Goldstein: Franchise Attorneys

An independent franchise association is formed, operated and perpetuated by individual franchisees. While franchisors have formed many associations, only a few have been formed by franchisees. Organizations that have the moniker “advisory counsel” or “advisory board” are generally franchisor organizations whose members are appointed by franchisors.

Most franchise associations are borne from system-wide discontent centered on a major disputed issue. However, the value of these associations should transcend beyond resolving the dispute that originally spurred the association’s formation. Once a franchise association is formed, the group should promptly adopt an infrastructure with the tools and interest to provide benefits to its members in the long-run – regardless of whether its members face a crisis in the short-run.

An effective independent franchise association should educate its members with the knowledge gained by the association. It should also provide instrumentalities for the franchisees to share information otherwise not available from their franchisors. Newsletters and internet sites are effective mechanisms by which information may be transmitted to association members.

Upon forming the association, the members should elect officers and adopt a statement of goals to guide the association’s agenda. Initially, a fluid framework should be adopted to ensure that all franchisees’ voices and views are heard, considered and acted upon by the association. As the association emerges from its infancy, a more elaborate and structured infrastructure may be developed and embraced.

For the long term, the franchise association should promptly retain an experienced outside franchise attorney who has the ability, expertise and experience to guide, advise and counsel franchisees and the franchise association regarding the many legal minefields that lie in franchise agreements and laws around the country. Also, a franchise association should retain an experienced franchise law firm or franchise lawyer because its goals, as well as the goals of the member franchises, must be examined within the parameters of written agreements – including, most importantly, the franchise agreement.

In this regard, although an association may gravitate toward an attorney who “counsels” rather than “litigates,” franchise associations will fare better with the guidance of a franchise litigator in today’s judicial climate. A franchise litigator, as opposed to a counselor, is most qualified to determine the “worst case scenarios” and how courts would likely respond in these situations. Once the franchise litigator has realistically identified and assessed the legal boundaries or parameters, the franchise association will be able to independently prepare and forge ahead with an achievable agenda. The goal of accurately identifying these legal boundaries does not mean that the franchisee association will venture out to these hinterlands; however, for negotiations with the franchisor to be successful, meaningful and realistic, the association must know in advance where the minefields and fences lie.

The issues that prompt a legal evaluation should not be limited to specific “crisis” issues. Instead, the association’s infrastructure and character must grow to a level where there exists an ongoing dynamic between membership concerns, legal analyses of these concerns, articulation of these concerns, packaging of the concerns, transmission of these concerns to the franchisor, receipt of the franchisor’s response to the concerns, and a transmission of the franchisor’s responses back to the membership of the association. The process would then start anew with the franchisee’s responses to the franchisor’s comments.

The life-blood of this crucial dynamic system is the efficient and effective transmission of information to and from the franchisee and the membership, as well as the accurate depiction of the legal contours of the playing field. The former is the job of the franchisee association, while the latter is the province of the association’s legal counsel. One cannot happen without the other.

The franchisor’s initial response to the formation of the franchise association will usually determine whether its relationship with the association will be constructive and positive. Accordingly, the initial approach by the association to the franchisor must be well-balanced, both in terms of content and temperament.

The association should primarily focus on communication with the franchisor and with its members. Effective and productive communication, however, cannot be achieved without the ongoing support and input of outside legal counsel. Franchise laws and franchise agreements are just too complex to ride the legal terrain without the assistance of experienced counsel.

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