Candice Lee talks about McDonald’s, Yum Meat Scandal

Candice Lee, the lead attorney of Palmieri Tyler's Franchising, Distribution and Licensing practice group, was quoted by Law360 regarding the Chinese franchises of McDonald's Corp. and Yum Brands Inc. caught in a food safety scandal for the second time in two years.  Regulators shut down their meat supplier for allegedly repackaging expired food — an incident that highlights the oversight pitfalls that international franchisers can face overseas.

“It certainly showcases some of the problems a franchiser can encounter when they expand overseas, namely in the area of brand or quality control,” said Lee, the head of the firm’s franchising practice.

Even when the root of the food scandal is a supplier that has no other direct connection to the restaurant company, it's the restaurant company that takes some of the hardest hits.

“It's just an indication that even being one of the largest franchise systems ... and certainly with corporate oversight, they're not immune to quality control issues,” Lee said.

But even when there are all those checks in place, having a supplier 14 hours away and in a different time zone, there are practical and logistical barriers that in and of themselves create oversight hurdles, according to Lee.

She also noted that there should also be extensive due diligence for any supplier that is approved to work with a franchisee and to make sure that they have a solid reputation and history in the area.

Key to surviving these kinds of scandals — which, in some ways, are part of the growing pains of an international empire in developing markets — is to be able to show that there were serious attempts at oversight being made, that the company is willing to step up to further tighten controls and that there are contingency plans.

While the food scandal is likely to cause some short-term pain for the companies, it shouldn't send a chill in the industry, Lee predicts.

“I think there's always going to be interest in Western concepts expanding overseas, and as long as there are opportunities, I still think U.S. concepts will go abroad,” she said. “I think they may vet and do more due diligence and regularly have more quality control inspections, but I don't think it will [chill the market].”

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