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Legal implications for rolling out
food trucks
By Chad Finkelstein
November 30, 2011
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This year's Food Truck Eats event in Mississauga featured seven vendors from the across the province. Photo by Steven Chester.
It would be an understatement to describe the roll-out of food trucks into Canadian streets as a mere trend. This concept has established itself and appears poised for significant development and innovation. If your restaurant has or is about to take the plunge into food trucks to deliver your services to customers across a wider geographic spectrum, you definitely need to be aware of a number of legal issues which may impact on your operation.
First, there may be a requirement to obtain special parking permits or storage space for your vehicle. Different municipalities will have varying rules with respect to the placement of food trucks on certain streets, so you should be aware of this additional cost. Similarly, you should make sure that food service and alcoholic beverage rules, regulations and by-laws are followed, just as they are required to be for any stationary restaurant.
Franchising considerations
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If your franchise is considering joining the movement of introducing food trucks as a novel means of reaching new customers, there are a number of issues of which you should be aware which relate to franchising, in particular.
You may need to revisit your fee structure and determine whether a lower royalty than that which is charged to your traditional franchisees may be appropriate. After all, food trucks require less supervision, overhead and training than a conventional restaurant does, so a reduced royalty rate may be fair for your franchisee.
Advertising and social media
The advertising standards and requirements which are imposed on franchisees may not be as applicable to truck-operating franchisees, as this particular model |
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may necessitate authorizing the franchisee to engage in social media advertising. Due to the mobile nature of food trucks, the quick and timed posting via Twitter or Facebook of which location the truck is headed next may mean more flexibility should be exercised at the franchisor level to approve of advertising activities. In this case, you should make sure that you have a thorough and comprehensive social media policy as between the franchisor and the franchisee to ensure that any such advertising is conducted in a manner that is consistent with brand standards. Bear in mind that it may be difficult to implement a social media strategy whereby only certain franchisees are authorized to utilize it without alienating those conventional franchisees who are not permitted the same rights.
Significant attention should be devoted to determining how to handle the territory which you will grant to your food truck franchisee. Many franchise systems grant exclusive or protected territories to their franchisees, which typically provide that the franchisor will not open another franchise of the same brand within a franchisee’s territory or permit the delivery of goods and services by another franchisee into that territory. If your franchise system has a practice of providing franchisees with exclusive and protected territories within which you will not open any other restaurants of the same brand, the ever-changing location of food trucks will need to be negotiated carefully to make sure that you are not encroaching on the existing franchisees’ rights which are protected under the franchise agreement.
And, from a strictly legal perspective, you will need to consider whether you need a new franchise agreement for the food truck concept, or whether augmenting your standard form will suffice. In the provinces of Ontario, PEI, Alberta and New Brunswick (and, soon, Manitoba), franchisors are required by law to provide prospective franchisees with a franchise disclosure document to assist them in making informed investment decisions. The addition of a food truck to your franchise system will also lead to required changes to your disclosure document to disclose the different costs and fees associated with the operation of the truck.
See also:
About the author
Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto and can be reached at cfinkelstein@dalelessmann.com or (416) 369-7883.
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