Franchisors looking to meet or exceed their franchise development and operational goals for 2019 must anticipate and overcome a variety of economic and market-based challenges. They also must anticipate and manage several key legal issues that otherwise could disrupt those goals for 2019 and beyond. The following is not an exhaustive list but certainly one that will impact nearly every franchisor.
Data Privacy Laws
The year 2018 marked the implementation of more stringent data privacy regulation in the European Union--the General Data Protection Regulation (GDPR). While franchisors with operations in Europe pursued development of GDPR compliant data privacy plans, most franchisors without such operations rightly or wrongly paid minimal attention to European data privacy regulation. That will change with the enactment of sweeping and historic data privacy legislation in California. This new legislation--the California Consumer Privacy Act (CCPA)--draws on many of the same consumer data protection principles as the European Union&'s GDPR. Those principles include the right of an individual to understand what personal information is collected by a business and how it is used, the right to opt-out of having that information sold, and the right to require a business to delete all personal information of that individual. Unlike the GDPR, California&'s law provides plaintiffs in litigation-friendly California easier access to the courts to remedy violations.
The law is scheduled to take effect on Jan. 1, 2020. With certain exceptions, franchisors that directly or through their franchisees collect personal information of California residents must comply with the CCPA. The California legislature quickly passed the original version of the CCPA under threat of a public ballot initiative. Despite the need for obvious corrections to the CCPA, California officials have not suggested such action. For example, will courts combine the revenue of an entire franchise system in determining whether a franchisor meets the small business exemption?