, for example, if your city’s major signs an executive order that prohibits indoor dining due to the recent spike in COVID-19 cases, you would not be required to open your restaurant’s dining room even if your franchisor says that dine-in service is required.
What Should You Do if You Think Your Franchisor’s Decision is Too Risky?
What if your franchisor says you need to close your franchise’s dining room—temporarily or permanently—and you think this is too risky for your bottom line? Or, what if your franchisor says you need to open and you feel like this presents an unreasonable risk for legal liability during the COVID-19 resurgence?
In both of these scenarios, your best option is to consult with a franchise lawyer before doing anything that could put your franchise in jeopardy. Depending on the circumstances, it may be possible to approach your franchisor and work out a temporary solution; or, you may be able to form a group with other like-minded franchisees. There are other potential solutions as well; and, while there are a lot of uncertainties in this situation, the one thing that is clear is that you do not simply want to ignore your franchisor’s mandate.
Schedule a Confidential Consultation with Franchise Lawyer Jeffrey M. Goldstein
If you have questions related to the COVID-19 pandemic about your legal rights or obligations as a franchisee, we encourage you to get in touch. To schedule a free and confidential consultation with franchise lawyer Jeffrey M. Goldstein, call 202-293-3947 or inquire online today.
