| Evaluating franchise attorneys and evaluating franchise | | | | capable of making sound, strategic business decisions |
| consultants can seem a daunting task. But the firm a | | | | and providing practical, ongoing advice. Some franchise |
| company selects to assist its entry into franchising, | | | | consultants, on the other hand, have good business |
| refine existing franchise efforts or make franchise | | | | sense, but lack the requisite legal skills. Questions: |
| opportunity investment decisions will have profound | | | | (1) Does the firm have the proper blend of business |
| consequences. While asking for a list of references is | | | | savvy and in-house franchise legal expertise? It's |
| one approach (and when is anyone ever dumb | | | | always a big plus if the franchise attorney also has an |
| enough to provide a bad reference?) there are more | | | | MBA. You can do a Google search with these twin |
| objective criteria that are not dependent on selectively | | | | attributes (franchise attorney MBA) and narrow the |
| disseminated information. | | | | field considerably. |
| By addressing the nine Franchise Questions, topics and | | | | (2) Can the firm produce good legal documentation |
| subcategories of information discussed below, you will | | | | (franchise disclosure documents) and help you edit (or |
| eliminate virtually 95% of the individuals or firms you | | | | create) consistent operational documents (such as the |
| are considering. Then efforts can concentrate on | | | | franchise operations manual, training program, etc.) If |
| evaluating the 5% cream of the crop (especially | | | | your franchise agreement says "x" but your franchise |
| franchise attorneys) that truly merit consideration: | | | | operations manual or advertising materials say "y" |
| A. FRANCHISE EXPERT: | | | | about the same issue, be prepared to pay hefty |
| The #1 factor in evaluating so-called expertise - are | | | | franchise litigation fees and deal with franchise litigation |
| the principals really franchise experts? There are | | | | attorneys in the future. |
| objective criteria to determine this: | | | | (3)Can the firm provide competent and practical |
| (1) Have they qualified and been allowed to testify as a | | | | ongoing advice in critical areas like effective franchise |
| franchise expert in court and arbitration proceedings? | | | | marketing, media decisions, interviewing franchise |
| Being involved as a franchise expert in the franchise | | | | buyers, adopting the best franchise organizational |
| litigation process gives a sensitivity and radar for | | | | structure, implementing a franchise advisory council, |
| detecting and avoiding future franchise problems. | | | | etc? Mistakes made in these areas can easily cost |
| (2) How many books on franchising have been written | | | | the franchise company tens, if not hundreds of |
| by the principals? | | | | thousands of dollars. |
| (3) How many franchise articles have been published | | | | H. CONTRACT FAIRNESS: |
| in journals or magazines? | | | | Does the firm give you an option of choosing between: |
| (4) What is their franchise-related teaching | | | | (a) an hourly rate and |
| experience? (see topics E and F below) | | | | (b) a flat contract amount, where you don't have to |
| (5) What is their depth of experience in the franchise | | | | worry about accumulated hours and an unknown total |
| industry? (see next topic below) | | | | amount? |
| B. EXPERIENCE IN THE FRANCHISE INDUSTRY: | | | | I. RED FLAGS - BEWARE OF ANY OF THE |
| (1) Length of time the firm has operated exclusively in | | | | FOLLOWING: |
| the franchise industry? | | | | • Combination teams where one entity does one |
| (2) Experience on both sides of the franchise fence - | | | | part of the project and another the other part. For |
| working with franchise companies (franchisors) as well | | | | example, a consulting firm does planning, and |
| as with individual investors (franchisees) who have | | | | operational documentation, while an attorney "they |
| purchased a franchise? | | | | know very well" writes the legal documentation. |
| (3) Past experience principals have owning and | | | | • Or, a variant of the above, the company in the |
| operating a franchised business? This factor is | | | | “fine print” of its contract, requires your attorney |
| absolutely critical. If the principals have owned and | | | | (who you obviously have to pay) to review and |
| operated a franchise, they bring a unique perspective | | | | approve everything they do because the company (it |
| and radar for avoiding future franchise relationship | | | | says) is not rendering legal advice. Actually, by |
| problems from disgruntled franchise owners. | | | | providing documents that affect legal rights, they are |
| C. COMPREHENSIVE TRAINING & ONGOING | | | | rendering legal advice, but in an illegal manner. It’s |
| SERVICES; CONTROL SYSTEMS: | | | | called the unauthorized practice of law. You end up |
| (1) Can (and will) the firm train your personnel to | | | | paying two attorneys - yours and theirs. Besides the |
| operate and manage your new franchise company? | | | | expense, it sets you up for future franchise problems. |
| Remember, you're entering an entirely different | | | | Their attorney represents who? The franchise |
| business, one requiring new skills and abilities. If this | | | | packaging group, of course, and definitely not you. He |
| topic is not addressed in detail, you might as well | | | | or she is typically a recent law school graduate who |
| earmark the franchise fees received when you sell | | | | hasn't figured out what they're doing is illegal and could |
| franchises for a future franchise litigation war chest; | | | | cause them to lose their license to practice law. |
| (2) Will the firm help you review and update operational | | | | Besides that, they represent the franchise consulting |
| (franchise operations manual) and legal documentation | | | | group, whose interest is to churn as many franchise |
| (franchise offering circular) on an ongoing basis? | | | | packages per year as possible. You end up with a |
| (3) Has the firm developed, and will they help you put | | | | bad franchise disclosure document and sloppy |
| into place, franchise marketing, sales control and legal | | | | franchise operations manuals. To save time, the |
| compliance programs during the critical implementation | | | | franchise agreement gets watered down so it's easier |
| (start-up) phase of your franchise program? | | | | to push through some franchise registration states. |
| The existence of these programs is essential to | | | | Some of the "t's" may be crossed and some of the |
| ensure only the cream of franchise applicants are | | | | "i's" dotted, but not most of them. The end product are |
| allowed to enter the network, and to create a series | | | | documents that set you up for future franchise litigation |
| of documented files should a dispute arise in the future. | | | | difficulties. |
| Most of the legal risk in franchising occurs during the | | | | • Firms that advise you to franchise your business, |
| franchise marketing cycle when franchises are sold. If | | | | and they've never seen your business! You'd be |
| your company's done a good job here with these | | | | surprised how often this happens. |
| programs, then you've eliminated most of the risk. | | | | • Firms that say they'll write your franchise |
| D. LEGAL: FRANCHISE ATTORNEY | | | | operations manual for you. How someone, who knows |
| (1) Is the law practice devoted exclusively to franchise | | | | absolutely nothing about your business, could ever |
| law? | | | | come close to anything but a mediocre product at |
| (2) Total number of franchise disclosure documents | | | | best, is a frightening thought. The use of boilerplate |
| (formerly called franchise offering circulars) drafted | | | | manuals produced by consulting groups is yet another |
| and reviewed? | | | | future litigation time bomb. You are the true expert in |
| (3) Experience filing franchise registrations and working | | | | your business. With competent guidance and editing, |
| with state examiners in all 14-plus franchise registration | | | | you'll be able to produce a professional and workable |
| states? | | | | operations manuals, if you don't have these already. |
| (4) Experience represeting franchise companies as | | | | • Pricing quotes that seem exceedingly high or low |
| well as persons buying a franchise? Knowing both | | | | (especially "do-it-yourself" franchise kits). |
| sides of the fence is a tremendous asset. | | | | • If you are buying a franchise, BEWARE of any |
| E. ACADEMIC: UNIVERSITY & COLLEGE | | | | attorney recommended by the franchise company. |
| Experience teaching franchise courses at graduate | | | | Even worse, beware of franchise companies who say |
| and undergraduate university levels? | | | | you don't need to use an attorney. There are a couple |
| F. ACADEMIC: PROFESSIONAL | | | | of these online. |
| Experience teaching franchise courses to franchise | | | | • Firms (or individuals) that have EVER been sued |
| attorneys and general practice attorneys? | | | | for fraud, misrepresentation, the unauthorized practice |
| G. BLEND OF BUSINESS & LEGAL SKILLS: | | | | of law or violating any franchise law. DON'T FORGET |
| Specialist franchise attorneys and law firms produce | | | | TO ASK THIS CRITICAL QUESTION!! |
| tight legal agreements (sometimes overly so leading to | | | | ©1990-2008, Kevin B. Murphy, B.S., M.B.A., J.D. - all |
| future franchise relationship problems) and usually | | | | rights reserved |
| adequate franchise offering circulars. Setting aside the | | | | For more informaton, consult the Franchise |
| overly tight contract issue, the problem is most | | | | Foundations website. |
| franchise attorneys - franchise lawyers are not | | | | |