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the franchisee, the courts have placed it in a separate category," says Jonathan Lisus, partner with Lax O'Sullivan Scott Lisus LLP. "Because of this extra level of scrutiny, franchisors need to have good communication to protect themselves from disputes with franchisees." Good faith and fair dealing The franchisor/franchisee relationship is different than your traditional business relationship. In many ways, the two parties are joined at the hip — and the franchisor is required to maintain an extremely detailed level of control over all aspects of the business, from trademarks to marketing strategies. This creates plenty of opportunity for things to go awry and for the franchisee to become disgruntled. "I think franchisors understand that communication is important, but it becomes difficult when there's unrest," says Jennifer Dolman, partner with Osler Hoskin & Harcourt LLP. "In slow economic times, people aren't doing as well and they can become unhappy. Or sometimes just a couple of franchisees realize they got into something they didn't expect. It's fair to say that if you're too entrepreneurial, a franchise system might not be for you." The courts understand, given the nature of the relationship, disputes are bound to arise. What they're primarily looking for is that both parties are living up to their statutory duty of good faith and fair dealing. This is where a strong communication plan can come in handy. "If the franchisor ever gets into litigation with the franchisee, it's important to be able to demonstrate there has been reasoned communication," says Lisus. "When one looks closely at the big cases, there's a common element to many of them — the franchisor imposing important changes on the system or dealing with important issues in a way the court perceives to be autocratic. Those cases inevitably end badly for franchisors. If you look at the cases where franchisors do very well, it's when they're able to demonstrate very clearly that they've had robust, well-managed communication with their franchisees." So what does a good communication plan entail? Well, it likely starts with a clear, unambiguous disclosure document and franchise agreement — but it sel, franchising and Ontario operations at Loblaw Companies Limited. "If you keep an open dialogue, you hopefully never have to look at what the contracts say." Walk a mile in their shoes One of the most important steps a franchisor can take is to ensure there are plenty of representatives in the field to gather ongoing feedback and pass along franchisee concerns. During tough economic times — or if a company is growing rapidly — it can be tempting to either cut field staff or put off hiring them, but this can be detrimental to the business. "It's so much faster to send e-mails You never really know what the franchisees are talking about until you see it with your own eyes. You need those people in the field who understand what the operators are going through. LIISA KAARID, Loblaw Companies Ltd. goes a lot deeper than that. The key is to create a culture that prioritizes open dialogue and communication, and the rest of the process should naturally fall into place. "As legal counsel, we have an obligation to make sure agreements are very clear. But, in many ways, a franchise relationship is like a marriage. When was the last time you settled a marital argument by pulling out a legal agreement?" says Liisa Kaarid, vice president, legal coun- back and forth, but you have to devote the resources to have people go into the stores," says Kaarid. "You never really know what the franchisees are talking about until you see it with your own eyes. You need those people in the field who understand what the operators are going through." With a good field team in place, operators may also be more likely to talk to them when they have a problem, as opposed to talking to one another. Your lawyer. Your law firm. Your business advisor. BennettJones_IH_Dec_12.indd 1 w w w. c a n a d i a n law y er m a g . c o m / i n h o u s E February 12-11-29 10:33 AM 2013 • 35

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