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Normally we think of Triage as the process by which medical emergency facilities decide whom to treat first when there is a catastrophe requiring more resources than may be at hand. They leave those who are probably beyond help; start with those to whom immediate help may be the difference between life and death; then go to those with lesser injuries. The noted sociologist, Thomas Robert Malthus (Essay On The Principles Of Population), taught that most third world countries are like that; that some are just too far gone and shouldn't even be fed. A good bartender does the same thing, quickly getting a drink for the customer who could really use one right now. How does any of this apply in franchising? It applies in several ways.
Think of triage in establishing criteria for approving potential new franchisees. I know. The rule is that if the applicant has a good check for the initial fee he is, by definition qualified - to hell with everything else. In successful companies that are not hell bent to achieve some numerical goal, like 1,000 franchisees, one might be expected to be at least a bit more selective. Triage is very important here for numerous reasons. Better franchisees get more quickly to break even. Better franchisees pay on time. Better franchisees have better longevity. Better franchisees make you look good. Better franchisees will tell other prospects favorable things about their relationship with your company. Better franchisees buy more franchises. There is less risk of litigation with better franchisees if you treat them right.
The best material on initial selection triage is obtainable from Nick Bibby (www.BibbyGroup.com). He knows it so much better than I, so I won't try to describe his system of initial franchisee triage. Give him a call. You won't regret it.
In-Term triage is the next issue. Only now has the industry begun considering what to do with the mediocre franchisee who will never be successful, always just barely hanging on by his fingernails, a constant collection and compliance problem, and always the first with a cousin who is a contingent fee negligence lawyer. Ten years ago it was occasionally the case that a franchisor had a net worth or "approaching insolvency" trigger for terminating a franchisee. The politically correct public position is that we want every franchisee to remain in the system. In fact, truth to tell, in every system there are some franchisees who do not belong. They weren't suited or fully qualified to begin with. They are slow pay. They let the business run down. They are rarely in compliance with standards. They always badmouth the company. They are always looking to foment some kind of group revolt.
Although there cannot be a simple provision that is totally subjective (I hate you so you are terminated), it is becoming more and more desirable to disclose up front in the UFOC that the franchisor has an exit option where certain objective factors are present that, contractually, define a franchisee who is terminable for want of potential. No specific material breach of contract is required for this right of termination to arise. It will, at least until it passes muster in several judicial proceedings, be a focus of challenge on the basis of good faith or unreasonableness. And its likelihood of being judicially approved will depend upon whether, in the first cases to go through the courts, the franchisor has done a good analytical and drafting job, and has, in addition, established rational and reasonable criteria to trigger the termination right, and is applying it in a fair and non discriminatory manner in the "due process" and "equal protection" sense. Franchising is not unlike farming. No competent farmer would fail to winnow his crop of weak plants. It is fundamental to achieving the best harvest. How to go about this (since it is rather novel at this juncture) is a matter of counseling on a franchisor-by- franchisor basis. Only a very experienced franchise practitioner would be capable of assisting you with such a plan.
Franchise litigation is the third triage situation I intend to discuss here (though Lord knows there are many other, especially in the site selection and approval area). In my less than humble estimation, too many franchisors are making fight-or-not-fight decisions based upon ego, anger, and fear of reaction by other franchisees, and other non-merits issues. That is the short cut method and most frequently leads to judicial determination and opinions being published for all to see that the franchisor is acting improperly. More in depth, insightful analysis should accompany any decision to litigate with a franchisee (same applies to arbitration). All too often I have seen combat decisions made for the wrong reasons because folks just aren't skilled in the art of 'how to pick a fight'. I'm not saying fire your lawyer and hire someone else. But I am saying that a second opinion is the best money you can spend. Your lawyer has to worry about the strength of his relationship with you if he decides to disagree with your intended decision to 'fix' a recalcitrant franchisee. Every now and then that franchisee turns up with one hell of a competent litigator, and you end up wishing you had never made this decision. The more management hubris enters into any litigation decision, and the more your lawyer is afraid of being fired for disagreeing with you, the more ugly litigation experiences you are going to have. Seminar on it. Be willing to answer the tough questions. Get a second opinion from a lawyer who is noted for telling someone to go to hell if that is what they need to be told. Good luck.
Copyright 1997 - 2008 || Richard A. Solomon
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