Are Franchisees Subject to a Duty of Confidentiality?
As a franchisee, what are you allowed to say outside of the confines of your franchise? Can you post about a negative experience or tell a new franchise candidate what you think about your franchise? Are you subject to a duty of confidentiality? A knowledgeable franchise litigation attorney explains
Yes, Franchisees are Subject to a Duty of ConfidentialityFranchise agreements subject franchisees to a duty of confidentiality. This is universal among well-established franchise systems; and, to be fair, it makes sense to a certain extent. As a franchisee, you are paying for the right to gain access to the franchisor's proprietary systems and methodologies, and these systems and methodologies derive their value from not being known to the general public.
However, as tends to be the case with franchise agreements, the "standard" confidentiality provisions in franchise agreements usually go too far. These provisions are written by franchisor attorneys for franchisors, and they are designed to be as protective as possible. This means that they are broader than they need to be; and, as a result, they often create unnecessary confusion when they have not been negotiated.
So, what can you say, and to whom? The simple answer is that you need to look at the confidentiality provision in your particular franchise agreement. Generally speaking, however, it will be permissible for franchisees to:
- Discuss non-proprietary information with franchise candidates (i.e. What is it like to own a franchise? Are you planning to renew?).
- Discuss information that is already public (i.e. What menu items do you offer? Where do you advertise?).
- Provide information to your attorney and in court filings (a confidentiality clause cannot prevent you from seeking legal advice or asserting your legal rights).
On the other hand, franchisors will often seek to prohibit franchisees from discussing information such as:
- The contents of the Operations Manual.
- Future product launches or marketing initiatives.
- Customer and supplier lists.
- Financial performance information.
- Negotiated terms of franchise agreements.
If you are seeking to discuss any of these types of information, it will be in your best interests to have your franchise agreement reviewed by an attorney who can help determine if you could be exposing yourself to potential litigation.
Confidentiality vs. Non-Solicitation vs. Non-CompetitionAlthough confidentiality, non-solicitation and non-competition clauses often get lumped together, these are three very different provisions with very different effects and implications. While a confidentiality clause prevents you from discussing non-public information, a non-solicitation clause prevents you from contacting your former customers (even to discuss information that is not subject to confidentiality) after your franchise agreement expires. A non-competition clause prevents you from operating a competing business (however your franchise agreement defines "competing"), once again regardless of whether you rely on the franchisor's confidential information.
Contact a Franchise Litigation Attorney TodayIf you have questions about your duty of confidentiality as a franchisee and would like to speak with an attorney, we invite you to contact us for a free, no-obligation consultation. To speak with a national franchise attorney who has more than 30 years of experience, please call (202) 293-3947 today.