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Franchisee Compliance – Common Sense Steps for Partnering with Counsel

Date: 03/16/2016 | Category: Corporate Counsel | No comments


There comes a point during the growth of every new franchise system when the franchisor has to start thinking about using an attorney to assist with franchisee compliance matters. Of course, an important first step is to select the right attorney who is experienced in working with startup franchisors and who works well with the culture of the particular system. Beyond that, any franchisor that refers franchisee compliance matters to counsel – whether that counsel is in house or in an outside law firm – may want to consider instilling certain best practices in all departments that are responsible for communicating with franchisees.

Here are a few common sense guidelines to consider, which may not be obvious to the franchisor that is new to working with counsel on franchisee compliance matters.

  • Avoid commenting on communications from attorneys. If a matter is referred to counsel and the franchisor’s staff is asked about a letter from counsel, the correct response is: I cannot discuss that with you, you will have to talk to the sender of the letter about that.
  • Avoid side negotiations with franchisees. When a franchisee compliance matter is referred to counsel and a franchisee calls your staff to tell you the attorney is being unfair and wants you to do something, don’t fall for it! The correct response is: I cannot discuss that with you. I will speak with our attorney and he/she will get back to you with our decision.
  • Franchisors cannot give legal advice. For example, questions from a franchisee about what a term in its franchise agreement means or what type of entity it should form to run its business are best left to an attorney. The correct response in such a case is: I cannot answer that question, you have to talk to your own attorney about that.
  • Franchisees have the right to talk to an attorney at any time. There are no exceptions. An attorney can help the franchisee make informed decisions about its business, which will benefit both the franchisee and the franchisor.
  • Franchisors should be clear and precise in communicating with counsel. Take the time to draft clear and complete emails with the goal that a person completely unfamiliar with the situation can understand what is going on by the email alone. Also, franchisors should limit those who are authorized to communicate with attorneys to as few as possible and, ideally, keep it to a single point of contact.

Creating best practices can help keep a franchisor’s legal costs down and facilitate its relationship with counsel.

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