Isn’t a resident 2nd opinion a waste of $ once you lawyer-up?

No: actually an independent business consultant is needed during legal action.

It is wise to avoid a franchise lawyer for at least a year (commercial, slander, etc. are fine). Lots of reasons but mostly groups need to mature and build trust before any professional can really help them. Leaders especially need a type of de-programming.

Franchisors understand one thing: power. In 2010, predators understand only actionable legal threats. There are therefore 2 stages: pre-first legal claim and post-first claim.

Pre-first Legal Claim: It takes 1 to 2 years and a one-time investment of $500,000 for a franchisee group to develop a susttainable independent franchisee association.

Only after that investment can you decide whether to sue your franchisor or not. No shortcuts: it takes time, experience and money. Most franchisees have never been in a group before and many choose to free ride on the dues paid by others. Frequently, only 10 to 15% of franchisees pay, while all of the benefits are distributed to 100% of the franchisees.

What happens most times is that the early professionals end up subsidizing the creation and early survival of the group. These are obligations or accounts receivable that consultants like me have accumulated over the years.

First Legal Claim: Once the legal card is played, the dynamics change. It has little to do with the honesty of the attorney: it’s just the way it is when their is such an imbalance of information between client and professional.

Every attorney is a credence good provider: their services are difficult to determine as far as quality and quantity are concerned.

Problem: The risk of low quality or excessive quantity of services is very real. Groups of franchisees are at the mercy of monop0ly legal service providers once the papers are filed (see The Price of Law: How the Market for Lawyers Distorts the Justice System).

The best solution is for the consultant to remain as a resident 2nd opinion during the life of the lawsuit.

What is fair compensation (accumulated A/R and ongoing services, who does what) should be determined in a transparent way before the writ flies. Not only is it fair to pay your obligations, it’ s being a long-term, shrewd businessperson.

Lawsuits should not be about franchisors paying out cents (now) and then clawing back $ (later).

The destruction of the independent franchisee association should not be an option on the table as settlement time happens. Its survival should not be acceptable under any terms.

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