Investors should look online for the experience, expertise and stature of the proposed attorney when choosing a firm to assist with their franchise business review. A quick and easy google search, for instance, in the leading franchise online periodical Bluemaumau as follows is one way to easily detect any obvious defects in law firms.
You can also look up your potential attorney on AVVO (avvo.com) as attorneys listed have rankings. You can also look up the potential attorney on linkedin (www.linkedin.com) and examine the number of recommendations for that attorney. You should spend some time reading through the potential attorney’s website, asking some of the following questions:
- Are the articles on the lawyer’s website of recent vintage? If not, this is a negative.
- Does the lawyer himself or herself directly author regularly published articles in the field? If not, this is a negative.
- Are the articles on the lawyer’s website actually written by the attorney or are they ‘cut and paste’ or ‘business feed’ articles from other business or franchise publications written by other lawyers or experts and simply ‘placed’ on the attorney’s website? If the articles are not written himself or herself personally, this is a negative.
- Did you get the attorney’s name as a reference or referral from a Franchise Dealer Association whose operating revenues in part come from funds paid by the lawyer’s law firm to the Franchise Dealer Association? If so, this is a negative.
- Is the attorney who will do the review the owner, president, manager, or operator of a Franchise Dealer Association that has used the dues of its franchisee members to promote his own individual concealed personal legal practice? If so, this is a negative.
- Is the attorney a former businessperson who worked in the past as a franchise broker or franchisor representative in the franchise industry? If so, this is a negative.
- Does the franchise lawyer represent only franchisees and dealers, or does he or she also represent franchisors? If he or she also represents franchisors or employees of franchisors, this is a negative.
- Does the franchise attorney do both litigation and counseling in the franchise and distribution field? If the attorney does not do litigation as well as counseling, this is a negative.
- Has the franchise lawyer practiced in the franchise field for more than 20 years? If not, this is a negative.
- Will the lawyer who will be working directly with you on the franchise review be the lawyer with 20+ years of experience, or will your reviewer by a lawyer with less than 7 years of experience? If an attorney with fewer years will be doing the review, this is a negative.
- Has the franchise lawyer practiced at some point in his or her career in a top 50 international corporate law firm? If not, this is a negative.
- Does the franchise lawyer have an international or national practice or does he or she focus solely on a local city or state clientele? If the practice is limited primarily to a city, state or region, this is a negative.
- Does the franchise attorney also do unrelated ‘trusts and estates’ or ‘custody and divorce’ work as part of his or her practice? If so, this is a strong negative.
- Is the attorney an ‘approved or recommended vendor’ for many national franchisors? If so, this is a negative.
- Does the franchise lawyer advertise that he or she helps small businesses become franchises, ‘starts franchises’ or prepares FDDs? If so, this is a negative.
- Does the attorney represent himself or herself as a ‘deal maker, not a deal breaker’? If so, this is strong negative.
Answering the above questions will allow you to begin to narrow the field of potential attorneys. An attorney with 30 years of experience in complex litigation with a focus on franchising and distribution should normally be chosen over one with eight years of experience in general business contracts, for instance. Similarly, an experienced franchise litigator who represents only franchisees should almost always be chosen over a franchise lawyer who represents both franchisees and franchisors. All else being equal, the franchisee should give greater credit to the attorney who:
- focuses exclusively in the franchise and distribution area;
- represents franchisees and dealers and does not represent franchisors and manufacturers;
- has a healthy litigation practice in addition to his or her counseling practice (such that he or she does not merely provide counseling services);
- has an international or national practice;
- does not obtain individual clients for his own personal practice in the guise of a group national Franchise Dealer Association;
- does not simultaneously practice in unrelated, undemanding and uncomplicated legal practice areas, such as trusts and estates or divorce and custody; and
- is not an ‘approved legal vendor’ of a franchisor.
The Product: Franchise Review Quality
The evaluation of this second factor – franchise review quality – is a bit more clear-cutand manageable. Unfortunately, the overwhelming majority of lawyers providing franchise agreement or FDD reviews produce a written memorandum for the client allegedly ‘summarizing’ the 300+ pages of the FDD, the franchise agreement or both. This is in almost all cases a waste of time, money and effort. In almost all cases, such lawyer memos are the result of a young associate’s or paralegal’s ‘filling in the blanks’ on a ‘form memo’ already on the lawyer’s hard drive.
A more complete and highly accurate ‘summary’ of the terms in the franchise agreement is already incorporated in the FDD. Should a dispute between you and the franchisor later arise, the Court will not be interested in what your lawyer’s ‘summary memo’ told you about the terms of the franchise agreement; instead, the Court will look to the franchise agreement (and infrequently to the FDD). From a common sense point of view, the provision by your lawyer of another 15 page summary memorandum, on top of a 300+ page FDD and a 60+ page Franchise Agreement is relatively useless.
Then why do lawyers do this? Very simply it is many times much cheaper and quicker for a lawyer to have his or her associate or paralegal ‘fill in the blanks’ on a form memo instead of personally doing a full and complete evaluation of each of the provisions of the franchise agreement. In addition, many lawyers who practice on behalf of both franchisors and franchisees do not want to uncover in public all of the dirty details in the franchise agreement. Exposing all of the hazards in a franchise agreement would require the lawyer to ‘do battle’ with the franchisor, which, if the lawyer represents both franchisors and franchisees, is a large future potential client.
The cursory ‘fill-in-the-blank’ legal review memo also allows many lawyers to represent that they are ‘deal makers, not deal breakers.’ In the franchise context this is preposterous and alarming. One of the most glaring market deficiencies in the franchise sales market is the lack of information regarding the consequences of terms in the franchise agreement. The foremost job of the franchise attorney assisting a franchisee with purchasing a franchise is to explain in prolific detail the significance of the major terms in the franchise agreement. In turn, explaining the significance of these terms requires an analysis of the probability that each clause will be used offensively by the franchisor, and the magnitude of the related harm to the franchisee from such use by the franchisor. A form memo simply cannot accurately, fully, and meaningfully carry out this crucial analysis; indeed, it covers up some of the most damaging risks of the franchise.