Franchise Update Magazine Issue II, 2011 | Page 36

Grow Market Lead

Legal
perspective
q&A WITH
KEITH KLEIN
By Kerry Pipes

Reputation Management
Protecting your brand online

O

nline marketing,social media,
and social commerce have
created an environment
that places an increased
burden on franchise marketing departments. The task of effectively managing
a brand’s image is now so daunting that
it has spawned an entirely and relatively
new sub-industry called reputation management. We asked franchise attorney
Keith Klein to provide some advice.
Klein is a partner at Bryan Cave LLP
and is certified by the California Board
of Legal Specialization as a specialist in
franchise and distribution law.

Reputation management is Internet terminology for online brand management.
It evolved as a result of the increasingly
pervasive nature of consumer reviews
about products and services through
social media and customer review sites.
Since its beginnings as a grassroots forum
for consumer feedback, it has become
a powerful commercial convergence
of branding, marketing, and customer
service. Developing a reputation management strategy is increasingly critical.

beliefs, findings, or experiences of a party
other than the sponsoring advertiser.” Because virtually every form of social media
may fall within this definition (whether
by affirmative statements or omissions)
reputation management strategies must
ensure compliance.
A failure to comply with these FTC
guidelines can result in significant fines
and other consequences. A good example
is the FTC’s March 15th announcement
that it had reached a $250,000 settlement of an enforcement action against
Legacy Learning Systems. The FTC
alleged that Legacy had failed to monitor members of its affiliate marketing
program who endorsed its “Learn and
Master Guitar” DVD program on their
websites and blogs but did not disclose
their financial connection to Legacy.
Affiliate marketing programs are not
franchise systems, but they share some
similarities. They work by generating
endorsements of products through reviews in blog postings, website articles,
and other online materials. Affiliate
networks, such as Legacy’s, run into
trouble when the financial connection
between the endorser and the seller is
not adequately disclosed to consumers.

Are there general legal guideposts
for franchise systems implementing
a social media strategy?

Are there specific examples of legal
actions from a franchisor’s reputation management efforts?

Yes. The most widely discussed include
the “Guidelines Concerning the Use of
Endorsements and Testimonials in Advertising” promulgated in December
2009 by the FTC. The guidelines focus
on the use of “endorsements,” which, in
turn, are broadly defined to include “any
advertising message… that consumers
are likely to believe reflects the opinions,

The FTC has become increasingly vigilant
in the enforcement of marketing online
as evidenced by the Legacy Learning Systems enforcement action, and franchise
systems are certainly within the FTC’s
field of vision. For example, when the
FTC promulgated the Children’s Online Privacy Protection Act, it pursued an
enforcement action against Mrs. Fields

Define “reputation management”
and its relevance to franchising.

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Franchiseupdate Iss u e II, 2 0 1 1

Famous Brands, Inc., with respect to
its pursuit of an online marketing strategy. Mrs. Fields entered into a Consent
Decree in which it was required to pay
$100,000, to provide a copy of the order
to all agents and representatives for a
five-year period, and to submit compliance statements to the FTC.
The FTC’s enforcement action against
Mrs. Fields can provide guidance to
franchise systems today as they develop
and implement strategies for reputation
management. Specifically, franchise systems should make sure the franchisor’s
employees and agents understand the
FTC guidelines. Similar efforts may
need to be made for franchisees.
Identify two key do’s and don’ts for
reputation management.

There is much to do so