Subfranchise- what is it?

businessman holding a touchpad pc and surfing in the social netw

 

The world of franchising has become layered with complexity. In every franchise system there is always a franchisor that grants the license and owns the trademark. There is always a franchisee that uses the trademark and operates the franchise location or unit. But there may be many layers in between. There could be subfranchises, area developers, and representatives.

What is a Subfranchise? What is an Area Developer? What is an Area Representative? How are they the same? How are they different? The 3 concepts are somewhat fungible and there is much confusion about the overlap and the differences. Recognizing this, the Franchise and Business Opportunity Project of the North American Security Administrators Association, Inc. [NASAA] post consultation with the Federal Trade Commission [FTC] has published Multi-Unit Commentary [“Commentary”] for public comment.

In the words of the Commentary:

These structures [Area Developer, Subfranchise, and Area Representative] are not mutually exclusive; that is, a franchisor may use just 1 structure or may use a combination of 2 or 3 structures. There are no universally accepted terms for these structures within the franchise industry. The terms used to describe the structures in different franchise systems, and in different laws and regulations, vary widely.

Previously on our blog we discussed Area Developers. Click here to see our post on Area Developers.

Today we are going to discuss Subfranchises. The Commentary defines Subfranchisor as: a person [or entity] that is granted, for consideration paid to the franchisor, the right to grant unit franchises to third parties, generally within a delineated geographic area. So in essence, within a defined geographic area, the Subfranchisor steps in the shoes of the franchisor. The Subfranchisor is given some portion of the initial franchise and royalty fee paid by the franchisee. The franchisee, under the subfranchisee model, is referred to as the Subfranchisee.

Now, you may be saying: ‘I have never heard the word Subfranchisor.’ You are not alone. This term is rarely used in the industry. Subfranchisees are typically referred to as master franchisees or regional franchisors.

This is the graphic depiction provided in the Commentary:

www.nasaa.org_wp-content_uploads_2013_10_Proposed-Franchise-subs-Commentary_Page_03

So how disclosure issues handled under a subfranchising relationship?  Take a listen.

Again, let’s keep things in prospective. The Commentary has not been adopted. It is only being published for public comment. The Commentary may change, be modified, or redrafted after public comment. The Commentary is not intended to override Federal Franchise Disclosure Laws.

Look for our Post on Area Representatives.

 

The Anatomy of a HIPAA Business Associate Agreement.

Image credit: Spectral / 123RF Stock Photo
Image credit: Spectral / 123RF Stock Photo

 

So, by this time business associates should have signed the updated BAA [business associate agreements]. The deadline to sign the new business associate agreement was September 23rd. Did you read the agreement? Do you know what it says? It is an agreement; so what is everyone agreeing to? Have business associates asked you what the agreement means?

 

Here is a general overview of the required provisions of business associate agreements. What provisions are included in the business associate agreement is governed by the HIPAA Rule. HIPAA says that covered medical providers, health plans, and clearinghouses must enter into business associate agreements with the service providers that use protected health information to perform services on their behalf. So, for example, if you hire someone or some entity to handle your billing, you’re a covered entity, and persons you hired are privy to protected health information as part of performing the billing services, a business associate agreement must be signed.

The HIPAA doesn’t just say sign any agreement. It says sign an agreement with these obligations. The Department of Health and Human Services has published sample provisions that must be included in the business associate agreement. The sample language can be integrated in your business associate agreement or you can draft your own language, but set obligations must be included. And, if you want, you can add your own provisions in addition to the required provisions. That is fine too.

What are the required provisions? The provisions cover 3 major obligations.

 

1. Facilitation of Patient Rights: Business Associates must cooperate with facilitating patient’s HIPAA privacy rights including:

• Receiving an accounting of protected health information disclosures

• Amending protected health information

• Authorizing and retracting authorization of protected health information disclosures

 

2. Completing and Implementing a Risk Analysis, Policies, and Procedures: Business Associates must implement the safeguards, policies, and procedures. Just like medical providers, medical plans, and clearinghouses, Business Associates have to conform and comply with the HIPAA Rules.

 

3. Reporting Breaches and Liability: Business Associates are responsible, liable, and must report breaches just like medical providers, health plans, and clearinghouses.

 

In summary business associates are not in with both feet. Business Associates must comply and are liable under HIPAA just like medical providers, health plans, and clearinghouses. Have questions about who is a Business Associate, when a Business Associate Agreement needs to be signed or if you are liable for your Business Associates? Watch the video:

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Want more information? Need compliance help? Contact us.

 

Franchise Area Developers: It is the Happening Thing.

What is an Area Developer? What is a Subfranchise? What is an Area Representative? How are they the same? How are they different? The 3 concepts are somewhat fungible and there is much confusion about the overlap and the differences. Recognizing this, the Franchise and Business Opportunity Project of the North American Security Administrators Association, Inc. [NASAA] post consultation with the Federal Trade Commission [FTC] has published Multi-Unit Commentary [“Commentary”] for public comment.

In the words of the Commentary:

These structures [Area Developer, Subfranchise, and Area Representative] are not mutually exclusive; that is, a franchisor may use just 1 structure or may use a combination of 2 or 3 structures. There are no universally accepted terms for these structures within the franchise industry. The terms used to describe the structures in different franchise systems, and in different laws and regulations, vary widely.

So let’s start with the Area Developer. Here’s the definition provided in the Commentary: An Area Developer is an agreement where the franchisor grants a right to open multiple franchise units in a designated time period in a designated area. An area development agreement itself does not itself grant a right to operate a franchise unit. Area Developer has many different aliases. Area Developers are sometimes called master franchisee, multi-unit developers, and regional developer. The nomenclature changes and are used interchangeably.

This is the graphic depiction provided in the Commentary:

 Pages from www.nasaa.org_wp-content_uploads_2013_10_Proposed-Franchise-Multi-Unit-Commentary

 In addition to defining Area Developer, the Commentary some great FAQs with insights and watch-outs for people looking to buy a franchise and franchisors.  Take a listen:

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Now let’s keep things in prospective. The Commentary has not been adopted. It is only being published for public comment. The Commentary may change, be modified, or redrafted after public comment. The Commentary is not intended to override Federal Franchise Disclosure Laws.

Look for our Post on Subfranchise.

New Release: HIPAA Notice from HHS

Hot off the presses, the U.S. Department of Health & Human Services (HHS) has released a downloadable model of Notice of Privacy Practice forms on their website at: http://www.hhs.gov/ocr/privacy/hipaa16808235_s (1)/modelnotices.html. To use the form you will need to identify your office’s privacy officer and input the privacy rules specific to your state. With the input of your practice specific information, the model Notices are designed to be an easy way for healthcare providers and other cover entities to provide a uniform Notice of Privacy Practices to their patients.

Image credit: bloomua / 123RF Stock Photo

 

Wait there is more. There are also sample business associate provisions available. You can get a copy of the sample business associate provisions from the HHS website at: http://www.hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/contractprov.html. The sample business associate provisions were published some time ago. They are good starting point for drafting an updated business associate agreement. Using the sample business association provision is not as simple as the downloadable Notice of Privacy Practices. You have to make some choices and you have to plug it into your own document. It is not a document that you enter your name and hit print button. Before building the agreement, you will need to know some things. For example, you need to know who is going to be responsible for reporting potential breeches to the HHS Office of Civil Rights and how you want business associates to respond to a patient’s request for amendment of their protected health information. The sample business associate provisions are a great resource, but you will need to do some work on the front end.

 Job done? Not exactly, HIPAA compliance more than just posting a privacy notice and signing a business associate agreement. The HIPAA Security Rule includes more than 40 required and advisable Implementation Specifications and 20 HIPAA Security Rule Standards that covered entities must follow. The Rule encompasses administrative, physical, technical, and organizational safeguard requirements.

To learn more visit: http://gettinslaw.com/hipaa-compliance-program/

 

New Law Throws a Wrench in Franchise Business Operations.

Laws throw a wrench into framchise businessOn September 17, 2013, the Obama administration announced that some 2 million home health care workers will no longer be exempt from overtime pay. Home health care is hot in franchising. With baby boomers aging, the demand for home health care is expected to increase, and increase for some time to come. Each day new franchise home health care businesses are opening.

But, what does this new law mean to the home health care franchises? Before September 17, 2013, many home health aides fell into an exemption under Fair Labor Standards Act [FLSA]. Before September 17, 2013, many home health care aids could be classified as rendering companionship services. Come January 1, 2015, home health care workers can no longer be exempt from overtime and minimum wages. For some states this will not be much of an issue. In about 20 states, home care aides are already covered by state wage and hour laws. But, for the rest of the 30 some odd states, this may mean a major shift in daily franchise operations.

Most commonly in the franchise agreement, the franchisees are obligated to know and comply with the federal and state legislative changes. If a new law is passed, the franchisee must have its ear to the ground. Beware of the new law. Change and comply with the new law. The onerous is on the Franchisee.

Many franchisors, as a part of their consulting services, will help and support franchisees in learning about and becoming compliant with new laws. This is an added bonus. It is, however, not an obligation of the franchisor.

What is work under the federal Fair Labor Standards Act, Under federal wage and hour laws?  The answer can be tricky.  Listen to 3 examples.

When buying a franchisee  and as a franchisor and franchisees what can you do to stay informed about and compliant with new laws? Here are 4 things you can do within your franchise system:

  1.  Learn the laws: that affect your franchise including federal, state, and local laws.
  2.  Keep the channels open: establish an intranet or other online forums where franchisees and franchisors can share and discuss legal issues and solutions that are working.
  3.  Invite professionals to impart knowledge: plan a webinar, reserve space during the national or regional franchise convention to have professionals speak about statutory and regulatory changes in the industry.
  4. Make it a priority: During advertising council meetings, carve-out time to discuss legislative changes. Form a subcommittee devoted to legislative changes.

VSB

 

Have a question about what is work or your company pay practices? Click here to schedule a Virtual Sidebar. Get answers to your wage and hour questions.

Working the System- Online Reviews

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Online reviews have become a real presence and concern for businesses. First there was the Better Business Bureau [BBB]. It was a staple for years. Before buying a product or contracting for a service, consumers checked the BBB rating of companies.

Today the market has changed. It has evolved. It has expanded. First, there came Angie’s List. Now there is Yelp and dozens of industry specific rating and review sites.

Good ratings can drive traffic and bring prospective consumers. Bad ratings can turn away prospective consumers. If you have no ratings or reviews, you fall beyond the competition. What can you do? What will you do to drive positive customer ratings and reviews?

Listen to what one bankruptcy law firm is alleged to have done. The law firm, McMillan Law Group, received its first review on Yelp-a negative one star review "Would never recommend. Didn't abide by their own agreement. Communication was very poor." Soon thereafter, positive reviews began flooding the Yelp listing for McMillan Law Group. Is it consequence or foul play?

Yelp is alleging foul play. One positive review came from a confirmed employee of the McMillan Law Group, one from a soon to be wife of an attorney employed by the McMillan Law Group, and 4 positive reviews were submitted from a computer at the McMillan Law Group IP address. There is more. The McMillan Law Group is accused of engaging in a “circle of San Diego lawyers who trade positive reviews” on Yelp. Yelp asserts that this conduct:

• Is a breach of the Yelp User Agreement,
• Intentionally interferes with contractual relationships,
• Is a violation of the Unfair Competition Statutes, and
• Amounts to false advertising.

Yelp is demanding an amount exceeding $25,000. Wow, who would have thought? Who would have thought this could lead to some heavy legal allegations?

Learn the law regarding the use of consumer endorsement and testimonials.  Watch the video below:

So what can you do? What should you do regarding online marketing and reviews?

  1.  The same rules of advertising apply to online, so follow traditional advertising rules when participating in online activity.
  2. Read those long User Agreements before participating in online activities.
  3. Review your and your staffs’ posts, comments, endorsements, and reviews for accuracy and truthfulness.
  4. Develop best practice social media and online policies for your company.

VSBHave a question about company online practices or customer testimonials? Click here to schedule a Virtual Sidebar. Get answers to your online and social media questions.

 

What is Your Franchise Doing to Remain Competitive?

What is Your Franchise Doing to Remain Competitive?

bigstock-Climb-the-career-ladder-concep-45638389What is your franchise doing in the product development realm? Take a listen to what is going on the beyond the scenes at Applebee’s test kitchen in Kansas City. The Applebee’s test kitchen in Kansas City is staffed by 5 chefs. They will research and create 200 potential menu items this year alone. Only a small percent [10 or 20 items] will make it on to the Applebee’s menu. The chefs are charged with developing new menu items that take regional differences into account, keep up with food trends, and incorporate ingredients that can be obtained nationally. Take a listen to the Minneapolis St. Paul Business Journal story to learn more click here.

One of the struggles of every business is to remain relevant and competitive within the market space. One of the potential benefits of being a franchisee is having a research and development team working hard on your team. But, not all franchises are equal in the amount of time and resources devoted to product and service development.

So what can and should you do if you are considering buying a franchise or if you are already a franchisee  or if you are a franchisor? Here some ideas:

1. Before buying a franchise, ask the franchisor about what resources they are devoting to new product and service development. Ask franchisees if they believe the franchise concept is relevant and competitive in the market space.

2. When buying a franchise, review the franchise agreement to see how new products and services are introduced into the system. Make sure the franchise agreement grants you the right to participate in new product and service offering, special accounts, and all available venues.

Learn more about Special Accounts and how they are used for expanding business: 

3. If you are a franchisee or franchisor, work to foster open communication lines. Talk with  franchisees about what they are doing new and different. Give input about what products and services are in demand in the market place.

4. Collaborate with your franchise advisory board or franchise forums about introducing new products and service initiative to the franchisor.

 

Port-a-potty Designs are Original Pieces of Art?

bigstock-Copyright-Word-Cloud-39228895That is the claim made by the city of Portland, designer of the aesthetically pleasing 24/7 flushable Portland Loo toilet. Portland Loo can be found throughout the streets of Portland. The city of Portland was hoping to sell the Portland Loos to other cities, but the prospects for sale got tight when Romtec, Inc. introduced the Sidewalk Restroom. The Sidewalk Restroom shares a similar design and it is being offered for almost a third of the cost.

This did not sit well with the city of the Portland. They are fighting back. The city of Portland has filed a law suit for copyright infringement against Romtec, Inc. Copyright infringe? Yes, copyright infringement. The city of the Portland claims that the design of the Portland Loo toilet was copyrighted. It was the city of Portland’s original pieces of the art. And, Romtec, Inc. committed copyright infringement in designing the Sidewalk Restroom.

How the case will turn is unclear, but it is a great example of the breadth and scope of what constitutes an original piece of art under copyright laws. Under copyright laws an original piece of art is protected upon the mere fact of its creation. You create something in tangible form, it is original, and it may very well have copyright protection.

Listen to the video to learn more about what is copyright is:

What does copyright protection afford you? Copyright laws prevent others from copying your original pieces of art and taking them as their own. Now, copyright law does not prevent others from taking inspiration from your work and creating their own original pieces of art. But, where inspiration stops, and copying starts is unclear.

When posting to the blog, we try to select cases and current topics that have meaning and offer insight. This case, by its sheer uniqueness of subject matter, is sure to remain in one’s recall when thinking of intellectual property protections.

Take a look around. What copyright materials does your business have? What are you doing and what can you do protect your intellectual property? Here are 3 steps that you can take to protect your intellectual property.

1. Put the copyright or trademark symbol on copyright and trademark items.

 

2. Register your copyrights and trademarks with the USPTO.

 

3. When entering into vendor, supplier, or employee relationships that involve the creation or use of the copyright or trademark materials make sure to get an agreement that acknowledges your ownership of and rules for using the copyright or trademark materials.

 

Unsure which symbol [℠, ™, ®, ©] to use? Send us a message below and request our quick reference sheet.

 

No Confidentiality Agreement is Not a License to Steal

horrified lady technician pouring liquidOne of the most valuable assets of any business is the “how-to”. Whether it is website development codes, the secret recipe for making the muffins, or special techniques; how you do things, your trade secrets, can be your most valuable business asset. When entering into employment relationships, you may ask employees to sign a confidentiality agreement. You may ask vendors and suppliers to sign confidentiality agreements.

But what if you didn’t? What if you don’t have a confidentiality agreement? Can you still prevent others from using your trade secrets? Yes. Maybe you can! Even in the absence of the confidentiality agreement you may be able to prevent others from taking, using, selling, or disclosing your trade secrets. Most states [with the exceptions of Massachusetts and New York] have enacted trade secret laws that prevent the improper use and disclosure of the trade secrets.

So does that mean that you forever more forget about getting confidentiality agreements from your employers, your vendors, your suppliers? No. There are true benefits to having a confidentiality agreement. With a confidential you can craft an agreement that specifically protects what is valuable to you and carves-out remedies and safeguards that protect your business. You don’t have to rely on a catchall state statue and hope it protects you.

Not sure what constitutes your trade secrets and what you can do to protect them? Watch the video.

August 9th marks the 34th anniversary of the uniform trade secret act. Want to know what you can do to protect your trade secrets and confidential information? Request a copy of our tip sheet! Send me a message below. Tell me want a tip sheet on how to protect your trade secrets.

 

Walgreens Fined $1.4 million for Ex-Girlfriend Snooping

bigstock-Business-woman-working-at-the--37073182We have all heard about the cases of snooping. Celebrities like Drew Barrymore, Arnold Schwarzenegger, Tom Hanks, Leonardo DiCaprio, and Farrah Fawcett have all been victims of snooping. Snooping is accessing - disclosing patient health information for reasons other than patient treatment, payment or operation, without authorization. It is a violation of the HIPAA privacy and security rule.

You may say: “Oh, I don’t have to worry. Tom Hanks or Leonardo DiCaprio is not going to come into my office.” Well, a recent case may have you re-thinking.

What happened? A Walgreens pharmacist, Ms. Peterson, accessed a patient’s records and shared a patient’s information with her husband. The patient happened to be her husband’s ex-girlfriend. What happened? Ms. Peterson was sentenced to 25 months in prison and Walgreens was fined to the tune of $1.4 million.

So maybe it’s a girlfriend, school teacher, neighbor, old friend. Patients come into the office and they may not be celebrities, but risk of the snooping, looking at, or sharing information that is protected is a concern for every health care provider. Medical records contain sensitive information: medical history, treatment information, contact information, and a lot of other stuff.

 So what can you do? What should you do? Here are 3 suggestions:

1. Have a policy in place against unauthorized access, use, and disclosure of protected health information.

2. Provide education to staff members regarding data privacy and security.

3. Implement a disciplinary policy in the event of snooping and other privacy and security violations.

 

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