Being Charmed is okay: Just don’t think franchise Justice means going to Courts of Law

SnakeCharmerI have liked, personally, almost every franchise attorney I have ever met.

They are smart, really hardworking and funny as hell.

  • Unfortunately, what they have to do to make a living in the franchise industry, is problematic.

The fundamental problems are twofold:

1. Lawyers are credence good providers: franchisees never know if their services are really needed and if what they provided for services was of a reasonable quality. This is the advocacy service element that can be abused by cheating (bill padding, extra bills at settlement time, etc.).

2. They are gatekeepers to the Courts. Courts in Canada, U.S., Australia, etc. are not corrupt or unsympathetic. Courts are simply incapable of resolving franchising disputes.

Courts are too coarse a filter for franchise problems.

The contracts have specific provisions that CANNOT be trumped by general, ill-defined terms such as “fair dealings”, “good faith” or “commercial reasonableness.”

I have had word sent to me from a few Ontario Superior Court justices over the years. They know precisely the meat grinder that their courts make of franchisees but they are are incapable of doing anything about it. All experienced court officials know that the likelihood of a mom-and-pop franchisee of surviving pre-trial, trial, appeal, etc. is slim to none:

  • in a sense, it is kinder for the Courts to put the franchisee out of his or her misery quickly at Trial.

Smart lawyers work with franchisee associations but those are few in number and notoriously difficult to organize and run, especially in Canada. Help is needed but lawyering up first, sends the very wrong first impression to your franchisor. Be ready, build a multi-1,000$ reserve fund but jumping into a 100% legal approach (a monopoly information relationship) is not wise.

The best solution is to have 2 or 3 lawyers working for an association for discrete projects. One project might be analyzing agreements, another litigation, maybe a corporate guy.

The goal is to separate the what you should do into two areas:

  1. diagnosis (you have a business problem with legal considerations not the other way around) and
  2. implementation (co-op buying group, political action, publicity, supplier or banker relationships,.

By keeping these two distinctions, there is much less risk of a lawyer maneuvering you into a litigation (billable hours) stance or cheating.

This may sound extreme: It is better to have zero lawyers, if you can’t afford  three of them.

I may be as charming but I am extremely accurate in my observations although they run counter to the industry’s conventional wisdom.

To do:

  1. Talk to 2 or 3 other franchisees (avoid the hotheads),
  2. read some of the stories on (so it couldn’t happen to you, then?),
  3. start with the cost of goods you’re forced to buy through your franchisor (see your royalty & ad fund %? Normally, at least that number of $ is packed onto hidden margins on product, renovations, equipment, training, fees, fines, etc.)
  4. work quietly; like a duck: calm on surface but paddling like hell underneath, but most importantly.
  5. rebuild trust in yourself and your core group (bring in the partners from Day 1 as key change agents).

If you can sustain this group for 3 months, you should contact me for a free telephone talk. WordPress weblogs are great and here are some links to some excellent examples but they can blow up in your face without proper preparation. Even 3 of 4 of you have much, much more influence than you ever think you do but your power must be used properly.

I always let you know very quickly if I can help you or not.


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