McDonald’s Closure of Russian Locations Spotlights the Proper Way to Franchise Internationally
Recently, McDonald’s has been receiving much attention for its closure of restaurants in Russia due to Russia’s aggression into Ukraine. As part of the coverage, news outlets have been reporting on some of the underlying infrastructure McDonald’s invested in as part of its efforts to expand into Russia. As noted in the Washington Post, as part of its Russian expansion, McDonald’s: Read More about McDonald’s Closure of Russian Locations Spotlights the Proper Way to Franchise Internationally
On May 23, 2022, the U.S. Supreme Court, in a unanimous decision, decided Morgan v. Sundance, Inc., No. 21-328, in favor of an employee who sued her employer, a Taco Bell franchisee, for wage theft. The Court concluded that waiving arbitration rights does not require a showing that the party seeking to have their case heard in federal court would be prejudiced by continuing with arbitration. The case, although decided on narrow grounds, demonstrates the risk that a party takes when it decides to delay enforcing a contractual arbitration provision. By eliminating the prejudice requirement, the Court removed a safety valve that saved parties who decided to forgo arbitration for a period of time, then ultimately opted for arbitration. As a result of the holding, a party seeking to invoke the right to arbitrate should not delay, or they will risk forfeiture of the right to arbitrate at a later time.
On December 23, 2020, then Governor Andrew Cuomo signed into law NY CLS Fin Serv §§ 801-812 (the “Disclosure Law”) with the intended purpose of “requiring certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient.” Although the law was slated to take effect January 1, 2022, the New York Department of Financial Services (“DFS”) issued a guidance on December 31, 2021, stating that the “obligations do not arise until the [DFS] issues final implementing regulations and those regulations take effect.” Given the latest regulations proposed by DFS provide for a compliance date six months after publication of the Notice of Adoption in the State Register, companies have until at least the summer of 2022 to comply with the Disclosure Law.
The Federal Trade Commission (“FTC”) has kept itself busy as of late, issuing a series of notices to over 1,000 businesses (many of them franchise companies) advising them that they could face civil penalties for conduct that the FTC has deemed unlawful. The Notice of Penalty Offenses Concerning Money-Making Opportunities is of particular importance to franchise companies. The first round of notices went out in late October. They advised businesses that if they deceive or mislead consumers about potential earnings or otherwise make false or misleading representations in connection with a money-making opportunity, they could be subject to large civil penalties (up to $43,792 per violation).