DR: How do you approach disclosure? What are your most frequently litigated disclosure items and conflicts you handle with franchisees?
CKL: We do not currently have any disclosure-related litigation. In the past, the company had issued the disclosure document to prospective franchisees and then entered into a development agreement, using a single franchise agreement for all of the future growth.
Going forward, we will be signing a separate franchise agreement for each new location. While this will create more work in the short term, it will also allow us to more effectively and efficiently transfer and manage individual units and will ensure that the most current form of agreement is in effect.
DR: How do you approach and handle disputes with franchisees?
CKL: We understand our franchisees' challenges because we operate so many company stores of our own. Many of the franchisees have been part of our system a long time and are a great source of ideas and inspiration. Our franchisees are very dedicated to the system, and we meet with them regularly through various committee memberships.
For example, we have quarterly business council and food committee meetings that provide a great forum to share ideas and opinions. We also meet with all of our franchisees (domestic and international) annually at our International Swimsuit Pageant.
That said, when issues do arise, we work with our franchisees to find a solution. On the rare occasion when we cannot reach a mutually agreeable outcome, we seek a resolution according to the terms of the franchise agreement. In many cases where a franchise is in need of new management, we are able to save the restaurants and the employees' jobs by turning over the store to an existing franchisee or by converting the location to a company store.
DR: What are your biggest headaches?
CKL: The source of many of my frustrations is the government, which sometimes puts unnecessary impediments in the way of small businesses like ours. By way of illustration, we are trying to figure out how we will work with the new health care laws and the myriad of related regulations. Obviously, we are not alone in this struggle, and we are learning from both our peers and outside professionals. The current health care system is far from perfect, but it is workable and largely predictable. There are so many unknowns with the new laws. Figuring out how to best implement them into our system will be a major challenge.
DR: How do you handle sexual harassment charges?
CKL: When I started at Hooters, I was pleased to learn just how few sexual harassment issues we have in our system. I believe that is because we are very pro-active in our approach through training and management and because we have a strict zero-tolerance policy. We conduct a great deal of training around this issue and provide many avenues for our Hooters Girls (and other employees) to voice any concerns. The safety and well-being of our employees is of the utmost concern, and we immediately investigate and take appropriate action when an issue is brought to our attention.
I was also pleased to discover that our Hooters Girls have great command of their jobs. Their confidence and poise deters many instances of potential harassment from ever occurring. If, however, customers or fellow employees do attempt to harass our Hooters Girls, we immediately take action, even if it means banning certain customers from the premises or terminating the employment of the offenders.
DR: What supplier issues do you typically deal with?
CKL: Like any franchise system, we strive for uniformity in the system with top-quality ingredients for our food and beverage offerings. Our main issue lately has been the supply and pricing of chicken wings. Due to many external economic pressures, the price of bone-in chicken wings has more than doubled.
Like many restaurants, we are sensitive to the problems caused by the sluggish economy and continually work with our suppliers to keep costs as low as possible so that we can keep our menu items fairly priced.
Of course, Hooters is well known for its signature (and delicious!) chicken wings; however, we also offer a broad menu of reasonably priced items such as burgers, seafood and salads that keep our customers fed at a fair price and coming back often for more great food and a fun environment.
DR: What kind of background checks do you do with employees?
CKL: We conduct criminal background checks for all management-level employees and anyone working in the corporate headquarters. I am a strong proponent of this policy and believe it contributes to a more trusted employee base, reduced turnover rates and more effective and efficient company operations.
DR: What firms provide outside counsel for Hooters?
CKL: We have franchise counsel for disclosure issues, liquor counsel for licensing issues, employment counsel for employment concerns and best practices, trademark counsel to protect our marks domestically and abroad, and litigation counsel for standard business matters.
Among the firms are: DLA Piper for franchise work; Jackson Lewis for employment matters; Elarbee, Thompson, Sapp & Wilson for employment matters; Parker, Hudson, Rainer & Dobbs for general litigation; Hill, Kertcsher & Wharton for trademark and Rutherford & Christie for personal injury.
DR: What are your biggest labor and employment issues?
CKL: Historically, our biggest labor and employment issues have been wage and hour matters, which, by their nature, involve a very complex set of rules. We always followed the laws as a company but reinforcing best practices with the field is an ongoing challenge. Since the new corporate leadership came onboard in 2011, we have greatly improved our controls and revised our policies for a consistent in-store approach.
DR: What is your best practice in negotiating real estate deals?
CKL: My department does not get involved in real estate and site-selection matters, although we occasionally work on leases and lease renewals. If there is an uncertain location or one that has had operational challenges from a prior franchisee, we often offer a straight percentage rent so that the risks are evenly divided between us and the landlord.
DR: Are the international challenges different from your domestic ones?
CKL: Our international store development is expanding rapidly. We recently signed a new development agreement for Japan and are finalizing agreements in China, the Philippines and elsewhere. We do very well internationally because Hooters is such an iconic American brand. We attract tourists, traveling Americans and the locals.
Certain markets have different tax laws and other rules affecting franchising, so I rely on the expertise of outside counsel for those issues. The main challenge for our international locations is sourcing of products. While they can source food and beverage ingredients locally, the apparel and souvenirs that are sold in stores generally need to be sourced from the U.S., and shipping of these items is expensive.
DR: As a woman, do you have any political correctness issues working for Hooters?
CKL: Professionally, I have not experienced any political correctness issues since I started working at Hooters. I find that my legal colleagues understand and appreciate the interesting legal work associated with this business. More often than not they remind me how lucky I am to have such an exciting and fun company for which to work.
In social settings, I do on occasion get a raised eyebrow or two when I mention that I am general counsel for Hooters. This is almost exclusively from people who have never visited our restaurants. Once I have the opportunity to explain what Hooters is really about, I tend to win them over from their initial perceptions.
