Sotos LLP: The McDonalds of CDN franchisee lawyers?

November 27, 2009

I have learned directly, personally, in-their-armpits relationships from the best in franchising.

Ted Gorski, McDonald’s, CollegePro Painters, Nutri-Lawn, Tony Martin, Canadian Imperial Bank of Commerce, Sam Grange, John Lorinc, Paul Herminston, Katherine Swinton, Canadian Franchise Association, Country Style, Gillian Hadfield, Michael Webster, Jay Harris, etc. They’re all brilliant in their areas of expertise.

When I got into a corner and thought I needed legal help I hired the best I couldn’t afford. John Sotos was my on-and-off-again lawyer from 1998 t0 2000 and I learned a great many things from John and his partner David Sterns. Both John and Michael told me to look at and talk to the banks. Oddly enough, the first lawyer I talked to about franchising in 1982 is now a Ontario Superior Court justice in Barrie. I like lawyers but they’ve got to cover their rent too, you know!

Many franchisees want to fight.

That’s good…and bad at the same time.

Many franchisees think in terms of black and white; now or never; us/them.

That’s good…and bad at the same time.

Many franchisees would rather choose a “white knight” professional instead of a group of franchisees plotting their own course.

That’s not good…and really, really horribly bad.

The McDonald’s U.S.A. president described his corporation as a real estate company with an interest in hamburgers. Let me repeat: McDonald’s is a landlord (to franchisees) with an interest in fast food.

I learned that the economics of modern litigation is very similar.

  1. The franchise industry legal cash flows = 95% by franchisors,
  2. Once the retainer is paid any consultants are shown the door (only one expert, please),
  3. Franchisees are one-shot clients (v. repeat business for franchisors),
  4. Disclosure laws are a God-send for billable hours, and
  5. The industry has a very, very long memory for those that oppose it’s interests.

All lawyers are businesspeople that operate in a near-monopoly on certain words and concepts.

Learning these terms is not hard if you have (1) a learning tool and (2) a willingness to face some difficult facts.

Most let their emotions rule their decision making (ie. denial and fear) but in their defense, aren’t really conscious of doing so. They’ve been conditioned to be on their knees and look to Daddy for acceptance.

Education is the only way out.

Franchisees are similar to an indigenous people

December 8, 2008

barrieThe basic premise of franchising only works when local owners are more experts in their own business “landscape” than some would be some far-removed head office or franchisor.

  • In hardball economics, they must be able to drive their sales higher, faster,  AND at a higher margin while at the same time more than compensating for the increased costs of being a franchise (tax drag). If this local competitive edge is missing, there is no economic justification for buying a franchise. Period. End of story -30-

Expansion through franchising and a scorched earth military-style strategy are oxymorons. Thinking that you can destroy in order to save, is as much lunacy in franchising as it is in Iraq or non-traditional military actions. Killing insurgents willy-nilly, today, alienates those who you must co-operate with tomorrow.

  • Franchising was created to embrace, to utilize local diversity.
  • The top-down, legalistic cookie-cutter mentality that has taken over franchising is what is killing it.

I remember, with over 10 years hindsight, distinctly when my hints of a latent spatial strength, my geographic nature, came forward.

1. It was manifested in the fear I saw in my franchisor’s face.

Larry the franchisor had just told me that I should get my 68 year-old mother to sign over another $50,000 so I could pay my “debts” to the head office. (Long boring story…)

I rose up from my chair (we were seated in my office in house; actually in the house I was raised in) and said:

  • “Larry, that’s it. Do what you want: I’m going to be right here next year.”

I didn’t mean it as a threat or anything; to me I was just predicting that I’ll be right here and you won’t be. Until then, I did not appreciate how isolated, fearful and mechanical most franchisors feel.

2. I saw the same phenomenon when Nutri-Lawn’s lawyer (Mr. Tonu Toome) had to show up to my local Courthouse to plead their “irreparable harm” motion to enforce their non-compete clause. Nutri-Lawn had failed to specify that they owned my customer list and at that stage, I was not prepared to just hand it over.

Mr. Toome was asked by Justice Paul Herminston several questions to which this experienced Toronto lawyer could not easily answer. (Note to Other: It’s not that litigators can’t read. It’s just that they get used to not having to).

Since I represented myself at the two-hour hearing (this is why the injunctive hearing had to be heard on my home turf), I was thumbing through my pretty well-organized papers just in case I was asked the same question.

  • Justice Herminston asked me if I could answer his 2nd question as it appeared I was prepared.
  • After that, he asked me all the questions.

Justice Herminston decided that I pay the product tab but let me continue on in the lawn care business long enough to get to trial (over the winter and 9 months later).

  • When I look back, I think geography and time (my social equity) had something to do with being given the chance to live to fight another day.

I did not know Justice Herminston and never talked to him before he died. I suspect, however,  that I knew some people he did (very close degrees of separation in  a 50,000 population city like Barrie).

  • Relationships (blood, kin, community, adopted, group, nation, etc.) and land (franchising is all about real estate) are the very essence of the North American aboriginal experience.

Canadian First Nations have suffered over the 400 years because their culture (personal and group identity, language, culture, self-image, sense of confidence, leadership, myths, etc.) were changed to a foreign model.

  • Franchisees, whether they care to admit it or not, share in those types of experiences.

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