Franchisors: Steps To Take To Reduce Your Legal Fees And "litigation Risk"

For the owners, and officers of existing franchise systems two constant and critical

management tasks involve the constant monitoring of legal fees and mitigation of "litigation risk". These tasks go hand-in-hand and involve a proactive approach toward establishing "best practices" and a working "partnership" with your franchise counsel. The following are "some" factors and steps that all franchisors (and their legal counsel) should be considering and discussing:

(a) Litigation is Always a Balancing Act. Litigation should be viewed as nothing more than a "means to an end," that is, litigation must be subject to a thorough cost-benefit analysis similar to that applied to business investments. When making this analysis it is critical to recognize that, in most litigation, once you are involved (either as a plaintiff or defendant) the advantages and benefits that may or may not stem from the outcome of the litigation may be outweighed by:(i) the legal fees that you will incur, (ii) lost productivity associated with your focus on the litigation (as opposed to building your franchise), and (iii) the uncertainty that is inherent in all litigation - no matter how strong your case is.(b) Long-Term Legal Fees can be Reduced by Short-Term Planning. Faced with the almost certain costs that you will incur in all litigation, the best course of action for franchisors is to establish with your legal counsel a continuous dialogue and plan focused on mitigating your "litigation risk". In addition to the critical task of managing your regulatory disclosures, as a franchisor, you must discuss and establish with your legal counsel a balanced relationship and system focused on the management of your day-to-day legal activities. Some of these activities should include:(i) The periodic evaluation and review of your trademarks and the filing of supplemental trademark applications; (ii) The establishment and enforcement of a specified and well documented "encroachment policy" respecting the grant of additional franchises; (iii) The establishment of a written policies respecting the negotiated modification of your franchise agreements; (iv) The establishment of standardized franchisee communications and compliance notices; (v) The review of vendor agreements; and (vi) The maintenance of strategic employment agreements with your management staff focused on the implementation fair and "enforceable" restrictive covenants.While establishing an on-going day-to-day working relationship with your legal counsel may be more expensive (for the moment) than "doing nothing", the value of this dialogue and planning process will far outweigh the costs associated with avoidable litigation. Once tasks become standardized and well establish many activities may be incorporated into the tasks of your "in-house" staff and, over time, serve to reduce your long-term legal fees.Copyright (c) 2010 Charles Internicolaby: Charles Internicola

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