Boutique firms hope to control purse strings
Lee Plave and Dave Koch were seated in Section 109 of the Verizon Center in Washington, D.C., watching the Washington Capitals play hockey. After a beer, Koch elbowed his former Federal Trade Commission colleague Plave, and said, "Why don't we do this on our own?"
|While boutique law firms made their debut a number of years ago, a new slate of them has popped up on the franchise horizon recently. As with most experiences where there is large versus small, there are pros and cons to both.|
Koch was referring to starting a law firm, not playing professional hockey - and thus began a two-year discussion that by 2006 was serious enough to take to the people who mattered most: their wives.
"We told them that if it doesn't fly with them, it doesn't fly at all," Koch said. Their wives agreed to the plan, and the Virginia law firm of Plave Koch opened the next year with the two named attorneys and another former-FTC colleague, John Tifford.
Small proves to be a good fit for the attorneys and their clients. Plave and Koch kept nearly all of their clients and have since more than tripled the firm's size - it now has 10 lawyers.
They are just two among a number of franchise attorneys who in recent years have drifted toward small, boutique firms from large, multi-specialty giants. The lawyers sacrifice the prestige, reputation and reach of the large law firm - and perhaps some pay - in exchange for more control.
Everything old is new again
Boutique franchise law firms are not new, but have come into fashion again. David Kaufmann started his boutique firm, which specializes in both franchising and entertainment, 25 years ago, after working for both the New York Attorney General's office and a large West Coast law firm that handled clients such as the legendary "Tonight Show" host, Johnny Carson.
Dennis Monroe, chairman of Krass Monroe, started his boutique firm more than 20 years ago when he realized he could provide niche services to multi-unit franchisees. At the time he started his firm, he felt no one else was handling the franchise sector from a multi-unit business perspective.
"It was a cutting edge strategy in 1985, and we built the firm providing a multi-disciplinary approach," said Monroe. "We recognized that most clients' needs do not fit into silos." The firm has since grown to 24 attorneys.
Rudnick and Wolfe and Brownstein Zeidman were also early representations of high-power boutique firms. While Lew Rudnick and Philip Zeidman, who both served as the International Franchise Association's general counsels, chose to merge and thus grow, Kaufmann stayed small. For its 25th anniversary, the firm is sporting a new name: Kaufmann Gildin Robbins & Oppenheim.
Boutique firms would seem to go against the grain right now in franchising, as franchise companies continue to grow in size and scope, which requires more legal specialties. Larger firms are in a better position to provide these specialists, although attorneys contend many clients are using fewer larger firms.
Quentin Wittrock, an attorney with the large Minneapolis firm of Gray Plant Mooty, said larger firms are more likely to have someone who has worked on a similar issue to the one a client is experiencing, which can increase efficiency - as can the firms' large databases of briefs and information. He added, from the attorney's standpoint, a larger firm provides steadier workflow. In a small firm, "when you're busy, you're really busy," he said. "There's not as many people to pull in for projects during busy times."
Franchising is dominated by smaller and mid-sized companies that can benefit from lower rates. But larger companies like lower rates, too. "People wouldn't think that large companies care about the hourly rate," said Amy Cheng, of Cheng Cohen. "But in fact, they pay more attention."
Cheng and Fredric Cohen started their firm in 2006. Both worked together at the Chicago office of the megafirm DLA Piper - Cohen as a litigator and Cheng as a transactional attorney. While they had talked for years about starting their own firm, Cohen said he was pushed into it when his practice flattened in 2006 after years of growth.
He blames it on rising rates. "The rates were increasing with absolutely no relationship with any index of inflation," he said. "I drew the conclusion that the reason my practice flattened had to do with rate increases that clients were no longer willing to put up with."
Cheng and Cohen decreased their rates 26 percent across the board, thanks to lower overhead. "Our practice has quadrupled in the last year and a half," Cohen said. Many of their new clients are large, established franchisors - rather than small upstarts that might benefit from lower rates.
Kim Lambert, general counsel for California Closets, said Plave Koch's lower rates are "great," adding it's important for companies to know what they will be billed when they call with a legal question.
At larger firms, she said, a less-experienced attorney may be assigned to the client and then must do research to find answers. "The last thing we need is to get billed for hours of research without any heads-up," Lambert said. "With senior-level people you generally get the answer you're looking for on the spot."
But that's not the main reason they stayed with Koch when he left Wiley Rein. The company used Koch for years, and his knowledge of the company was more important than the reach of a large firm.
"I think it was based on the personal relationship, his knowledge of the franchise system, its method of doing business and its culture," Lambert said.
And, as that client knowledge grows over the years, a smaller firm can change as their clients' needs do, said Monroe. "We have evolved as our clients have evolved from owner/operators to large multi-unit franchisors and franchisees," he said, "and we will continue to evolve to satisfy the needs of the industry that we have chosen to focus on. That's what makes boutiques successful."
"Clients hire lawyers, not law firms," Plave said. "If we need a specialist, we find one. The big firm was only a convenience. The only difference now is you get two invoices, not just one. It's still uninterrupted legal service."
There are many legal issues smaller firms cannot handle - notably major mergers that require lawyers from several different specialties. Yet, overall, "the only difference between us and a firm with a global footprint is the global footprint," Cohen said.
That's not to say boutique firms are similar to large firms in terms of their operation - they're not.
"The personality of the small firm comes through more apparently than it does in a firm with 3,000 lawyers," Cohen said. "You're either going to like it or not. That's a reality that generates a lot of loyalty that can be difficult to establish in a megafirm. Does a megafirm have personality? Sure, but it gets diluted a little bit."
To this point, Cheng told of the time she attended a firm-wide meeting a few years ago and introduced herself to the lawyer sitting next to her. She assumed he was with one of the firm's other offices, but in fact he was in an office down the hall from her - just in a different practice group. To make their new office more collegiate, Cheng said they buy the entire office lunch every day. The meals are served family-style in the break room. "It's a chance to catch up on work and our personal lives," she said.
On a personal level, the attorneys say their lifestyles are better at their small firms. They face less pressure to put in more hours and have more flexibility to run their practices. Cohen called the move a "rebirth" for him.
Koch vows never to work for a large firm again, a vow he made as Plave Koch began to add lawyers. "In the first year, I said that if we ever get to 15 lawyers, we'll go back down to 14," he said, "because I'll be leaving the firm."