The New Class
Meet the new Legal Eagles: 1. Douglas Ferguson at RWO Law 2. Laura Lewis at Mullin Law 3. Evan Goldman at Hill Wallack 4. Adrienne Boudreau at Sotos LLP 5. Karl Brandes at Phelps Dunbar 6. Andraya Frith at Osler 7. Jason Power at Barber Power Law Group
The 2018 class of first-timers to the Franchise Times Legal Eagles list aren’t fresh-from-the-nest attorneys, but that doesn’t mean they are any less bright-eyed and bushy-tailed. It just means they’ve taken the time to become the eager and able specialists necessary to navigate franchise law’s most esoteric corners. Here’s an introduction:
A unique corner
Karl Brandes, a partner at Phelps Dunbar in Florida, sees all manner of franchise law cases as a litigator and mediator. But he has deep experience with petroleum marketing, a unique part of the franchise space that falls under all sorts of special rules and regulations. “You have landlord tenant issues, breach of contract issues and environmental issues at gas stations, you have crimes that occur, you have people get hurt,” said Brandes.
There are so many different legal considerations brought to bear connected with franchising.”
That unique practice area also has ramifications for the rest of his practice, especially when it comes to a push for new franchise rules. It’s been dubbed the Small Business Parity Act in Florida, but a number of states are looking to pass similar legislation that ensures franchisees that are operating in good faith avoid at-will terminations, keep renewing and transfer their licenses.
The short version sounds great for franchisees, but Brandes said it sounds like a problematic rule from petroleum’s past.
“It was theoretically designed to level the playing field. But you saw a lot of validation of the practices of the franchisor and not as many wins in court for the franchisees,” said Brandes.
“It may benefit both by providing a structure, but as long as they’re complying with that, you might see a lot of franchisees be frustrated. They may have their business fail not because of some reason under the statute, but ultimately because the courts say this franchisor has jumped though all the hoops.”
He’ll certainly be watching how it plays out, and will pad his future cases with wisdom from the wild world of 1980s petroleum marketing law.
Evan Goldman, chairman of the franchise practice at Hill Wallak, specializes in helping startup franchises with their unique legal needs and getting up to speed with the franchise model.
“A few things that keep coming up are for start-ups, they don’t really know what being a franchisor means. They’ve heard of it, they’ve seen McDonald’s, but they don’t really know,” said Goldman. “So it’s really teaching them what they can and can’t do and what the boundaries are.”
And he’s taking a few lessons from major brand blunders to get the new class of franchisors started on the right foot. One increasingly important legal frontier for all brands, but something that is scalable if done right early on, is data security.
“Data security is really huge,” said Goldman. “Making sure that the franchisor is setting up a model that creates a solid structure for their ‘zees to work under and make sure that once they’ve grown to five, 10, 20 locations that the data doesn’t become so insecure that you can be hacked.”
From the North
Of course the Legal Eagles wouldn’t be complete without some star Canadian lawyers like Adrienne Boudreau, a litigation lawyer with Sotos LLP.
As the U.S. market becomes more and more competitive, brands are looking northward with mixed legal results.
“We’re seeing continued interest of U.S. franchisors expanding to Canada. Often that’s not something that devolves into a litigation matter, but that’s something we’re seeing,” said Boudreau.
What becomes a court battle can, however, be easily remedied by a lawyer with Canadian expertise.
“Sometimes what we see is a franchisor who doesn’t get that legal advice before coming to Canada,” said Boudreau. “We do have different rules, we do look at the U.S. FDD and build on that, but the Canadian disclosure rules are very different. If you’re a franchisor coming to Canada, you really need to work with Canadian counsel—the penalties can be very extreme.”
Around the world
International growth means different things to different people. For international specialist Douglas Ferguson at RWO Law out of Denver, Canadian laws aren’t the biggest enigma. But beyond our neighbor to the north, there are plenty of disclosure oddities around the world.
“The big change I’ve seen in the 30 years I’ve done this is the amount of foreign countries that have come out with their own franchise laws,” said Ferguson. “When I started it was just the U.S., then Mexico came on line, then Spain, France and Brazil.
“Today there’s over 25 countries that have some sort of FDD disclosure requirements, some have relationship laws, some have registration requirements. So staying on top of that has increased the amount of effort tremendously.”
But for Ferguson, that complex international landscape and FDD item orders, codes and registration oddities isn’t the first step. He also helps clients navigate the murky laws around intellectual property.
Before a client ever goes into a country, “you have to get on top of the trademark issue,” said Ferguson, who has relationships with counsel around the world for on-the-ground insight into those intellectual property idiosyncrasies.
‘Better be bulletproof’
Texas-based Laura Lewis at Mullin Law said her franchise specialization means straddling the line between litigation and transaction. She said that makes both sides of her practice area stronger.
“Because I litigate my own documents, I have a different eye because it’s going to be me in the courtroom. So they better be bulletproof,” said Lewis.
She’s also plugged in to the real estate world, helping her clients navigate the complexities of leases, transactions and especially the recent nuances of a very active market.
“Because it’s such a hot market, there’s a lot more risk-shifting. Landlords are trying to shift a lot more risk to franchisees, which is hard, the average franchisee can’t survive an indemnification clause that covers everything,” said Lewis. “So that makes it hard for the small franchisee.”
But because of her personal relationships across the real estate world, she can say, “Hey, you know I helped you out, now you got to get my hot dog guy in here,” said Lewis.
Those connections and creative documents help keep risk-averse landlords happy, but also maintain an open path to sensible real estate for small and growing franchisees.
For Andraya Frith, a Toronto-based lawyer and chair of Osler’s National Franchise and Distribution Practice Group, specialization means sticking with one side of the franchise model. She and the Osler team work exclusively with franchisors.
“We work only for franchisors. We think that separates us quite a bit from other Canadian firms,” said Frith. “We philosophically think that we can act in the best interest if we only act for the franchisors, and we can be consistent in how we approach a litigation defense, because we don’t have to think about the other side of the relationship and our role there.”
She helps brands work through all manner of Canadian law, from the wage increases to new rulings about when a contract can be rescinded. But a major part of her advisory work focuses on the relationship between franchisor and franchisees. While it’s not necessarily a bad thing to have a franchisee group or association form, keeping that relationship from turning toxic blends legal and relational skills.
“I act as a strategic adviser to our franchisor clients when they’re working through relationship issues or when associations form. I do a lot of litigation work to form the arguments and strategies,” said Frith.
A business mindset
Jason Power, at Barber Power Law Group, is solely focused on transactions, but like many of the Legal Eagles, he builds a business mindset into the practice, something especially helpful for small franchises. Power is essentially the negotiating ringer for his clients.
“A start-up franchisor can be a little harder to negotiate because they don’t have enough purchasing power as someone with a dozen or 100 locations. So early on we’re laying the groundwork, but many times we’ll at least get some kind of incentive so that when franchisees come in, they’ll have some rebates and stuff like that that puts money in their pocket,” said Power.
He said the same negotiating tactics work for the franchisor.
“We can sometimes get a rebate back to the franchisor which allows them to be more profitable, or we can just get that discount for the franchisees, which lets them keep more of their money and makes them value their relationship with the franchisor because they see that they’re actively out there negotiating better prices. So it improves morale and means better economics,” said Power. “Then as they grow larger and they have more locations, we’ll go back and renegotiate.”
These new Franchise Times Legal Eagles give just a glimpse at the deep specialization of the expert legal professionals within franchise law. For every issue, there is a lawyer somewhere within the franchise bar that has dealt with it before.
So let’s hear it again for the new class, sorting out the ever more complex legal framework that makes up franchise law with deep specialization and a like-minded approach for clients large and small.