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being proactive

Being Proactive Can Save Attorney Fees

By Newsletter

Early in my legal career, I was contacted by a Florida franchising company that had been sued by 12 different franchisees, all represented by the same attorney. After invoking the arbitration provisions of the franchise agreement and dividing the franchisees into separate arbitrations, rather than one lawsuit with 12 plaintiffs pooling their resources, I received neatly organized packages for each arbitration from the president of the Florida franchise company.  In each franchisee package was a summary of claims made by the franchisee, along with documents supporting my client’s position. In addition, my franchise client had one packet containing general information about his company and everything it had done (seminars, newsletters, workshops, etc.) to fulfill the company’s contractual obligations for all franchises.

In my naiveté, I did not realize that my first arbitrations were a utopian experience with a company that was extremely well organized and willing to devote the necessary time to succeed.  My wake-up call came not long afterwards when another franchising company had an arbitration filed against it by a master franchisee in Maryland. Beside the garden variety of law-suit claims, my client was also sued for failing to fulfill its franchise contract by not devoting the resources to make the franchise concept a success.  To my chagrin, the franchisor client provided little assistance in accumulating information to counter the allegations of the master franchisee.  It was only after much prod-ding of the franchisor that I was able to gather enough information to mount a successful defense of the claims filed against my client. It took me months of time consuming work going from one department to the next, finding a piece of the puzzle here and there before I was able to gather the same information that was made available by my first franchise client.  Can you guess which client paid thousands of dollars in unnecessary legal fees?

The first client was pleased with the success of the process and with the fees charged.  The second client was pleased with the successful outcome but not with the charges to reach the success.

Whether it is running a successful efficient franchise company or avoiding the tremendous cost of litigation, a Franchisor can save attorney fees by deciding to become proactive in the legal process.  Start by developing a legal plan designed to avoid unforeseen costs.  That plan would normally involve a Compliance Program which addresses the following areas: 1.) Review of your Operations Manual; 2.) Monitoring all advertising to ensure compliance with federal and state laws – including registering the advertisement before issuance in registration states; 3.) Preview of your Website and pamphlets for compliance with state laws; 4.) Knowing when to call your attorney for advice on your relationship with franchisees and whether you are complying with each state’s relationship laws. 5.) Annual review with our office to update all legal documents at the end of the year for compliance with new laws, regulations and recent case decisions.

As a franchisor, you must build a solid foundation and without a legal plan in place, your foundation is resting on quicksand.  My job as a franchise attorney is to be as productive as possible and provide value to my clients.  I would prefer to help you by being proactive rather than reactive to the latest emergency.  You truly receive the best value from an experienced franchise attorney when you lay the foundation with a good solid legal plan.

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