Waste Not, Want Not! – How COVID-19 Made us Rethink Our Foodservice Franchises

Although it may feel to some that the public health concerns relating to the novel COVID-19 pandemic have relaxed, the lasting impacts on various industries, specifically in the foodservice sector, continue to influence consumer dining expectations. As evidenced during the pandemic, consumers are able to adapt to changing circumstances and similarly, so do their expectations of consumer-facing businesses. More than ever, franchise brands need to ensure that there are mechanisms, procedures and protocols in place, to alter their system standards to readily adapt to changes in the market and to consumer demands. Franchisors in the restaurant industry, in particular, should regularly review and update their operations manual and their franchise agreements to ensure that franchisee operations are able to adapt and stay consistent in response to market changes and to rapidly evolving consumer expectations that now exist in the post-pandemic era. Below in this article are a summary of the some of recent changes to food and drink legislation, and health and safety initiatives, as well as recent developments in sustainability practices that restaurant brands have had to adapt to.

Food and Drink Legislation

Throughout Canada, provincial legislators have re-evaluated certain food and drink legislation in the wake of COVID-19 in order to respond to and address public health concerns and to ensure consumer safety. Specifically, the pandemic highlighted the importance of maintaining stringent health protocols throughout the food service industry.  In Ontario, franchisees must continue to comply with the updated regulations of the Food Safety and Quality Act[1] (the “FSQA”) and the Health Protection and Promotion Act [2] (“HPPA”).  Under HPPA, every person who intends on operating a food premises, in the province of Ontario, must notify the Medical Officer of Health of the health unit in which the premises are located. Ontario Regulation 493/17: Food Premises[3] outlines the general requirements for food premises, in relation to operations, maintenance, cleaning, sanitizing, sanitary facilities, and food handling. Since the onset of COVID-19, there have been several changes to O-Reg 493/17 that emphasize more rigorous cleaning and sanitizing practices, particularly for high-touch surfaces and food preparation areas. While it is common for franchise agreements to include provisions that relate to the cleanliness and appearance of the franchised business, in light of increased sanitizing protocols, franchisors may wish to provide additional guidance on food handling procedures and operation standards in their operations manuals that can be easily adapted to the legislative amendments.

Additionally, O-Reg 493/17 requires at least one food handler or supervisor, who has completed the food handler training, to be on the premises of a foodservice establishment during every hour in which the business is operating.[4] Franchisors in the restaurant or foodservice industry are encouraged to review their operations manuals and their franchise agreements to ensure that there are policies and procedures in place for compliance with  applicable health regulations and to ensure consistent compliance by franchisees throughout their system. Such provisions may include mandating that all of the franchisee’s employees satisfactorily complete all food safety programs in the applicable jurisdiction in which the franchised business is located and submitting such records to the franchisor.

Additionally, in accordance with the FSQA, restaurant franchisors should ensure that they are not only sourcing packaging products that comply with the product requirements under the FSQA, but they must also verify that franchisees are actually using prescribed packaging for delivering its food products. Pursuant to the FSQA, only individuals with a valid license from the Minister of Agriculture, Food and Rural Affairs can operate a premises from which a licensed activity is carried on or where the preparation for the use, packaging or selling of food takes place. Restaurants and other food service businesses can be subject to inspection by an inspector, with or without a warrant, if there are reasonable grounds that there may be a food safety risk that constitutes a significant risk to public health or safety at the premises. Franchisors may consider incorporating provisions in their operations manuals that require franchisees to report to the franchisor on such issues or areas of concern relating to potential food safety risks at the premises. While it is common for franchise agreements to require that franchisees comply with applicable laws and use only franchisor approved suppliers, it may warrant a franchisor’s further review of such relationships with suppliers in view of these regulations to ensure that the franchisees continue to utilize packaging products that comply with evolving consumer expectations and food preparation regulations. For example, during the pandemic, consumers expressed an interest in packaging of food products that was both appealing and provided comfort as to the safety precautions taken by the restaurant to avoid contamination of the food commodity. As a response, certain franchise systems implemented tamper-evident packaging as a way to reassure consumers that their food products were not altered before reaching the destination, which has been well-received by consumers.

Sustainable Initiatives

Similarly, sustainable initiatives in franchising have become increasingly important as government and businesses recognize their role in promoting environmental responsibility and utilizing ecologically friendly packaging in a post-Covid environment, particularly in light of Canada's Single-use Plastics Prohibition Regulations (“SUPPR”)[5]. Under this regulation, businesses are prohibited from offering single-use plastic straws, single-use plastic cutlery, single-use plastic bags, etc. In response to these government initiatives, many franchised systems have had to reevaluate their product packaging and implement alternative forms of packaging, such as paper straws, “strawless” lids, or the use of reusable containers. Certain franchise systems have begun to prioritize eco-friendly packaging and encourage their customers to participate in sustainability efforts, such as offering customers the ability to purchase reusable cups or containers which both appeals to consumers and complies with legislative requirements. By integrating these sustainable practices, franchise systems not only enhance their brand reputation but also meet the growing consumer demand for environmentally conscious choices. However, for these initiatives to be successful, franchisors must proactively introduce these system changes in a timely manner which allows franchisees throughout the system the time to implement the changes. Franchisors should ensure that the terms of their franchise agreement allow for system-wide rollouts to occur within prescribed timelines, as a lack of uniformity across the system can cause frustration for consumers when products or service offerings are not consistently available.

Further, franchisors are increasingly focusing on implementing strategies to minimize their ecological footprint, such as adopting energy-efficient practices in their operations. Many establishments are adopting energy-saving technologies, such as LED lighting, energy-efficient appliances and advanced HVAC systems, to help regulate temperature at the premises effectively, while lowering electricity consumption. Franchisors should include, as part of the estimated initial investment in their disclosure document the cost of energy-efficient equipment and other energy-efficient requirements which though may be higher can lead to on-going less operational costs for franchisees. For existing locations, the franchise agreement should include provisions to require certain renovations or upgrades to the franchised location during the tenure of the franchise agreement, in order to ensure that all franchisees remain committed to the overall sustainability efforts of the brand. A number of Canadian franchised brands have successfully implemented sustainability initiatives across their franchise locations, and with their supplier relationships, in an effort to reduce the system’s ecological footprint and which aligns the brand with consumers’ environmental and ethical values.[6]  

As we emerge from the challenges posed by COVID-19, franchisors must continue to adapt to the new landscape characterized by evolving food and drink legislation and a heightened focus on sustainability. By proactively being aware of and addressing the changing market, franchisors and franchisees can build resilient businesses that not only comply with regulations but also meet the ever-evolving demands of consumers. Emphasizing adaptability, innovation, and sustainability will be key for franchise systems to thrive in this post-pandemic environment.

About the Author

Ashley Caldwell is a senior associate at Sotos LLP. Her corporate and commercial law practice focuses on franchising, licensing and distribution. She advises both franchisors and franchisees, guiding them through the review and negotiation of franchise agreements, the purchase and sale of franchised businesses, compliance with provincial franchise legislation and the resolution of franchise disputes. In addition to her practice, Ashley serves as its Technology Liaison for the Franchise Law Section Executive of the Ontario Bar Association. She also actively engages with several other professional organizations, including the Hamilton Law Association, the Canadian Bar Association, the Canadian Franchise Association, the American Bar Association Forum on Franchising and the International Franchise Association.

Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.