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Re-Opening New York Franchised Businesses

        COVID-19 impacted New York more than anywhere else in the world, spreading rapidly, especially through New York City, resulting in approximately 30,000 deaths statewide. Because of the overwhelming impact in the state, Governor Andrew Cuomo implemented some of the country’s strictest lockdown orders for his state’s economy (known as the PAUSE orders) in an effort to minimize the spread of the virus. Businesses of all industries, size, and net worth have been affected by the PAUSE orders, some of which had to permanently close operations due to the economic downturn. New York is in the process of reopening according to a schedule of “Phases.”  The Phases prioritize the opening of those businesses and industries that pose the least amount of risk for infection to employees and customers. Another factor is population. Less populated regions of New York will reopen more quickly than others that are more heavily populated, like New York City. New York’s varied schedule of Phases could affect franchised business operations in a unique way.

        For the businesses that are awaiting to open their doors to the public again, or those that have already begun, certain precautions have been implemented in order to avoid a spike in the number of cases from people congregating in public places again. Governor Cuomo has expressed that he is not opposed to reversing the reopening schedule and reverting to another economic shutdown, so it is imperative that businesses follow necessary protocol in order to remain open. New York’s scattered reopening schedule and the precautionary rules and guidelines may have a particular impact on franchised businesses. Of course, a staple attribute of a franchise is uniformity. Uniformity allows for consumers to become familiar with a certain quality, product and/or service that a franchised business offers. New York’s Phases may affect certain aspects of a franchise that are typically uniform or customary to the business. For example, while one franchisee of a restaurant business in an area that is in Phase Two is permitted to provide outdoor dining, another franchisee of the same business, in an area that is still in Phase One, cannot provide outdoor dining services. Consumers with accessibility to both of these restaurants cannot experience the same services at each location in a way they would normally expect to have. Other business operations that may vary include: revised hours of operation (i.e. restricted hours as opposed to being open 24 hours per day), restricted numbers of employees allowed on the premises, and restricted numbers of customers allowed on the premises.

        Phase Three will allow franchised businesses a bit more liberty to regain control of their uniformed franchised systems because more industries will be permitted to reopen with less operational restrictions. However, franchisees should still be cautious and make sure that they are following whatever rules and restrictions may apply to them. Failure to do so could not only expose the franchisee to local and state government violations, but it could also put the franchisee in breach of its franchise agreement because most agreements require franchisees to abide by all governing law and authority with jurisdiction over the franchisee.

        COVID-19 has undoubtedly taken its toll on the world’s economy as a whole, but the state of New York was affected in a particularly burdensome and overwhelming way. Following the reopening schedule of Phases will come with its own new set of obstacles, and perhaps a unique set of obstacles for franchised businesses. Staying up to date with the progression of Phases (and any changes to what constitutes such Phase) will assure a franchised business is aware of how and when it can open its full operations in its usual and familiar way.

To read more about reopening New York, click here.

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