Who profits when a $500-million Canadian class-action franchise lawsuit happens?

The least likely are individual franchisees.

That may or may not happen especially when 98% of all lawsuits never make it to trial and withstand an appeal.

The negotiations are held between the 2 lawyers. Franchisees are decision takers.

Parties:

  • Franchisor (defendent) – the only payer, repeat player, credence good monopolists, (happier to pay 2 law firms a lot rather than a little to hundreds of franchisees)
  • Franchisor’s Specialized Law firm – only one in Canada, repeat player, expert credence good provider, member of franchisor association
  • Franchisees (plaintiff) – one time player, only non-credence good player, unskilled but unaware
  • Franchisee’s Specialized Law firmonly one in Canada, repeat player, expert credence good provider, member of franchisor association

Both CDN law firms (one for the franchisor, one for the franchisee) at this level are businesspeople, first and foremost.

The two law firms act as rent seeking coercive monopolists.

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