By Blair A. Rebane and Eric C. Little

Social media is a powerful and, arguably, essential marketing tool for many businesses today. Effective use of social media platforms such as Instagram, TikTok, Twitter, Facebook, and LinkedIn can enable businesses to directly connect, communicate, and interact with existing and potential customers, enhance customer relationships, and distribute marketing or promotional messages and other content instantly and often.  For franchise systems, the effective use and management of social media can raise unique challenges.  Ensuring consistent messaging, look and feel for a franchise system’s social media activity is important for brand protection, as is ensuring alignment with the franchisor’s brand standards.  Coordinating all of this across a network of franchised businesses can be challenging and there is no “one size fits all” approach that will work for every system. Each franchisor must look at its own system and determine which approach to social media and social networking fits best, given the nature of its business and brand, its customers, expectations and prevailing practices within its industry, and the needs of its franchisees.

One of the key questions for franchisors is whether all social media and social networking for their franchise system will be managed centrally and controlled entirely by the franchisor, or if franchisees will be given the ability to manage their own social media and social networking for their respective franchised businesses.  While some franchisors may prefer the former approach, there is increasing desire and pressure in some areas of business or certain product or service categories for more localized content and a more direct connection between businesses and their customers. For franchise systems whose customers are demanding a more localized approach or immediate connection, restricting control of all social media for the system to the franchisor may not be an option.

If franchisees will be given the ability to manage some or all of the social media for their respective franchised businesses, the franchisor will need to ensure that appropriate legal controls and protections are put in place to protect the interests of the brand and the franchise system. This article discusses some of the key legal items that franchisors should consider to ensure that the use of social media and social networking within their franchise system is managed appropriately and in accordance with system standards and that the franchisor has the necessary tools to deal with any problems that might arise.

What is Permitted?

If franchisees will be permitted to manage some or all of the social media for their own franchised businesses, the franchise agreement should clearly set out what they are permitted to do and what they are not permitted to do.  For example, will a franchisee be permitted to establish their own social media accounts in relation to their franchised business or will they simply be given the right to access and use an account established for them by the franchisor?  Will they be able to post their own content?  Is there a social media policy or standards and specifications that must be adhered to with respect to the franchisee’s use of social media and any content they propose to post?  Is franchisee content subject to the franchisor’s prior review and approval before it can be posted or published?  The grant of rights in the franchise agreement should address these matters explicitly, and any rights the franchisor intends to retain for itself should be clearly and expressly reserved.

In addition to clearly describing the rights that are granted (and not granted) to the franchisee in relation to managing its own social media, the franchise agreement should also expressly require the franchisee to ensure that its use of social media and all content that it posts to its accounts complies with all applicable laws, the terms and conditions of the franchise agreement and any other standards or specifications of the franchisor, and any terms or conditions imposed by the administrators of the respective social media platforms.  It should be clearly stated that the franchisee is solely responsible and liable for its own actions in relation to its social media accounts and any content it posts, re-posts or shares.

A well drafted social media policy can work hand-in-hand with the franchise agreement to address the more detailed aspects of managing franchisees’ use of social media and social networking in relation to their respective franchised businesses. For example, a franchisor’s social media policy may address which social media or social networking platforms are approved for use by franchisees of the system, any specific guidelines, standards or specifications that franchisees are required to adhere to with respect to their own content, or whether franchisees are required to post or re-post any franchisor-generated content on their own social media platforms. Like an operations manual, a social media policy typically exists outside the franchise agreement and is updated or amended from time to time as the needs of the system, operations, technology or business practices change.  Accordingly, a social media policy can address issues relating to franchisees’ use of social media in much more detail than the franchisor would ordinarily be able or inclined to do in the franchise agreement.

One of the specific items that a franchisor should consider addressing in its social media policy is whether there will be any restrictions on the username, domain name or “handle” that a franchisee can use in relation to its social media accounts.  In the interest of ensuring brand consistency and avoiding confusion among customers, franchisors might want to require franchisees to use a specific format for their usernames.  An example of this is a username format which begins with the name of the brand or system and ends with the city or street address where the franchised business is located (e.g. “BurgerCoVancouver” or “BurgerCoRobsonSt”). In the absence of such restrictions, there is a risk that franchisees could adopt usernames involving a multitude of different variations on the franchisor’s brand name, potentially making it confusing for a customer who is browsing or searching on a particular social media platform to determine which is the official account of the franchisor, which accounts belong to franchisees, and which account relates to a particular franchised location.

Another specific item that a franchisor might wish to address in its social media policy is any specific restrictions or guidelines regarding the content that franchisees may post, re-post or share from their social media accounts. For example, the social media policy might restrict franchisees to only posting content relating to their specific franchised business and only re-posting or sharing content provided or approved in advance by the franchisor in relation to the brand or franchise system. Restrictions such as these can assist in managing the risk of franchisees posting, re-posting or sharing content relating to matters which are not connected with the brand or franchise system and which might be controversial or not aligned with the values or views of the franchisor or the system.

The social media policy should also clearly prohibit franchisees from posting or sharing any confidential or proprietary information relating to the franchise system on their respective social media accounts.  While this restriction might seem obvious and potentially repetitive of the franchisee’s obligations under the franchise agreement, given the speed and the frequency with which information can be shared on social media, it is a good idea to explicitly remind franchisees that the same obligations of confidentiality apply to their activities on social media and that they need to be mindful of those obligations at all times when posting or sharing pictures, videos, stories, reels or other content on their social media accounts. This can include information about customers or suppliers of the franchised business or system, which franchisees might not always think of as confidential when posting or communicating through their social media accounts.

To be effective, restrictions on franchisee content such as the ones discussed above need to be paired with appropriate remedial provisions in the franchise agreement which enable the franchisor to quickly address any non-compliance by a franchisee with the requirements of the social media policy. This topic is discussed in further detail below.

Ownership of Domain Names, Accounts, and Content

If franchisees are permitted to manage some or all of their own social media for their respective franchised businesses, the franchise agreement should clearly provide that the franchisor owns all rights to every social media account used in connection with the franchised business, the usernames, domain names or handles associated with such accounts, and all content posted to such accounts by the franchisee. The franchise agreement should also provide that upon expiration or termination of the franchise agreement, all rights the franchisee has to access and use such social media accounts will automatically come to an end and the franchisee must take all steps reasonably required to transfer the rights, permissions and access to such accounts to the franchisor, including providing all passwords and other information required to log into or administer such accounts. This way, the franchisor can ensure that if a franchisee leaves the system, the social media accounts relating to their specific franchised business or location will remain with the system and can be transferred to a new franchisee if the business or location is refranchised.

In connection with this, if the franchisor has authorized its franchisees to use any specific social media platforms in relation to their franchised businesses, it is a good idea for the franchisor to review the administrator’s terms and conditions for those platforms on an ongoing basis to ensure that it is aware of the administrator’s latest requirements and procedures relating to the transfer of rights and access to accounts.  In the event that the franchisor needs to take over a franchisee’s account, working knowledge of the administrator’s requirements for this can assist in making this change as quickly as possible. If a particular platform does not allow accounts to be transferred between users or has particularly onerous requirements in relation to this, this may be a consideration for the franchisor in determining whether that platform should be approved for use by franchisees of the system.

Remedial Provisions to Address Non-Compliance

As noted above, in order to ensure that the restrictions contained in the franchise agreement and the social media policy with respect to franchisees’ use of social media and the content they may post or share are effective, a franchisor must ensure that it has appropriate remedial provisions in the franchise agreement to address any noncompliance with such restrictions by franchisees. Information can be posted to and shared on social media very quickly and can reach a large number of viewers in a short amount of time. The risk of brand damage in these circumstances can be significant. Accordingly, if a franchisee posts, re-posts or shares any content via their social media accounts which is offside of the franchisor’s standards and specifications or the terms of the franchise agreement or social media policy, the franchisor must be able to address or correct that noncompliance immediately.

The franchise agreement should explicitly give the franchisor the right to remove, or require the franchisee to remove, any content from the franchisee’s social media accounts which is contrary to the franchisor’s standards and specifications or which otherwise creates a risk for the reputation or image of the brand or the franchise system. The franchisor should have the right to make this determination in its sole and absolute discretion and there should also be a covenant by the franchisee to cause each of its principals, employees, contractors or other representatives who are involved in posting any content to the franchisee’s social media accounts to comply with any demands or directives of the franchisor in this regard.

It is also a good idea to ensure that a failure by a franchisee to adhere to the terms of the franchisor’s social media policy will give the franchisor recourse to the default provisions under the franchise agreement and the remedies available to the franchisor in the event of a default.

Key Takeaways

Social media can be an excellent way for franchise systems to promote their brand and business and engage with their customers.  It also presents certain challenges when franchisees are allowed to manage some or all of their own social media, which if not managed appropriately can expose the franchise system to risk.  A well-drafted franchise agreement and social media policy can assist a franchisor in reducing the risks associated with allowing franchisees to manage their own social media and ensuring that the franchisor has appropriate contractual protections to address any problems that might arise.

About the Authors
Blair A. Rebane is a partner at Borden Ladner Gervais LLP (“BLG”) and the National Leader of the firm’s Franchise and Distribution Group.  Eric C. Little is a partner in the Corporate and Capital Markets Group at BLG, who practices corporate commercial law with an emphasis on franchising, licensing and distribution.