Our Boyd Neil co-wrote the following paper which was also presented on November 19, 2013 at the Ontario Bar Association’s 13th Annual Franchise Law Day.

The piece was co-authored by Kerry Renker Green, corporate counsel, Franchising, Tim Hortons USA Inc., and Dominic Mochrie, partner, Osler, Hoskin & Harcourt LLP.

INTRODUCTION

Social media has drastically changed the way franchisors manage their brands in the online world. Social media enables people – brand owners, competitors and fans alike – to virtually congregate in community spaces and share opinions, praise and criticism. It has become an “everyone, everyday” means of communication and sometimes, rather than sharing our thoughts with a defined circle of friends like we all used to, members of online communities can broadcast their opinions to hundreds or thousands (or more!) of friends and strangers. There is also significantly less control over who can view or access the messages as online content can be “shared”, “retweeted”, “tagged”, “memed”, “liked” over and over again to an ever-expanding cascade of readers in a way that is simply not possible in traditional media. Anonymity, combined with the speed and breadth of communication possible with social media, makes it possible for a single negative event to have far-reaching and long-lasting consequences for a franchisor’s brand.

This paper explores some of the common triggers and sources of incidents of social media abuse, how to prepare for them, and how to react when they happen. It is intended as a practical guide, rather than a legal treatise on related issues such as defamation, trade-mark infringement and other matters.

WHO CAN TRIGGER INCIDENTS OF SOCIAL MEDIA ABUSE?

The list of companies that have faced the wrath of the social web continues to grow, and the source of these incidents can range from well-intended promotions to careless communications to deliberate attacks on a franchisor’s brand. Understanding where and how these attacks can arise is the first step in preparing a good defense.

The Brand Owner/Franchisor

Sometimes incidents of social media abuse can arise from well-intentioned but poorly received marketing promotions by the brand owner itself. When Gap tried to modernize its image by creating a new logo, the online critics held nothing back: Parodies were made and even a fake

Twitter account was created to mock the new logo. There was nothing particularly offensive or controversial about Gap’s new logo, but fickle fans’ reactions resulted in Gap quickly retreating from introducing its new look. Bic’s attempt to capture the female market with its “For Her” line of pens was met with mockery on Amazon, where reviewers accused the brand of promoting sexism. The ease of exposing and visually ridiculing franchise missteps has bred a culture of criticism and judgment on Twitter, Facebook and Google+ and created the urge to expose and mock companies on “news” platforms like Reddit and Buzzfeed. This feeling of entitlement to criticize means no organization is safe from the possibility of a social web mugging.

The Franchisees

Franchisees could draw social media attention to a brand intentionally, or merely by speaking out and voicing their opinion on an issue wholly unrelated to the brand. In November 2012, Denny’s restaurants experienced a social media debacle when a franchisee, upset over “Obamacare,” made a statement to the prolific web news site The Huffington Post. When interviewed, multiunit franchisee John Metz, voicing political disgust over the healthcare law declared that he would charge a surcharge to offset its effects, providing that “customers have two choices: They can either pay it and tip 15 or 20 percent, or if they really feel so inclined, they can reduce the amount of tip they give to the server.”1 The article and other similar articles received tens of thousands of comments and attention on Facebook. Denny’s customers threatened a boycott and the brand later released carefully crafted statements disavowing the views expressed by their franchisee. In another example, when an Illinois-based McDonald’s franchisee prematurely tweeted that certain menu items would be discontinued before head office had released a statement, McDonald’s was forced to rush to confirm the discontinuation sooner than planned after the tweet generated national speculation.

The Franchisee’s Employees

Employees of any company will from time to time speak out to let their work satisfaction (or dissatisfaction) be known, whether it be on the worldwide web or by the local office coffee pot.

Many franchised restaurant chains employing social media-savvy young employees have felt the sting of unwanted social media attention. There are numerous franchisors who have seen social media attention go awry through franchisee employees posting pictures and videos of themselves on Facebook and YouTube doing unauthorized activities on work premises and performing unsanitary acts with food. In many cases, the public and the media do not disassociate the employees’ behavior from the employer’s brand, resulting in franchisors taking the blame. For example, in July 2013, a Subway “sandwich artist” posted on Instagram what can only be described as “lewd” photos of himself comparing himself against the size of Subway’s sandwich buns. Another co-worker of the same Subway location tweeted pictures of his frozen urine in a water bottle. After one blogger saw the tweets and tipped, again, the Huffington Post, the impending social media frenzy took hold. With no comment from the franchisor before the evening news, the media had one side of the story to tell. The following day, a statement from

Subway’s public relations department disavowed their behavior and announced that the employees involved had been fired.

Customers/Overzealous Fans

Customers occasionally speak out in uncomplimentary ways and voice concerns regarding actions, menu items, sustainability practices—you name it—and the social media attention that follows can cause viral headaches for franchisors. In some of these incidents, customer commentary is actually encouraged by the franchisor by using the franchisor’s social media accounts to encourage customers to tweet, post and otherwise share their experience with their brand. As you can imagine, in some of these instances, the conversation does not go as planned.

From a unique and different angle, it is important to recognize that social media attention can originate with well-intentioned customers who are in fact brand “fans.” Tribute websites are wrought with opportunity for brand confusion and misconstrued messages

A Competitor

Social networks offer a quick, inexpensive method of promoting one’s brand and standing out amongst one’s rivals. Advertising ethics and guidelines get shorter shrift from companies marketing on social media as opposed to through traditional advertising media. Due to the lack of formality and enforcement on social media, competitors are more inclined to “play dirty”. In

2007, Whole Foods’ CEO posted online messages under a pseudonym praising his company (and himself) and panning competitors. The negative firestorm that was unleashed once this became public was far greater than any benefit derived from the posts.

Such incidents can be damaging to a company’s reputation and dictate the success or failure of business decisions or marketing efforts. This makes it crucial for franchisors to anticipate where online attacks may come from, integrate a defensive social media policy into their organizations and plan for damage control.

THE BEST DEFENSE: A GOOD OFFENSE

The heavyweight prizefighting logic of Jack Dempsey, “the best defense is a good offense,” applies appropriately to the social media boxing ring. The time to start preventing social media attacks is long before they occur. With a little pre-planning and forethought, a franchise system can place itself in a prime position to both review and understand the social media conversation, and then to curb and mold it to the desired tone.

Franchisors must have a solid social media policy. Before this current era of videos going viral and opinions trending as hashtags, franchisors generally may have relied on more traditional internal policies on confidentiality, harassment, or internet and e-mail use to prevent online attacks against their brand. However, social media has become unpredictable in terms of what platforms will be available, how these platforms will be used and exactly how big the audience will be. Accordingly, the importance of flexibility in the social media policy cannot be overstated.

Effective social media policies communicate, in plain language, what the franchisor hopes to achieve with the brand’s online presence and what the franchisor aims to avoid. The terms of the policy should be specific enough to give clear guidance while leaving wiggle room for new developments in the law and technology. Given the various angles that franchise systems can come under attack, franchisors need to consider drafting and addressing social media usage by employees (and franchisee’s employees) and franchisees. Each social media drafting scenario comes with its own considerations.

Social Media Policies for Employees

The bulk of social media blunders that have had lasting notoriety have been caused by employees misbehaving. Unfortunately, employees – even those with the most nefarious intentions – are seen as brand ambassadors. Where a video of a customer making a lewd gesture with a Subway product may be singularly ignored, if that person is wearing a Subway uniform, the video will doubtlessly go viral. Franchisors need a comprehensive social media policy to govern franchisee and franchisor employees’ online activity even if it is off duty or from their personal accounts. Franchisors should provide their franchisees with a form of social media policy and require that each of their franchisees also adopt and enforce a policy that is no less stringent with respect to its employees.

To form a part of the employment relationship, social media policies must be brought to the attention of, and acknowledged by employees at the outset of the employment relationship.

Covenants that prohibit disparaging remarks after termination must also be introduced and acknowledged by the employee at the beginning of the employment relationship. Otherwise, the non-disparagement covenant must be included in a separation agreement for which new consideration must be given by the employer.

When defining restricted content in the policy, mere negative comments expressing dissatisfaction with an employee’s work environment should not be the subject of social media policies. Rather, social media policies should be written to prohibit the sort of behavior that constitutes harassment, bullying, discrimination, and retaliation, and should prohibit public dissemination of material non-public information or material that is truly considered confidential or proprietary. Franchisors must be mindful to specifically restrict publications that are not obviously damaging. Consider the hypothetical scenario where an employee takes an Instagram photo of themselves at their workplace and lingering in the background of the photo is confidential information that the employee did not even notice. It is a good idea to discourage franchisee employees from taking videos or photos while on-site. Besides the risk of capturing non-public information, there is a stronger association between the employee’s activities on camera and the franchise brand when such activities are seen to be occurring at the workplace.

Imagine another scenario where an employee criticizes a competitor online with the intention to boost morale, make a funny joke or promote their employer’s brand. Not only could this make the franchise look petty or vicious, it may also result in defamation suits or trademark infringement. Social media policies should apply to statements made in good faith or in inadvertence as they can be equally powerful in damaging a franchisor’s brand. Policies should explicitly require employees’ social networking to comply with the law.

Furthermore, policies should elaborate on the elements that make up non-compliance as employees may not even realize it when they are breaching the law. Employees also need to avoid controversial subjects like religion and politics, especially if posting from an account affiliated with the franchise brand. Franchisors should have a separate provision restricting the disclosure of confidential and proprietary information. The provision should contain a clear definition of confidential and proprietary information in plain language. Employees should be instructed to refrain from commenting, disclosing or taking pictures of non-public information.

Finally, including statements about the consequences of promoting the brand image poorly can be an effective deterrence method. Warnings that harming the image of the company could lead to job loss (theirs and others) as well as unit closures may be advisable.

Of course, having the best policy is hardly helpful if nobody knows about it. All employees must be educated about the policy, and clearly understand its restrictions and obligations. Periodic reminders are also warranted, along with ensuring employees are aware of any updates to the policy.

Special Considerations for Employees in The United States and Their Lessons for Canada

In drafting a policy that will be distributed to a franchisor’s own employees and for their franchisees’ employees in the United States, all consideration and diligence should be taken to draft a legally supportable policy that prohibits illegal speech and conduct. In the United States, much has been made of employer policies that curb employee speech to the point that it negates protected “concerted activity” under the National Labor Relations Act (the “NLRA”), which applies to both union and non-union employers. The NLRA broadly prohibits employers from taking adverse action against employees for engaging in “protected concerted activity”, including activities for the “mutual aid or protection” of fellow employees. The National Labor Relations

Board (“NLRB”), which is charged with enforcing the NLRA, has generally taken the position that discussions among employees about supervisors and managers, salary, employer policies, or benefits may constitute protected concerted activity. Social media policies negatively reviewed by the NLRB include rules broadly prohibiting disparagement of the company or its employees on social media, rules that limit or restrict employee use of social media on personal time, and alleged disparate enforcement of facially neutral social media rules. Although these may be seen as considerations for U.S. franchise systems, the underlying premise applies equally to Canadian social media policies: paint with a brush broad enough to prohibit the behavior that should not occur, and narrow enough to allow for appropriate use of free speech.

Another hot-topic in the U.S. pertaining to social media policies involves the intersection of personal privacy considerations and social media accounts of employees. In the state of Ohio, it is currently perfectly legal to require an employee to provide social media passwords as a condition of employment. This practice, however, however, is widely seen as an invasion of employee privacy and legislation is underway to change it. At current count, legislation prohibiting employers from requiring access to employee social media accounts has been introduced or is pending in at least 36 states in the U.S. Ten states–Arkansas, Colorado,

Illinois, Nevada, New Jersey, New Mexico, Oregon, Utah, Vermont and Washington—have enacted legislation so far in 2013. See, e.g., H.R. 537: Social Networking Online Protection Act (in committee – likely not to be enacted); Ohio S.B. 45 (Feb. 20, 2013 to Senate Committee on Commerce and Labor). With this legislative climate, a franchisor would be ill advised to try to enforce such a requirement in a system’s social media policy.

Social Media Policies for Franchisees

Franchisors should consider social media policies as a supplement to the franchise agreement.

The policies a franchisor chooses to impose in its own franchisees can be a matter of contract and included within the franchise agreement at the time the franchise is entered into, or incorporated into the system manual. Franchisees are not considered to be employees of franchisors, which is a double-edged sword in this context. While franchisees can be defaulted and ultimately terminated for conduct that is harmful to the brand’s image, they cannot be immediately fired. As a result, it is important to have a clear brand image protection clause, mentioning social media, within the franchise agreement’s termination provisions. Exercising this clause in good faith, and not defaulting a franchisee merely for speaking out regarding negative aspects of the system, will be the goal in its enforcement.

The same considerations go into drafting social media policies for franchise agreements as they do for employees, especially covenants on compliance with the law, controversial topics and confidentiality. However, unlike employees, the franchisor may want to encourage or even require franchisees to participate in the brand’s social networking strategy. Should franchisees have Facebook and Twitter accounts for their own locations where they can communicate local promotions and information unique to a specific store? Or should a franchise’s head office operate one, uniform account that represents all locations and stores? The answer will depend on a franchise’s business model, the uniqueness of each regional market and whether there is a risk of inconsistent branding.

If franchisees are authorized to operate their own individual social media accounts, the franchise agreement or system manual should make it clear that the account, username and content are owned by the franchisor. The franchisor should have the right to cause any online information to be changed or be removed. It is a good safeguard for the franchise agreement to ask franchisees to provide a disclaimer on their personal and corporate social media accounts stating that the views and content of the franchisee’s site are those of the franchisee and do not necessarily reflect those of the franchisor. Mandating prior approval from the franchisor for certain types of online content or participation in a particular social media platform may also be included in the franchise agreement or system manual.

The nature of social media posts (e.g., Twitter posts) can make it difficult for the standard preapproval requirements in a typical franchise agreement to apply. Submitting every Tweet or post to the franchisor for pre-approval could be unduly burdensome to the franchisor, cause delay and undermine some of the primary benefits of social media initiatives. Accordingly, consider creating and including in the social media policy a framework within which franchisees undertake certain initiatives which can be fast-tracked through the approval system, or limited exemptions from the approval requirements.

The franchise agreement or system manual must also offer procedures on how social media attacks will be addressed and who will address them. It makes the most sense for a franchisor to retort to competitors as competitors usually go after the franchise brand. With respect to employee attacks, the delegation depends on whether the franchisee or franchisor is privy to the employment relationship, but if it becomes a branding issue, it will likely warrant a public statement from the franchisor’s upper management. As for consumer attacks, consider these questions when deciding on a procedure: Are franchisees well equipped to respond to customer comments about their individual locations? What about customer comments about the entire franchise brand? Do customers expect your brand to connect with the local community in a timely manner? It is prudent policy to delegate to the franchisees the responsibility of addressing day-to-day complaints that are specific to certain franchise locations, while franchisors address issues that affects the entire brand or issues that require legal action. On the other hand, a franchisor may want to be the only point of contact for customers if franchisees do not have a separate social media account or if the franchisor wants to use customer complaints as a quality control tool.

Preparation

A good preventative strategy takes more than legal solutions. Knowing that no brand is naturally immune — not even those with a sound social media policy — from social web scrutiny, scorn from the media and visual sabotage from angry customers or disgruntled employees, the need for preparation seems self-evident. There are three practical steps that any franchise can take to get itself ready:

  1. Get a Home-Court Advantage: The best preparation is to establish social platforms on which franchisors can create their own communities. These communities should include people who are influential either in impacting public perception (journalists or regulators) or in reaching customers through their own channels. Having an independent voice on social media can teach franchisors (before they actually need it) the most effective means of interacting with the social web and the appropriate tone to use when communicating with their online audience. From a crises-control perspective, Facebook and Twitter are the most important platforms in which to have a meaningful presence.
  2. Keep Watching: Any company that faces the public should monitor mentions of its brand or its products or services on social media. At a minimum, this requires using something like Google Alerts. For a more thorough sweep of the web, franchisors should consider services like Topsy.com, Social Mention and HootSuite that offer a higher level of sophistication in monitoring online branding. Franchisors can find their best shield by establishing a formal keyword-based monitoring and reporting program using such paid programs as Sysomos, Trackur or Radian6.
  3. Be Prepared: Franchisors should have a protocol that facilitates rapid assessment of their need to respond to a social web outburst related to their brand. This protocol should describe the intensity and speed of their response based on:
  • The source of the attack;
  • Its strength of “influence”;
  • The likelihood of it “going viral” or mainstream media pickup;
  • Your internal capacity to respond and maintain interaction if the problem should spread.

WHEN DISASTER HITS

Despite the best preventative measures, social media crises can hit at the most unexpected times, arising from the most unexpected things. Who could have foreseen that a Burger King employee would post a video of himself bathing in the restaurant’s kitchen sink? Or that one’s advertisement for kettles would be accused of resembling Adolf Hitler, as was the case for JC Penney? In the social media boxing ring, sometimes franchisors get knocked down. How franchisors swing back depends on a variety of factors.

Get Lawyers or Get Followers?

The first reaction of a victim of a social media attack may be to take legal action, most commonly in the form of a cease and desist letter or defamation lawsuits in some cases, to heal their wounds. Be warned—sometimes, legal action can be more damage than damage control. In Canada, Labatt found this out when it took legal action to have the Montreal Gazette newspaper remove a photograph of a serial killer holding a bottle of its iconic beer brand, Labatt Blue. A prominent journalist heard about Labatt’s actions from a colleague at the Gazette and launched a Twitter firestorm making fun of Labatt, that took more than a week to settle down. In that time, the picture was circulated far more frequently and widely than had Labatt taken no action at all.

The source of the attack is an important factor in determining whether the legal route is appropriate. Oftentimes, suing or threatening to sue a customer or member of the general public can project an image of being harsh and unaccountable. It is easy to invite more backlash and even unwanted media scrutiny. Once a cease and desist letter is sent to the attacker, there is no guarantee that they will not return to social media to share and mock the letter. Just recently, Ferrero, maker of Nutella, attracted negative attention after a consumer published a letter from Ferrero’s legal counsel on her blog. The letter demanded her to cease and desist using her Nutella-dedicated blog to promote a self-invented holiday, “World Nutella Day.”  Ferrero’s strategy took the brand steps backwards, not forward. Social media uproar ensued as World Nutella Day Facebook fans and Twitter followers (the blogger had 40,000 and 6,500, respectively) criticized the brand for being ungrateful. Despite all the hassle, World Nutella Day still lives on (it is February 5th, if you were curious).

The challenging logistics of taking legal action against a consumer may also outweigh its benefits. The true identities of the individuals behind social media accounts are not readily available and jurisdictional issues may arise. If a legal action is brought, franchisors should bear in mind that proving defamation requires them to show that their reputation was harmed and that the statements were untrue. The latter element may require a franchisor to reveal more than they would otherwise want. Legal responses to a consumer’s social media attack may only be sensible when the statements are commonly viewed as excessively egregious or defamatory. Under other conditions, it may be more discrete and effective to answer to incidents on a franchisor’s own social media platform, a strategy used by many organizations. For common customer dissatisfaction, many organizations have staffs that acknowledge these online grievances with a public message that says “Hello, we are sorry to hear about your experience at ABC Co. Send us a private message so we can make your day better!” This shows dedication to customer service in a public way, which can nip an online rampage in the bud. Other times, organizations use humour, promotions or issue serious statements by upper management to sway public opinion or even, Twitter “followers”, in their favour. If none of these options seem to be the right fit, as the proverbial saying goes, silence may be golden.

Defending against attacks from a competitor, employee or franchisee does not always require the same delicate approach. There may be a better chance of recovering your legal costs when claiming damages from a competitor or franchisee. More importantly, the PR risks are not as great. In 2008, Subway sued Quiznos for holding a social media contest that asked consumers to submit videos depicting Quiznos as superior to Subway. The two rivals settled out of court and the story never gained momentum in the media. Mind you—Subway’s lawsuit may not have been as discrete if Quiznos were a small start-up or a local mom-and-pop’s. It is also more acceptable to put out social media fires started by franchisees or competitors with legal solutions. Franchisors have a reasonable expectation that their franchisees will protect their brand under the franchise agreement.

Legal actions against current or former employees often walk a fine line between effective damage control and unnecessary overreaction. The public perceives employees as more vulnerable and relatable than a corporate franchisor, so a legal strategy works best when employees use social media to threaten the brand’s reputation in health and safety or to disseminate confidential or proprietary information. In these situations, the public is likely to be more sympathetic to a franchisor’s cause. Cease and desist letters should outline exactly what the employee has done to merit such legal action, rather than use a generic statement that allows the employee opportunities to publish the letter on social media, and distort or hide the facts. Though a franchisor’s legal costs will most likely outweigh any damages awarded in such a lawsuit, it may act as an effective warning to other employees and prevent future disasters.

Responding to a Social Media Incident

The social web changes the game not only with respect to whether a franchise might suffer an assault — justified or not — but also how communication is managed during the crisis that results. A franchisor should recognize that the public will most likely hold a presumption of guilt against them, and social web denizens will expect franchisors to be empathetic even where they were not at fault. Where there has been harm, franchisors will have to address calls for restitution. Overarchingly, franchisors will need to develop an aptitude for managing chaos internally, and a willingness to listen and interact externally. Essentially, there are nine elements to a successful social web crisis response.

  1. Do not overreact — the social web is filled with isolated nastiness. You must first analyze the reach and influence of the troublemakers or complainants.
  2. Accept that you will have to say something faster than you would like. The ideal time frame is within 30 minutes to an hour, at most, after evidence that the social web has taken hold of an issue.
  3. Respond first on the franchise’s official platforms — including the franchisor’s website. While the offending social media incident will doubtlessly be on another platform, most people, including journalists, will go there for information, news and evidence. On your own platform you are speaking to an audience who knows and is connected to you and likely supports the franchise’s product and brand. These platforms should become the social ‘hub’ for your franchise’s messages and information.
  4. Extend a response to the platform where the matter was first exposed — likely Twitter, Facebook or YouTube. Continue to release information and messages on the specific platform in which the discussion is taking place. Eventually direct people back to the franchise’s message ‘hub’ so that the public is being provided with appropriate context.
  5. Clearly define your point of view on the issue or incident and provide helpful advice. Commit to fixing any problem and repairing any damage if it is within the organization’s control and promise to review internal processes if appropriate to ensure that the incident or issue will not happen again. Strive to phrase each post in a manner that is not conducive to further replies.
  6. Speak in a “personal” rather than a corporate tone of voice that can best be described as “confident humility.” Ignore the sarcasm and humor of the critics, unless you can give as good as you get.
  7. Use multiple media formats (visuals + video + text) to explain your opinion or spread their messages. These formats facilitate sharing of your point of view and information by supporters or neutrals.
  8. If you want to reach broader audiences with your messages, consider buying promoted tweets or using Facebook “adds” to reach specific target audiences
  9. Use #hashtags related to incident so that your information is there in the forum used to share news (Twitter/Facebook) and can be found when people search for the stream related to the incident or problem.

CONCLUSION

Managing the way social media users view and present your brand has become imperative to franchisors. Controlling your online image is more than relying on legal remedies. The following are ten takeaway tips on averting social media setbacks:

  1. Draft a comprehensive social media policy for your franchisees and recommend that they too adopt a social media policy for their employees in order to increase awareness on the hazards that derive from their online activity. Present your policy to the employee immediately as the employment term begins;
  2. Incorporate a social media policy for franchisees into the franchise agreement and operations manual that covers what, where, how and when a franchisee can use a separate, individual account for their own franchise location. The policy should delegate responsibilities in responding to social media complaints or attacks;
  3. Establish a solid voice and presence in social media using your own platforms and forums, including a company website, to prepare for a speedy response if your brand ever falls victim to an attack. Use these social networking accounts to connect and respond to customer comments as much as possible;
  4. Monitor the social web using appropriate software that provides you with a heads-up on commentaries that could possibly turn into a reputational hazard;
  5. How you approach damage control greatly depends on whether the culprit is a customer, competitor, employee or franchisee. Be flexible; your preventative and defensive strategies cannot be the same for all categories of critics;
  6. Weigh the pros and cons of pursuing legal action before the jump. In particular, consider how your brand will be portrayed once you take legal action.
  7. If you do send a cease and desist letter, always assume that it will be made public online. Be careful of your language and your tone. Be specific when outlining the reason behind the cease and desist letter;
  8. Incidents that have serious and likely potential to damage your brand require more than legal action, for example, they may require public statements from your upper management;
  9. Be the first to respond to criticisms and continuously make statements on the social web so that you have control over the message that the public hears. Keep directing the audience back to your social “hub”;
  10. When implementing business decisions or releasing corporate messages, consider possible social media reactions and prepare for them. Franchisors hope for the best but these tips will prepare them for the worst. By increasing awareness, implementing a plan, and understanding the ups and downs of social networking, franchisors give their brands ammunition to combat the fickle audience of social media.