Franchisees must worry about employee lawsuits, as employment litigation has shot up dramatically in the last decade. A franchisor must also shield themselves from the potential lawsuits of the franchisee's labor. One way to distance the franchising companies liabilities from the franchised outlets operations is to include a clause in the franchise agreement, which states that all obligations and lawsuits regarding employment are the sole responsibility of the franchisee's operation.

It is for this reason that I had expanded our franchise company's section in the franchise agreement to address this very issue. Below you will find a copy of the inserted clause,

3.5 Employees

Franchisee must hire and train all employees who are necessary for the operations of the Franchised Business. Franchisee will be solely responsible for the terms of employment of its personnel, including compensation, training, supervision and payroll withholding. Franchisee will in no way obligate Franchisor for expenses incurred in the operation of the Franchised Business including labor costs.

Franchisee is required to hire and maintain sufficient staff in order to handle customer volume at all times. Franchisee is required to pay their employees and staff the wage prevailing (or in some areas a wage high than the then prevailing wage) in the Marketing Area for employees with similar labor skills, people skills and similar job responsibilities.

Franchisee is responsible for making sure their crews meet the standards, specifications and procedures outlined in the Confidential Operations Manual. Franchisee will hire only efficient, competent, sober and courteous employees for the conduct of the Franchised Business and will pay their wages, commissions, piece work and any other compensation justly due with no liability on our part.

Franchisee must take all steps necessary to preserve and protect proprietary information from publication, ommunication or other unauthorized disclosure or misuse. Franchisee must not disclose any of the proprietary or confidential information, use it in any unauthorized way or assist any other person or entit

y to disclose or use it either during the term of this Franchise Agreement or at any time thereafter. In particular, Franchisee will require as a condition of the employment of any employee by the Franchisee in the management and operation of the Franchised Business that the employee similarly covenants to maintain and protect the confidential and proprietary information, including the signing of the Franchisee's employee non-compete agreement. Franchisee will be responsible for the compliance with such covenants by their employees, with such covenants being for the benefit of the Franchisor and enforceable by the Franchisor.

In the event Franchisee becomes aware of any actual or threatened violations of any such covenants by any of their employees, Franchisee will promptly and fully advise Franchisor in writing of all related facts known to Franchisee. Franchisee will further cooperate with Franchisor in all ways reasonably requested by Franchisor to prevent or stop any such violation, including without limitation institution or permitting to be instituted in the name of Franchisee any demand, suit or action that Franchisor determines is advisable, which demand, suit or action may be maintained and prosecuted by Franchisor and/or Franchisee at the Franchisee's expense.

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All franchisors would be well advised to also shield themselves from liability and speak to an experienced franchise attorney on how best to protect themselves from lawsuits of the franchisee's business operations having to do with employment law. I hope you will consider this in 2006.

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