Food & Beverages, Retail and Franchising

In a nutshell

Food and beverages, retail, and franchising law are three overlapping practice areas, which center on the trade of products and services. They encompass the sale of goods and services to consumers, as well as business-to-business (B2B) matters. Attorneys who specialize in these fields must take a holistic approach to their work, as they deal with a wide range of issues; matters can encompass real estate leases, franchise documentation, M&A deals, antitrust compliance and IP regulations. There is a contentious side to these practices, where the work is similarly varied: false advertising class actions, GMO (genetically modified organism) labeling claims and data breach investigations are covered alongside other issues. Practitioners act for an unsurprisingly broad list of clients, including multinational food distributors, international fashion houses, shopping centers and trade associations.

The global flow of products and services, facilitated by the rise of e-commerce, means that lawyers typically have expertise in both international and domestic regulations. The latter are issued by the likes of the Food and Drug Administration (FDA), The United States Department of Agriculture (USDA), the Drug Enforcement Administration (DEA), the Department of Justice (DOJ), and the Federal Trade Commission (FTC).

What lawyers do

Food & Beverages/Retail (contentious)

  • Receive instructions from a client who has been accused of false advertising.
  • File for a motion to dismiss.
  • If it's a class action, conduct 'class' discovery. This involves working with experts to try to defeat class action certification. Attorneys will depose the experts before filing and defending their reports.
  • If class certification is granted (or if the case was never a class action in the first place) attorneys carry out 'merits' discovery. They obtain all the relevant documents and conduct depositions about liability and damages.
  • Apply for summary judgment. If summary judgment is denied, the case goes to trial. Attorneys determine the evidence and depositions to use, produce the exhibit list, and decide on what sort of discovery or motions to advocate.
  • Go to trial. Handle post-trial steps.
  • Attorneys for the plaintiff conduct due diligence before filing a complaint, oppose motions to dismiss, defend class action certification and oppose summary judgment.

Franchising (transactional)

  • Receive instructions from a franchisor who would like to establish a franchise agreement with a franchisee.
  • Draft a franchise disclosure document (FDD) and send it to the franchisee to review.
  • Negotiate any revisions to the disclosure document in consultation with the client.
  • Apply to have the FDD filed by a state agency if required under state law.
  • Draft the franchise contract and ensure that it is signed by both parties.

Realities of the job

  • Miriam Guggenheim, co-chair of Covington & Burling’s food, drug & device practice group says: “The issues in the food and beverages industry are quite broad. There is nutrition and public health policy; engaging with congress and the FDA; considering what consumer advocacy groups and NGOs think about a particular issue; helping companies think through acquisitions and about the value of the brand; giving labeling advice; and preventing consumer fraud litigation.”

“There will be enforcement actions and recalls where you need to drop everything and help a client make a decision and interact with regulatory agencies.”

  • Martin Hahn, a food and beverages partner at Hogan Lovells, asserts: “The typical day is unpredictable. There will be countless calls and people that will stop by your office. There will be enforcement actions and recalls where you need to drop everything and help a client make a decision and interact with regulatory agencies.” He jokes: “I never accomplish what I intend to do when I come into the office!”
  • Food and beverages cases are often filed in California with the US District Court for the Northern District of California, which is fondly referred to as the 'Food Court.'
  • Lawyers in this field must maintain a thorough understanding of various acts, especially the Nutrition Labeling and Education Act (1990) and the FDA Food Safety Modernization Act (2011).
  • An interest in science is essential within the food and beverages domain: “You have to be willing to engage with scientific studies and grapple with them,” Guggenheim points out.
  • Guggenheim also emphasizes the importance of time management, especially as a regulatory attorney: “We tend to work on several different matters at a time, compared to litigators or corporate attorneys who might work on one deal for an extended period. I have 14 to 16 client matters on any given day, which is fun but can also be challenging.” However,she also notes that “the hours are still lower compared to typical litigation or corporate practices.”

“You have to be willing to engage with scientific studies and grapple with them.”

  • Deborah Coldwell, a franchising litigator at Haynes and Boone, flags the difference between a litigator's and a corporate attorney's schedule: “50% or more of my colleagues are transactional lawyers. They are very busy at year end, whereas we are not so busy. However, we work really hard when we are going to trial— 24/7 in some instances.”
  • Working with foreign jurisdictions is common for a transactional franchising lawyer. “We do a significant amount of work for US-based clients expanding internationally,” states Stuart Hershman, a franchising partner at DLA Piper. He explains that most overseas jurisdictions do not have governmental franchising agencies: “You have to comply with laws internationally, including franchise-specific laws in an increasing number of countries, but overall (there of course are exceptions) there isn't government interaction and oversight like there is in the US.” In contrast, franchising litigators find that most brawls tend to be domestic in nature. “I have not seen that many cross-border court cases,” Coldwell tells us. “Typically if they are cross-border they end up in arbitration.”
  • Many firms actively seek out candidates with professional work experience. Warren Karp, chair of Greenberg Traurig's global retail practice, notes: “We look for people who have taken a year or two after college to go out into the real world, to do volunteer work or gain business experience. We find that when they come into the firm as a young associate they have a different, beneficial perspective.”

Current issues

Food & Beverages

  • There has been much debate in recent years over what constitutes 'natural' food, with some courts staying lawsuits until the FDA clarifies its definition of the term. One case that hasn't been granted a stay is Claudia Morales et al v. Kraft Foods Group: questions over Kraft's use of artificial colors in its shredded, fat-free cheddar mean that the case will hit the courts soon.

“We're seeing a continued interest by consumers to learn more about their food.”

  • Consumer concern over misleading food labeling and health and safety issues continues. PepsiCo recently found itself the subject of a lawsuit filed on behalf of consumers after traces of the pesticide glyphosate were found in Quaker Oats (a brand owned by PepsiCo, labeled '100% Natural Whole Grain).
  • As a result, transparency is on the rise, as Miriam Guggenheim explains: “We're seeing a continued interest by consumers to learn more about their food. Companies are intending to be more transparent about their products, by stating what the ingredients are and where they come from.” This can, however, create new problems: “They are using more plain English and can come up against regulatory bodies if they aren't consistent with defined terms.”
  • The FDA has announced that food manufacturers will have to introduce a new 'Nutrition Facts' label for their packaged foods by July 2018. Martin Hahn tells us that this has resulted in “a tremendous economic burden on the industry.” He hopes that the new administration will be “more sensitive to industry concerns.”
  • According to Hahn, “litigation continues to be one of the biggest threats to the food industry. People are looking for new and creative ways to bring actions against the industry. It is a tremendous drag on resources and companies' ability to produce high-quality food products.”
  • Like many practice areas, the food and beverages market is becoming increasingly international in its focus. Guggenheim reports: “Foreign companies are interested in entering the US and domestic companies are looking to acquire foreign companies and bring new food products to the country.”
  • There is much uncertainty over how the Trump administration will affect the market. Guggenheim tells us: “I don't think food safety rules will change, as they are tied to legislation issued from congress. Whether there will be less enforcement and fewer inspections remains to be seen.” She adds: “I don't think private litigation will go away; it will continue to grow.” Hahn comments: “I'm optimistic we will continue to see fair trade between the US and its trading partners.”

Retail

  • The popularity of online shopping has inevitably affected the commerce of bricks-and-mortar retailers; retail space in shopping malls has consequently become cheaper.
  • Furthermore, the sector has suffered from the lackluster economy, leading to an increased number of companies filing for bankruptcy.

“There is a move to consumer-centric, omnichannel retailing where the consumer has multiple choices.”

  • The digitalization of the retail market (via increased use of mobile devices and the spread of social media) has given rise to many opportunities for lawyers – particularly in the area of advertising and its associated privacy issues. Attorneys must assess the merits of false advertising claims in relation to the The Federal Trade Commission Act (1914) and consider state statutes, such as the California Consumer Legal Remedies Act (1750). Warren Karp identifies an important trend in this digitalized retail market: “There is a move from multichannel retailing to consumer-centric, omnichannel retailing where the consumer has multiple choices. They can get products from anywhere, delivered directly from a fulfilment center or store.”
  • Intellectual property is an important strand of retail work. Companies often look to protect their designs under trade dress – a constituent of the Lanham Act. In 2012, for example, the fashion designer Christian Louboutin succeeded in protecting his red shoe sole under trade dress in the US.
  • Products are also becoming 'smarter' in line with technological developments. E-textiles are of great interest to apparel manufacturers, who are looking to patent their new technologies.
  • How will Trump affect the retail market? As with other practice areas, our sources predict a decline in enforcement from regulatory bodies. Karp asserts: “For me, from the supply chain side, I see tariffs being imposed and free trade being tightened.”

Franchising

  • The main issue in the franchising market concerns the 'joint employer' model. It has thrown up the following question: which party is responsible for employees? The franchisor (the owner of the franchise) or the franchisee (the company or individual licensed to operate under the franchise)?
  • “Over the last two-plus years there has been an increasing effort by certain administrative agencies in the US to hold franchisors liable for things that happen at the franchisee level,” Stuart Hershman tells us.Consequently, a lot of franchising lawyers are advising on employment dispute resolution matters.
  • In October 2016, the world's biggest franchise, McDonald's,agreed to pay $3.75 million to workers, finally settling a dispute over pay. A District Court in San Francisco had previously ruled that McDonald's could be sued for franchisee level violations as it was a joint employer.
  • Elsewhere, Deborah Coldwell notes that technology poses a challenge to the franchising market. She explains that there are laws for everything “from drone delivery, to online ordering, to website franchise sales,” adding: “Keeping up is going to be a challenge for lawyers and companies because technology moves so quickly.”

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