[opendtv] Re: Internet's Biggest Companies Ask FCC to Please Leave Net Neutrality Alone | Fox News
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Thu, 20 Apr 2017 03:26:40 +0000
John Shutt wrote:
Bert, ever hear of a franchise agreement?
John:
https://www.thebalance.com/franchise-agreement-1350570
Do you think it might make a huge difference, in what such agreements might or
might not limit, if the business involved is largely made up of local
monopolies, as opposed to not at all? Like I keep telling Craig, these
agreements are signatures on a piece of paper. If technology changes, allowing
different arrangements which are beneficial to the business owner(s), there's
no reason to pretend that these signatures were chiseled in stone by a divine
power, and can never change for the rest of time.
So for example, just because a legacy MVPD had to carry bundles formatted just
so, it doesn't mean that when technology permitted it, Sling TV was impossible
to set up (by a previous DBS-only franchise). Or HBO Now. Or CBS All Access. Or
DirecTV Now. In some of these cases, incumbent MVPDs have already created new
agreements, with different content owners, to cover different territory.
When I watch prime time TV, I witness daily how the TV networks have moved
beyond legacy "franchise agreements," with little trouble. I'm using other than
the previously mandatory OTA affiliate (or the previously mandatory MVPD
bundle). New options exist now.
Only the guaranteed neutrality of the Internet has made this possible, in
practice.
I know that you are coming at this from the point of view that the middleman is
entirely hamstrung. I'm instead looking at it like the old way was beneficial
to the supply side, and that given half a chance, **e.g. by abolishing net
neutrality**, the supply side would be just as happy to retain the old market
constraints. And that "supply side" would incorporate the content owners and
the legacy distribution franchises. The neutral Internet permits any single
content owners to say "forget the past restraints, I'll do something more
competitive," and then others *have* to follow.
Bert
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Franchise Agreement
By MSA Worldwide
Updated June 30, 2016
Definition: The Franchise Agreement is a legally binding agreement which
outlines the franchisor's terms and conditions for the franchisee. It also
outlines the obligations of the franchisor and the obligations of the
franchisee. The franchise agreement is signed at the time an individual makes
the decision to enter the franchise system.
A. While every franchise is a license, not every license is a franchise.
What turns a license into a franchise in the United States is governed by the
definition established by the Federal Trade Commission ("The FTC Rule") and by
the various states that have adopted alternative definitions.
Under the FTC Rule, there are three general requirements for a license to be
considered a franchise:
1. The franchisee's business is substantially associated with the franchisor's
brand. In franchising, the franchisor and each of its franchisees are sharing a
common brand.
2. The franchisor exercises controls or provides significant assistance to the
franchisee in how they use the franchisor's brand in conducting their business.
Since the franchisee is an independent contractor and not a joint employer,
generally those controls are over brand standards and do not extend to the
human resources of the franchisee, nor do they extend to how the franchisee
manages their business - subject to meeting the requirements of the brand
standards - on a day-to-day basis.
3. The franchisor receives from the franchisee a fee for the right to enter
into the relationship and to operate their business using the franchisor's
trademarks. The fee can be an initial fee, or it may be a continuing fee in
excess of $500 (adjusted annually) with certain exemptions provided under the
law.
Several states have also passed laws defining "what is a franchise" and those
laws can capture into the definition of a franchise some relationships that do
not meet the FTC Rule.
B. It's a formal and complicated long-term business relationship.
It's not a partnership, it's not a joint-venture or cooperative (although it
could be), and it's not a joint-employer relationship (although it could be
that also).
It's a license that establishes the rights and obligations of the licensor and
the licensee. Regardless of how the parties refer to the relationship, every
franchise is governed by the terms of a contract (generally a written
agreement) between the licensor (the franchisor) and a licensee (the
franchisee), and that document is called a Franchise Agreement.
As in any well-crafted contract, the Franchise Agreement is designed to balance
the needs of the franchisor to protect its intellectual property and ensure
consistency in how each of its licensees operates under the brand. It needs to
also ensure that even though the relationship is codified in a written
agreement, meant to last sometimes more than 20 years (generally the agreement
is ten years), that the franchisor has the ability to evolve the brand and its
consumer offering over time. It needs to be flexible enough to allow the
franchisor to modify the agreement so that when franchisees in different
situations have specific needs, the agreement can reflect those decisions. And
it also needs to serve the needs of franchisees to manage their independently
owned businesses on a day-to-day basis governed by a requirement that they
continually meet brand standards.
It's long, detailed, and provided to prospective franchisees as an exhibit to
the Franchise Disclosure Document well in advance of the franchisee signing it
to ensure they have time to review the agreement and get advice from their
lawyers and other advisors.
Franchising is about consistent, sustainable replication of a company's brand
promise and needs to detail the thousand and one business decisions that go
into creating any franchise system. It's complex and in most instances a
contract of adhesion (meaning an agreement that is not readily subject to
change). Because it is meant to reflect the uniqueness of each franchise
offering and needs to also craft the dynamics of the intended franchise
relationship, copying another franchise system's agreements in developing any
franchise system is likely the single biggest mistake new franchisors can make.
Franchisors who choose to work with lawyers and franchise packaging firms that
cut corners and copy others' documents put their franchise systems in peril.
Because of the length and complexity of a Franchise Agreement, most qualified
lawyers will not attempt to roll into it all the agreements required by the
relationship including personal guarantees, leases, and other requirements of
the relationship, and instead have those contained in separate documents.
As with any well-written contract, the Franchise Agreement needs to deal with
some basic elements including, but not limited to:
1. An Overview of the Relationship. The parties to the contract, the ownership
of the intellectual property, the overall obligations of the franchisee to
operate their business to brand standards, etc.
2. Duration of the Franchise Agreement. The term of the relationship, the
franchisee's successor rights to enter into new agreements, the requirement to
upgrade the franchisee's location, etc.
3. Initial and Continuing Fees. Franchisees generally pay an initial and
continuing fee to the franchisor for entering into the system and remaining a
franchisee. There are also a host of other a la carte fees that are included in
most agreements. Most franchise systems also provide for a payment to an
Advertising or Brand Fund that is used by the franchisor to market the brand to
the public and for other contractually defined purposes.
4. Assigned Territory. Not every franchise agreement grants a franchisee an
exclusive or even a protected territory, and how a territory is established
must be defined. Franchisors also need to deal with reservation of their rights
within a franchisee's territory, including alternative distribution sites,
sales over the Internet, etc.
5. Site Selection and Development. Franchisees generally find their own sites
and develop them according to the franchisor's standards. The role of the
franchisor is generally to approve the location found by the franchisee and
then approve, prior to opening, that the franchisee has built their location to
meet design and other brand standards.
6. Initial and Ongoing Training and Support. Franchisors generally provide a
host of pre-opening and continuing support including training, field and
headquarters support, supply chain, quality control, etc.
7. Use of the Intellectual Property including Trademarks, Patents, Manuals. As
the IP of every franchise system is its most valuable asset, some of which will
change as the system evolves, the agreement defines what is licensed to the
franchisee, how the franchisee can use the IP, and the rights of the franchisor
to evolve the system through changes to the franchisor's operating manual.
8. Advertising. The franchisor will reveal its advertising commitment and what
fees franchisees are required to pay towards those costs.
9. Insurance Requirements. Franchise agreements will define the minimum
insurance a franchisee is required to have prior to opening and during the term
of the agreement.
10. Record-Keeping and the Rights to Audit the Franchisee's Records. The
franchisor defines the records that it needs its franchisees to maintain in the
agreement and in the operations manual, the software they are allowed to use,
its rights to access that information including online through the internet,
and its rights to audit that information from time to time.
11. All the rest. Some may call it boilerplate, but in well-developed
agreements it is not. Among the myriad other issues contained in the Franchise
and other agreement are the franchisee's successor rights, default,
termination, indemnification, dispute resolution, resale rights, transfer
rights, rights of first refusal, sources of supply, local advertising
requirements, governing law, general releases, personal guarantees, roll-up
provisions, etc.
In developing a proper set of franchise agreements, each of the elements of the
franchise need to be evaluated and decisions made. Prior to having the lawyers
begin to draft the agreements, it is essential for the franchisor to first
develop its business plan, with all the myriad of issues decided on. For most
franchisors it is important that in addition to working with qualified
franchise lawyers, they first work with experienced and qualified franchise
consultants in crafting their franchise offering.
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