Maximize Resources, Minimize Legal Costs
September 2009 Franchising World
The key to minimizing legal expenses is understanding that lawyers have to sell their time.
By H. Michael Drumm
If you are a franchisor or a franchisee, the odds are good that you have utilized the services of a lawyer at some point in your franchise career. Odds are also good that you have received one or more bills for those legal services. As you reviewed those bills you may have thought as Shakespeare wrote in King Henry VI: “The first thing we do, let’s kill all the lawyers.”
But let’s be fair, lawyers must sell their legal services just as franchisees have to sell their products or services. Lawyers stay in business by billing for the time required to produce a written product such as a franchise disclosure document, or the time spent giving verbal advice, as when they advise their client on how to deal with a defaulting franchisee. This time is sold as billable hours recorded in increments of time between six to 15 minutes, depending on the law firm’s policies. The client who keeps this billing structure in mind can more effectively and efficiently make use of the lawyer’s services.
Modern technology has changed the way lawyers practice law. What may have previously taken several hours of combing through law books can now be accomplished in a fraction of the time using computers and the Internet. With e-mails, software, Blackberries, fax machines, laptops and other devices, lawyers are now able to stay in touch with their clients in a more timely fashion, work from anywhere in the world and perform a multitude of services in ways that were not possible just a decade ago. Franchisors and franchisees need to utilize the technologies available to them and their lawyers to be as efficient as possible and to keep the billable hours, i.e. their legal fees, to a minimum.
Communicate and Organize
Two areas where franchisors and franchisees alike can maximize their use of available resources and minimize their legal expenses are communication and organization.
By considering the benefits of various types of communication a franchisor or franchisee can choose the method that will work best for a given purpose. There are times when a phone call is much more efficient than an e-mail. This is especially the case where there will be several back and forth conversations between the lawyer and the client. There are also times when an e-mail will prove to be the more efficient method, as when the client is conveying information that the lawyer will want to review multiple times or is using technical language that will require analysis.
The most efficient type of communication may also depend on attorney preferences. It is important for clients to be familiar with their lawyer’s choice of technology. Some attorneys prefer telephone calls to reading e-mails while others prefer e-mails. If the client uses a Macintosh platform and the attorney is on a Windows personal computer, there may be issues in transferring files back and forth. While most clients prefer to use the “Track Changes” feature in the word processor to track revisions, most attorneys will use redlining software. Some lawyers want to see handwritten changes incorporated into a document by their legal assistant while others prefer that the clients themselves incorporate those changes electronically in the document. As clients of legal services, franchisors and franchisees need to talk to their lawyer to determine what works best and then use that knowledge to maximize the value of all communications.
With the understanding that lawyers bill the time that they spend talking with clients, it is important for clients to make that time count. To paraphrase Pythagoras, make your words count. This does not mean that clients should think in terms of writing a telegram because they are being billed by the word, but rather that the client should have an outline or direction for the conversations that they have with their attorneys. It may help to have a written bullet-point outline prepared to keep the conversation on track and ensure that all major points have been discussed. Along these lines, clients should also make sure that they know what all of the major points are before they contact their attorney. None of this means that clients should wait until the last minute to get their attorney involved because lawyers often can assist their clients early and prevent problems from growing. It does mean that clients should prepare beforehand so they can convey all the relevant information in one phone call or e-mail message.
Technologies that eliminate the need for lawyers to travel can save franchisors and franchisees money on their legal fees. Video conferencing and conference calls can be very cost effective because clients will not have to pay for the lawyer’s travel time, airfare and lodging yet will still have the lawyer’s presence when needed.
Lawyers and clients exchange information to accomplish their tasks. How that information is stored, maintained and arranged can impact the legal fees required to complete the tasks. There are many options franchisors and franchisees can use to effectively store and keep their information organized, including traditional methods such as filing cabinets or hard-copy files, as well as more modern methods that incorporate electronic copies of information, such as software platforms or programs. Some of these methods may seem easier than others to maintain, but the key to organization is to develop a system and then follow that system so that information may be quickly accessed and transmitted as needed.
Let’s compare two hypothetical franchisors. Franchisor A has an integrated software system that tracks all communications between the franchisor and its franchisees. There is a folder on the software for each franchisee that contains the franchise agreement, any amendments, any written correspondence including e-mail or letters and all other relevant information about that franchisee, each appropriately titled. When Franchisor A has to terminate a franchisee, she pulls up on the software the file for that franchisee and sends the electronic copies to her attorney via e-mail.
Franchisor B has a filing cabinet that has a copy of the franchise agreements. Franchisor B keeps every e-mail received and has all correspondence with every franchisee somewhere in his inbox. Franchisor B has another filing cabinet that contains default letters, lease copies and other correspondence that he receives. When Franchisor B has to terminate a franchisee, he has to locate the franchise agreement and fax/e-mail or mail it to his attorney, then sort through his e-mail and forward those that relate to the franchisee in question to the attorney and then still needs to send the other correspondence on that franchisee to that attorney.
The attorney for Franchisor A quickly has all the relevant documents in electronic form necessary to draft the appropriate paperwork. The attorney for Franchisor B is going to have to spend the time to gather and review the documents and information sent from Franchisor B. As illustrated in this example, if clients are able to pass on organized information they will only have to pay their attorneys for time spent actually reviewing the information, not for the time spent organizing it. Franchisors and franchisees need to implement efficient systems to assist them in managing their information.
With the complexities of the franchise disclosure process and the relationships between franchisors and franchisees, it does not appear that lawyers and legal fees will be going away anytime soon. The key to minimizing legal expenses is understanding that lawyers have to sell their time, that there are things a client can do to help the lawyer reduce the time necessary to complete a task, and that those reductions will result in a lower legal bill.
H. Michael Drumm is an attorney of Denver-based law firm Snell & Wilmer, LLP. He can be reached at 303-634-2096 or firstname.lastname@example.org