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Franchise Law: Keep it Simple

We in the legal profession are often unjustly accused of being "deal killers" and of making things too complicated. The real problem frequently turns out to be the "fly by the seat of the pants" entrepreneur or business person who acts and reacts before thinking. Then they call the lawyer.

In franchising, however, I believe we do over-complicate matters, particularly on the transactional and operations side. The legalities of franchising just aren't that hard. Part of this is the lawyer's desire to impress and convey the value of his or her skills to the client by emphasizing the complexity of franchising and the need for special legal expertise. Many times a client or prospective client has told me how another lawyer quoted them a fee and bundle of services that would not only allow them to franchise but would get them registered in every state.

Perhaps it is my less than traditional background, starting out in the mail room of a franchise company before law school, but I think we as franchise professionals need to re-evaluate how we communicate and what we emphasize with our clients. I tell my entrepreneurial clients that I come from the "KISS" school of law, "keep it simple, stupid." If they will follow a few basic principles and communicate with their attorney regularly, their compliance problems should be few and their legal bills reasonable.

We will provide the best results for our clients, if we take a more holistic approach to franchise representation. Too often we allow clients to treat us as a "lawyer in a box", taking us out to answer a question or fix a problem and then putting us away until the next time. Although this is true in many areas of practice, I feel it is especially true in franchising. Allowing for economic considerations and determined clients, we can be more effective by seeking out the big picture. Franchise lawyers should understand not just the legal issues, but the business dynamics and interpersonal relationships as well. By doing that, we are better able to identify and solve the real problem. For example, a franchisee may have been defaulted not for breaching the contract, but because the CEO feels insulted when the franchisee did not keep a promise made to her personally.

From the KISS school of franchising:

Franchising is about relationships: franchisor-franchisee, franchisee-customer, franchisor-customer. In each case, treat the other with respect, listen, respond honestly.

Advice for the franchisor client:

  • Keep your promises.
  • Undersell and overdeliver
  • Take the time to think it through and do it right.
  • Remember you are running two separate businesses, the franchised business and the franchise relationship.
  • Things change, be flexible.
  • Don't take it personally. Before you do, ask: is it business or is it ego?
  • If franchisees put you on a pedestal, you are bound to fall - or be knocked - off.
  • Attitudes come down from the top. If you don't respect and honor your franchisees and your commitments, then don't expect your employees to do so.
  • Make it fun.

Advice for the franchisee client:

  • Your franchisor is entitled to make a profit - if it doesn't, it won't be around for long.
  • Don't surrender your judgment and critical faculties to your franchisor.
  • There really are no guarantees in any business, you are ultimately responsible to create a successful business for yourself.
  • If it sounds too good to be true, it usually is.
  • Do your homework, the franchisor's promises are no substitute for researching the business and the franchise system.
  • Don't take it personally. Your franchisor is not your mother.
  • Management and ownership of the franchisor can change, but your contract won't.

Fundamentals for the franchise attorney:

  • Create reasonable expectations:
    • about what franchising is
    • about the law
    • about what you will provide
  • Listen first. Be sure you understand what makes business sense for the client.
  • Repeat yourself. Management changes, and corporate direction changes.
  • Understand your client; their attitude toward franchisees and their goals.
  • Help your clients distinguish between the legalities and the realities - being right isn't always being successful.
  • Be a counselor first, lawyer second. In other words, focus on solving the problem, rather than proving your client right.

Of course, all of this is premised on the franchise concept being viable. If the business doesn't make money, then it shouldn't be franchised. If it is franchised, then our litigation members will taking this to a less holistic level.

© K. Tidd, 2001
Originally published in
Vol 5.No. 1 The Franchise Lawyer, 2002

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