Best Western Hotels and its Franchisees May Be Liable for Millions

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Recently on the Gettins' Blawg, we discussed the case of CHUTICH et al v. PAPA JOHN'S INTERNATIONAL. In that case, consumers were trying to hold the Papa John franchisor accountable for endorsing a franchisee practice of texting a consumer contrary to federal consumer protect laws. Franchisors working nationally should be aware and informed about national laws. That is a no brainer!

Should franchisors be responsible for complying with laws in all 50 states? Knowing and acting in compliance with federal law is hard enough. But, that may not be enough! If franchisors are implementing nationwide franchise programs, franchisors need to know and comply with laws in all 50 states!

Take the case of Simpson v. Best Western International, Inc. Simpson and a group of the callers to the Best Western reservation line are suing Best Western for recording their cell phone calls to the reservation line in violation of the California law.  (Franchisor's Motion to Transfer Venue to the Central District of California and Motion to Dismiss, or in the Alternative, Strike Class Allegations, were denied.)

We have all heard the pre-record message: "This call may be recorded for quality assurance purposes." That message is given in order to comply with state law requirements. States have various laws regarding the recording of the phone conversations. State laws are not the same. The statute in this case is a California law that pertains to cell phone calls. Not all states have this same law or even a law similar.

Best Western could be liable for $5,000 for each cell phone call made to or from a California caller. How many calls do you think occurred between the Best Western reservation line and California callers? This could add up to a huge liability for Best Western and its franchisees.

So what is the best practice for franchisors that are implementing national or centralized franchise programs? The franchisor cannot possibly engineer a national reservation line or other national initiatives specifically tailored to the laws in each state. What is a franchisor to do?

Franchisors need to apply the highest dominator approach. Franchisors need to be aware of differing state laws and implement national programs that satisfy the most restrictive state law mandates.

Business take away: Apply the highest dominator approach when implementing national franchise programs!

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About this Entry

This page contains a single entry by Mary Beth Gettins published on February 14, 2013 9:13 AM.

How Much Money Can I Make If I Buy This Franchise? Financial Claims was the previous entry in this blog.

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