COVID-19 has disrupted and irrevocably changed the world.  The sudden pandemic sent shockwaves through the United States, provoking fear, and crippling our economy.  While many businesses are suffering, this is a particularly challenging time for the food industry.  Restaurants have been forced to shutter their dining rooms and find new ways to deliver their products to customers.  With ever-changing governmental rules and regulations, restaurants struggle to implement new policies and procedures that will help slow the spread of COVID-19, satisfy state and local regulations, and still turn a profit. 

Creating and executing new protocols becomes even more challenging when the restaurant is a franchise.  Unlike national chains or mom-and-pop businesses, franchises do not operate under a single parent company.  Instead, a franchise is owned and operated by the franchisee but in accordance with the franchisor parent company’s policies and procedures.  A franchise agreement, a legally binding contract between the franchisor and the franchisee, describes the franchisor’s terms and conditions for the franchisee.  Essentially, it is a list of rules the franchisee must follow to do business with the franchisor.  Common terms and conditions include specific requirements for a restaurant’s décor, layout, color schemes, menu items, recipes, and service techniques.  The franchisee’s compliance with these standards is usually mandatory. 

A question many franchises currently face is: “Who outlines and implements the business’s COVID-19 health and safety policies and procedures?  Franchisors or franchisees?”  It is highly unlikely that pre-COVID franchise agreements contained a “Pandemic Clause,” which defined who was obligated to do what in case of a global crisis (although these clauses may be drafted into post-COVID agreements).  This is a particularly interesting and topical question given the recent allegations that McDonald’s provided unsafe working conditions for its employees during the coronavirus pandemic.  On May 19, 2020, McDonald’s workers from Chicago, along with their families, filed a lawsuit against the fast food giant alleging that it failed to provide employees with masks, gloves, and hand sanitizer to protect workers from the virus.  The lawsuit also alleges that managers at one location failed to inform its workers that a co-worker tested positive for COVID-19.  Further, the plaintiffs argue that they did not receive proper training regarding how to protect themselves or customers from the virus.  A core question in the lawsuit:  Who is/was responsible for providing the necessary equipment and training during the pandemic?  McDonald’s corporate or the local franchisee? 

The answer may lie in a typical franchise agreement.  While the franchisor determines much of the design, products, and branding for the restaurant, the franchisee has some autonomy, particularly over its employees.  The franchisee is allocated sole responsibility for all employment decisions related to the restaurant.  This includes hiring and firing employees and setting compensation and benefits.  Importantly, these duties also include setting work hours and work rules; supervision and discipline of employees; and training and maintaining a competent staff.  Under these provisions, it seems franchisees would be responsible for creating new policies and procedures related to COVID-19.  Franchisees would also be responsible for training and supervising employees to ensure that the new protocols were properly implemented.

Another common clause in franchise agreements may also shed some light on this question.  Most franchise agreements require the franchisee to comply with all applicable laws and regulations, including those related to the handling of food products as well as employment issues.  The franchisee is also commonly responsible for maintaining restaurant cleanliness and sanitation at their location.  Related to COVID-19, the Texas Health and Human Services “Checklist for Restaurants” provides the minimum recommended health and safety protocols for Texas restaurants choosing to operate during the pandemic.  In relevant part, restaurants must: (1) train all employees concerning appropriate cleaning, disinfection, hand hygiene, and respiratory etiquette; (2) screen all employees before entering the restaurant and send home any person who has signs of COVID-19; (3) have employees wash or sanitize their hands upon entering the restaurant and between interactions with customers; and (4) have employees maintain at least 6 feet of separation from other individuals—if this distance is not feasible, have employees wear face coverings and rigorously practice hand hygiene, cough etiquette, cleanliness, and sanitation.  The Centers for Disease Control and Prevention (“CDC”) outlines similar guidelines for restaurants.  Additionally, the CDC encourages restaurant owners to provide “adequate supplies to support healthy hygiene behaviors,” including soap, hand sanitizer, disinfectant wipes, and cloth face coverings. 

While the practices listed above pertain to post-COVID restaurant operations, these new guidelines do not change the respective franchisor/franchisee obligations.  As discussed, in a typical franchise agreement, the franchisee will be charged with: (1) setting work hours and work rules for employees; (2) supervising employees; (3) training employees; (4) maintaining restaurant cleanliness and sanitation; and (5) ensuring compliance with all applicable laws related to the handling of food products and employment issues.  While COVID-19 has forced restaurants to implement stricter policies and new procedures, it has not changed the way in which franchises operate.  Franchisees should continue to perform under their franchise agreements while adapting to the new regulations of a post-COVID world.

Click here for more information concerning the Centers for Disease Control and Prevention “Considerations for Restaurants and Bars.”

For more information regarding the McDonald’s lawsuit, see Amelia Lucas, McDonald’s Workers in Chicago File Lawsuit Against Fast-food Chain for its Coronavirus Response, CNBC (May 19, 2020, 2:21 PM), https://www.cnbc.com/2020/05/19/mcdonalds-workers-in-chicago-file-suit-against-chain-for-coronavirus-response.html.