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“Water
and Oil - Consultant and lawyer/accountant”
Most people
looking at becoming involved in the franchise sector, and many who
already are, have little or no idea of the very different roles
filled by the lawyer, the accountant and the franchise consultant.
This means they do not know which to talk to or when, yet the
essential services offered and skills and experience of each sector
is quite different with overlaps only occurring in a very limited
area of expertise or possibly in a very few individual
cases.
I will talk
more about water and oil in a moment but I want to say at this
point that it is us, the lawyers, accountants and consultants, who
are causing this state of affairs.
As is often
the case in matters of advice being offered to clients, it is hard
if not impossible for them to judge the quality of that advice as
the very reason they are seeking it is because they don’t have the
knowledge or skills in that area themselves.
It is also
often the case that the less experienced and less professional in
each field who claim to be able to do what should be left to the
others. The consultant who either tries to bring matters that need
legal /accounting expertise under their consultancy umbrella and
fee or uses the” friendly” lawyer/accountant who has no franchising
experience. The lawyer or accountant who says “you don’t need a
consultant; I can give you everything you need to go franchising or
solve your franchise problem”.
The roles,
skills and services of each are essential but very
different.
The
consultant deals with the practical issues of creating and
operating a franchise system.
The
consultant sits with the client and works through the practical
issues of;
•
Can they and should they franchise their business, are all the
essential elements of a franchise there and if not what needs to be
done to put the client in to a position of being ready and able to
franchise
•
If the answer is we are ready and able to franchise the following
questions are answered: what our system will look like, what will I
have to do to change my role from hands on business owner to a
business owner and franchisor? What are all the things a franchisor
needs to know and do.
•
The consultant will know when the time has arrived to consult with
the lawyers. It will vary in each case e.g. do we need the lawyers
to do some restructuring of our business model, do we need some
early non disclosure documents, supply agreements, are their
trademark issues etc.
•
The system will be designed e.g. territories, franchise fees,
advertising fees, locations ,reports, field service ,compliance,
recruitment etc etc etc and the consultant may help put in place
appropriate training for the franchisor and franchisee and their
staff.
•
The operations manuals will be written by the consultant in close
association with the client. These cover every aspect of the day to
day operation of the franchise and will be anything from
approximately 250 to 700 plus pages long. The size depends on the
business and how much detail over and above the essentials the
client needs. The consultant will also assist the client to prepare
the manual dealing with the technical aspects of the business if
one is needed e.g. the pizza recipe and how to bake it.
•
The lawyer will definitely be consulted at this stage to prepare
the legal documents, including the agreement and disclosure
document.
•
The consultant may offer a service of ongoing consultancy dealing
with things such as helping the franchisor get started in their new
roll, recruitment, training both franchisor and franchisee and
their staff. Ongoing services such as field service support and
compliance assistance may also be offered.
Because of
the hands on approach of the professional consultants they are
often the best suited and are often used by existing franchise
systems in a whole variety of ways including; to help with specific
issues, to modernise a system, to do a health check on the system,
to assist with training and, if qualified, to do mediation of
disputes between or with franchisees.
The lawyers
use their experience and expertise to deal with all matters legal
including;
For the
franchisor,
•
The Intellectual property of the business and its
protection.
•
The business structures most suited to the new format of
franchising.
•
Confidentiality agreements.
•
The franchise agreement
•
The disclosure document
•
Employment contracts
•
Franchise sale agreements both preliminary and final
•
Lease and property related issues
•
Supply agreements
•
All matters pertaining to the legal aspects of the creation of a
system and the sale of a franchise.
For the
franchisee,
•
Advising whether they should purchase a franchise
•
Attending to the legal aspects of a purchase.
•
Leasing advise structure advice
The
accountants’ are the third vital cog in the franchise
machine;
For the
franchisor,
•
Providing essential financial advice to the potential franchisor or
accurate financial information to the consultant so the viability
of converting a business to a franchise can be assessed.
•
Advising on financial matters and systems relevant to the creation
of a franchise system
•
Setting up the franchisor correctly from financial and taxation
perspective and providing ongoing accountancy advice.
•
Assisting with the financial KPI’s on a compliance
basis.
For the
franchisee,
•
Advising on the financial aspects before purchase
•
Advising on the systems for the franchisee
•
Structure and tax issues
Both
accountants and lawyers are also used by existing systems to deal
with matters which arise in their area of expertise ,possibly for
mediation if qualified and in the lawyers case for litigation if
all else has failed
It is obvious
that very distinct aspects of the franchise process are dealt with
by the three groups.
Having been a
lawyer for many years who dealt with franchising, then a franchisor
for a substantial Australian chain and now a franchise consultant I
at least feel I have some experience to speak on this
topic.
Those among
us practicing in one field who claim they can provide the services
of another are not being honest with themselves nor their
client.
Even leaving
aside the experience and expertise issues, it is a case of a very
different focus being needed for each area and you simply cannot
successfully combine them to give the client the best outcome,
which they are entitled to, in the most cost effective manner,
which they are also entitled to.
As a lawyer I
would not have dreamt of saying I could deal with the hands on
practical matters consultants deal with quite apart from the
unacceptable cost outcome for the client from an hourly rate method
of time recording. Nor would I have dealt with accounting matters.
As a lawyer or accountant running a practice I would suggest you
simply cannot devote the blocks of time necessary but which are a
natural part of the consultant’s method of operation.
As a
consultant, even with legal qualifications and experience, I would
not contemplate offering legal advice, I am not focused on that
part of the exercise nor could or should I be if I am doing my job
as a consultant.
The
experienced and professional lawyer/accountant and consultant know
all of this and make no attempt to mix the two.
The
consultants’ are the water that is the day to day initial and
ongoing practical element of a franchise system. The lawyers and
accountants are the oil that deals with areas requiring their
special skills and which provides the lubricant for the system,
each happily working with the other in the one solution which is
the franchise operation but none trying to mix their role with
either of the others.
Geoff
Langham
Franchise
Alliance Queensland
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