Global Franchise Issue 10.1

franchising is a business, and it is a business that requires that both the franchisor and the franchisee be successful, and as such, our guidance must be calculated to achieve that mutual success. This cannot be attained merely by preparing ‘tight’ or ‘one-sided’ documents favoring the franchisor. The business plan itself must work for both parties, and we counsel our franchisor clients to follow that path.We encourage our clients to embrace a program that engages longevity and sustainability at its core, and we help to guide our franchisor clients in this direction. Along with our reputation, which, fortunately, is a good one, we have found that in dealing with potential investors, partners, or master franchisees (or franchisees) and their respective counsel; by utilizing a respectful, fair, and open approach, we can help to enhance our client’s credibility and create a positive negotiating environment amongst the parties. These are always key factors. But our interactions on behalf of our franchise clients do not end with the above negotiations.We also engage in discussions and work with all parties who are on the same side as our client.Working with suppliers, consultants, and developers to outline agreements and understandings with respect to mutual goals and approaches is a key point of our engagement.We sometimes will even introduce such parties to our clients if they do not have their own sources. This is frequently the case with accountants, a key component for any expanding franchisor, where the goals of the franchisor and the accountant should be, theoretically, the same. Our job is to help them reach an appropriate result and to resolve any difficulties between them, should they arise. Private equity effect And, of course, the same issue applies most graphically to the relationship between the franchisor (or master franchisees) and the franchisee (or subfranchisee). Many folks ascribe to the view that franchise agreements are put into play “when things go wrong” and, as such, should be made as ‘airtight’ and one-sided in favor of the franchisor as possible. I don’t agree. I have always been a proponent of fair franchising. I was, for over 25 years, the Chairman of the Fair Franchising Standards Committee of the American Association of Franchisees and Dealers (AAFD), during which time we produced the Fair Franchising Standards. The committee consisted of approximately 50 franchisors, franchisees, franchisor counsel, and franchisee counsel, and the result was fair to both sides. That is how I believe that the legal documents in the franchisor-franchisee relationship should be formulated – all-inclusive but considering the reasonable needs of each party, and trying to achieve them, where possible, in a fair and even- handed manner. This is also one of the reasons that we recommend negotiation and mediation before the parties arbitrate or litigate their disputes, should they have them. It is better to resolve by settlement, if possible, rather than seek to draw blood. So where are we headed? I see our role as legal counsel to franchisors, internationally or domestically, changing and evolving over the next 5 to 10 years.Why? Because of the role that private equity is sure to play. The involvement of private equity and the availability of capital that it brings to the table is certain to have an impact on how virtually everyone in the franchise field will both structure their deals and implement them. As for the lawyers…we will become business advisors to our franchise clients, both in the way our agreements are formulated, and in the business decisions that we help our franchisor clients to make. Exciting times are ahead. “Successful franchising demands fairness and foresight – legal counsel must be more than lawyers; they must be strategic business partners who guide growth while fostering trust” Richard L. Rosen is the founding member of Rosen Karol Salis, PLLC, a New York boutique law firm specializing in franchise law. With over 40 years’ experience, he advises franchisors and franchisees on system development, agreements, and compliance. He is widely recognized as a leading authority and author in the field of franchise law. 41 GLOBAL-FRANCHISE.COM Interv iew | FEATURE