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Franchisee Associations Morphing Into Litigation Groups

There is a sequence followed by every franchisee group, without exception. At first, of course, there is the perception of overreaching by their franchisor and attendant disgruntlement. A core group, usually not realizing that they are painting a target on their backs, engage in discussions about "what is wrong" - much of which is not wrong, but they don't appreciate the terms they signed on to. Had they begun by consulting a specialist in establishing effective franchisee associations, their startups would be less fraught with alienation risks.

In any event, having started up as some kind of rump group to deal with the perceived issues, they communicate with each other using an insecure email system - usually the franchisor's system - that is the same as sending email copies directly to the franchisor. Their level of understanding does not even arise to this standard of concern. They take for granted that they are reasonable businessmen and that they can simply "talk" their way out of any situation.

What they see as "abuses by their franchisor is just about always associated with some revenue stream, be it commissions from vendors or alternative channels of distribution cutting into their market opportunities - what they thought were their market opportunities - or some other but similarly impactful practice.

When they finally do seek competent representation, the pernicious behavior had long ago taken root and will be more difficult to modify through discussion. Few franchisors perceive the risk to the franchise relationship and most will therefore not respond favorably with any such objections, no matter how expressed. But they always have to learn this the hard way. By the time they actually do "lawyer up", heels are well dug in on both sides.

Nowadays, most franchisees are astute enough to go search for a specialist who does disgruntled franchisee group representation. The representation opportunity is always presented to the candidate lawyer(s) as "not looking for litigation". The lawyer, therefore, has to accept this at face value and allow the configuration of the level of resistance to develop in its own time and in its own way. It must be understood that everyone with any sense abhors the thought of confrontation in court or arbitration, not only for its perceived negative impact upon relationships, but also for its expense.

The financial performance of the franchise system at the franchisee level will play a large role in defining the scope and creep of any group representation. It will always be a fundamental point of screening attorneys that the attorneys must be made aware that there is no budget for confrontation. "They just want to talk." Even though the selected attorneys know that "talk" has little chance of resulting in progress/resolution, the exercise has to be played out to the point at which it is the franchisees who recognize the futility of it all and make their own decisions about what to do next. It is for that reason that so many franchisee associations, lacking competent guidance, are little more than social clubs in their manner of operations. The least competent even set up their own website thinking that making it password protected will prevent the franchisor from knowing what is being posted. They don't appreciate how utterly absurd a supposition that is. But that usually comes with the territory and one must just live with the knowledge that the franchisor has penetrated the website by any of various means, and has filed every negative/hostile posting away for future use.

Eventually, the larger franchisees begin to perceive, in their own minds at least if not in fact, that they have different interests than the smaller members of the group. This schism, if you will, just about always occurs and it simply has to be managed, because the larger franchisees still want the smaller franchisees to help underwrite the expenses of having the group operational.

Later on, if it does morph into a litigation/arbitration group, that schism must be dealt with in the client project fundamental agreement of retention unless the attorneys want to see themselves mired in conflicts of interest. The more well off franchisees will prefer a more experienced franchise counsel, and the smaller members will be reluctant to share in the cost of retaining effective, experienced counsel. The metrics of how this is managed requires patience.

This is the manner in which franchisee associations morph into confrontation groups. There is no free Bubble Up and no free lunch. Hopefully they come to understand that on their own, because without accounting for adequate resources the entire effort is just a waste of time. Experienced lawyers will be able to answer the expenses issues in a responsible manner.

To be sure, there are other nuances to franchisee group representation, and they are deal with on one of the division websites of the

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