LICENSING vs.
FRANCHISING
(Inc
[Including “Selling Licenses”]
A
short discussion about greatly lowering the cost of business expansion through
low cost licensing rather than investing in the huge expense of
franchising. See who qualifies!
By
Robert Townsend, Attorney At Law.
Tel. 310 207 0180 (24/7)
[Please note: If you wanted LICENSING IN A NUTSHELL, press here to change].
What You Have to Know
·
There are Many Ways to Skin a Cat. Though this article discusses
“licensing versus franchising” as methods of expanding a business,
it is important to note that these are just two paradigms that can be used. There are many other methods to use, and
each factual situation will dictate the best possible expansion avenue to
pursue. Maybe more than half of
my clients pursue something other than licensing or franchising once they learn
what is available…and usually at a 60-75% savings in costs in legal fees
compared to franchising.
Why Consider “Licensing”?
·
Licensing is Lower Cost and Can Be Done Quickly. If you are thinking about expanding your
operation through franchising, licensing may be an alternative because (1) it
is substantially less expensive (sometimes
one-twentieth of the cost of franchising), and (2) it
takes about ten to fifteen business days to complete rather than months and
months for franchises. Also, no past
audited financial records showing successful performance are required in
licensing.
·
Business Goals Often Can Be Met. It is often possible to draft a license
agreement that achieves the goals of the licensor and does not violate the various
franchising laws.
·
Existing Businesses as Potential Licensees. Existing businesses often buy a
license and add the product or service to that existing business; this allows
the licensee to keep his “bread winner” business going while he
tests the licensing operations and thus reduces the risk on the acquiring the
license.
·
Much Less Work on Daily Basis. The day-to-day business operation of a
licensor is customarily much less work and complex than the business of being a
franchisor. If you become a
franchisor, you generally have to give up the operations of your own business
and enter the full time business of being a “franchisor”.
·
Avoid Complex Government Regulation. There is little or no government
regulation in licensing, and there is substantial and complex government
regulation in franchising. But keep
in mind, that no matter what expansion format you use, there is someone who may
call it a “franchise”. You can have your five year old son and six
year old daughter sell lemonade at two different stands outside your house, and
there is someone who will allege that they are franchises. That is just a fact you have to live
with in a world where there are too many attorneys with not enough to do.
·
Licensing More Effective in Difficult Economic
Times. In a time when
A Quick Overview of Licensing
·
Licensing is a business structure and method of expanding
the distribution of goods and services.
Rather than create a franchising business structure with the substantial
costs involved, an entrepreneur who wishes to expand its business may be legally able to use a licensing
legal structure. Usually a quick no-charge telephone
conversation with experienced counsel can tell you if licensing will work in a
particular situation. (Note: I do this several times a day.)
·
As in franchising, in licensing there can be (i) an initial
upfront fee, (ii) continuing royalties, (iii) monthly license fees during the
term of the agreement, (iv) exclusive territories, and (v) long or short term
agreements.
Difference between Franchising and Licensing
·
Franchising and licensing as a means of expanding a business
are often confused with one another.
However, franchising and licensing come from two distinct areas of the
law. Franchising is based on
securities law and licensing is a form of contract law.
·
What does this mean to the non-lawyer? It means that if one takes up
franchising as a means of expanding a business, then compliance with the
franchise laws, like the securities laws, requires registration of the
franchise in the applicable jurisdictions.
On the other hand, licensing is merely a contract between two
independent contractors and franchise registration is not required.
·
Here is the effect: It’s in the pocket book! Franchising creates more work for
lawyers in complying with all the registration requirements, and consequently
it is far more expensive to go the “franchising route” than down
the licensing road which requires substantially less legal work.
·
It is simple as that!
If the factual situation is right for both formats, franchising is
substantially more expensive than licensing!
Why Do Franchises Have To Be Registered?
·
In general, the primary difference between a license
and franchise situation is the amount of control that the franchisor or
licensor exercises over its franchisees and licensees, respectably.
·
A franchise has to be registered, because the
control by the franchisor over the franchisee is what is suppose to make the
money for the franchisee; i.e. if you do what the franchisor says, then you
will make money. Buying a franchise
is like buying a security; i.e. the control over whether or not the buyer of
the franchise or security makes money is in the hands of a third party; for the
security situation it is in the control of the people who operate the company
that issues the security, and for the franchise the control is in the
franchisor who dictates how the franchise operates to make money.
·
Thus, the government requires disclosure of
the risks
to the potential franchisees just like the government requires a disclosure of
the risks in buying a new stock issue.
There are government requirements of registration of both franchises and
securities for the same reason; i.e. to protect the public and give the public
full disclosure of all risks before purchasing.
There are Two Types of
Franchises
·
In practical terms there are two types of franchises: (a)
intentional franchises and (b) unintentional franchises.
·
The first type is the situation where someone wants to
expand their business and decides to intentionally use the franchising
mechanism to do it and comply with the registration laws.
·
The second type is the predicament where in the effort to expand
the business, franchises are inadvertently created (sometime called
“hidden franchises”).
These hidden franchises are often spawned from a poorly advised and
drawn distribution agreement, license agreement, and other marketing
formats. These are the franchises
that get people into trouble!
·
The problem is that both types of franchises have to be
registered in the appropriate jurisdictions, and the consequences of failing to
do so is often substantial civil penalties and/or criminal punishment. There
have been many entrepreneurs that have served substantial prison terms for
selling unregistered or improperly registered franchises.
·
So this area of the law is nothing to “trifle
with”, so to speak.
·
If you go the licensing route sometimes in certain situations
it is easy for a licensing format to slip into an unintentional franchising
structure either by poor draftsmanship of the licensing documents and/or the
inappropriate use of business applications in company operations. If a licensor slips into the franchise
arena, he needs to either (a) immediately comply with franchise laws or (b)
re-adjust the operations to comply with the licensing laws and avoid the
franchise laws.
AN IMPORTANT
VISUAL AID IN UNDERSTANDING LICENSING
THE THREE-LEGGED FRANCHISE STOOL
The Legal Definitions of a Franchise So Everyone Can Understand It
You have to learn about the “Three-Legged
Franchise Stool”. You have to know what franchising is to know
how to lawfully avoid franchising,
and you have to know how to avoid franchising to create a licensing or other
mode of business expansion.
Consequently since we have been talking about franchises and need to
know about them, we better make it understood just what constitutes a
“franchise”. First, I have
to tell you the various States and Federal definitions of a franchise are
pretty clear, but the application of the facts to these definitions is highly
mercurial. You may have trouble
ever getting any two franchise lawyers to agree on whether or not franchise law
compliance in various situations has been met.
Federal
Definition of the Federal Trade Commission
·
THREE ELEMENTS. The FTC “Franchise”
definition has three key elements: (1) the franchisee’s goods and/or services
are to be offered and sold under the trademark of the franchisor; (2) the
franchisor requires the franchisee to make a minimum payment of $500, and (3)
the franchisor maintains significant
control of, or provides significant
assistance to, the franchisee’ operation methods.
Author’s Note:
This is important! Think of
each of these three elements as a leg on a stool with three legs. This visual aid will help understand the
discussion of licensing below. THE
THREE-LEGGED FRANCHISE STOOL!
·
Common Name Leg. The element (or leg of the three- legged franchise stool) of the use of the trademark or common name is clear for
the purposes of this discussion.
You want your trademark or common name to be the rudder that moves your
business expansion. “McDonalds”
is the most famous example of the common trademark name of franchises.
·
Fee Leg.
The element (or leg) of payment of a fee means that franchisee must pay the franchisor at least $500 as
a condition of obtaining the franchise or of beginning initial operations. Any payments made at any time before or
within six months after beginning operations shall be aggregated (combined) to determine if the $500 element is
present. These payments may be a
requirement of the franchise agreement, or a secondary agreement (e.g.
agreement to purchase goods only supplied by franchisor.).
·
Operations and Marketing Control Leg. As to the element (or leg) of “significant control or assistance in
franchise operations or marketing”, the key word is
“significant”. Franchisor
actions that trigger the application of the concept of “significant
control” are (for example): operations manuals, site approval, personnel
policies, accounting procedures, co-op advertising, operations training, etc.
The
States’ Definitions of Franchise
(The Three Categories)
·
The FTC basically sets a minimum standard of what a
franchisor must disclose to a prospective franchisee. Then it leaves it up to each State to
add any laws it deems necessary to protect the potential franchisee. Thus, each State has its own franchise
laws which include the definition of franchise that must be followed. I have used three categories to describe
the various types of franchise laws of the States. They are:
1.
Category I. In California, Illinois, Indiana,
Maryland, Michigan, North Dakota, Oregon, Rhode Island, and Wisconsin, a
franchise is defined as having three essential elements: (a) A franchisee is
granted the right to engage in the business of offering, selling, or
distributing goods or services under a marketing plan or system prescribed in
substantial part by a franchisor, (b) the operation of the franchisee's
business is substantially associated with the franchisor's trademark or other
commercial symbol designating the franchisor or its affiliate and (c) the
franchisee is required to pay a fee.
Please
understand this! Except for
Categories ll. and lll. below, a Category l. license agreement will in general
be applicable in almost all the country, because almost all the States in the
country are Category 1 States.
For instance, an agreement drafted to comply with the Category I States
will be applicable in all the 44 Category 1 States. The same agreement may work in the six States included in Categories ll., but may require some changes in the documentation.
Virginia and New York of Category III may require separate agreements when one
either has potential licensees or operates as a Licensor from those States.
NOTE:
For example, I prepare a California License Agreement (where I practice and which is a category I State) and that License
Agreement is usable in 44 Category I States…almost all the country. For Category II States the same
agreement is probably not usable for “service” businesses, but with
some tweaking it can be adjusted for businesses which market “products”.
2.
Category II. Hawaii, Minnesota, South Dakota,
and Washington have a broader definition of franchise which include three
primary elements:.(a) Franchisee is granted the right to engage in the business
of offering or distributing goods or services using the franchisor's trade name
or other commercial symbol or related characteristic (b) franchisor and
franchisee have a common interest in the marketing of goods or services, and
(c) franchisee pays a fee. The
definition of a “franchise fee” may be an important element to look
at in determining if the licensing model will apply in these States.
3.
Category III.
Virginia and New York are different than other States. New York, for instance, the (a) franchisor
is paid a fee by the franchisee, and (b) is either essentially associated with
the franchisor's trademark or the franchisee operates under a
marketing plan or system prescribed in substantial part by the franchisor.
HERE
IS THE QUESTION:
How Do You Create A License Without
Creating A Franchise?
There are two key things that
have to be done to create a license in a business opportunity situation that
does not constitute a franchise:
1.
Eliminate one leg of
the Three-Legged Franchise Stool.
Usually the One Leg you cannot eliminate is
getting paid for all the work!
Unless the initial fee is under $500, you ordinarily cannot eliminate
the leg that requires the Licensor receive a fee or payment, because getting paid is the primary reason for
establishing the licensing structure.
Consequently, there usually remains a choice of two legs to eliminate:
(a) using a common trademark or common name, or (b) the Licensor’s
“somewhat” control over the operations and marketing of the product
or services involved.
2.
And make sure that the
Licensee is an independent contractor in its relationship to the Licensor.
See info on Independent Contractor issue below.
(Interesting Observation. I have found that there are few
franchise lawyers that will want to do licensing because (i) licensing legal
work pays only a fraction of the legal fees paid for franchise work, and (ii)
logically and for fair reason they have little or no experience in actually
doing a license as their “mind set” is franchising law as this is
their area of specialization.
(Warning to “Do-It-Yourself”
People. I want to make
this clear to anyone considering Licensing without using an experienced
attorney: Do not try and do this
yourself without your legal counsel. There are NO forms on the internet that
will get the job done! I have
reviewed “do it yourself” documents from time to time, and they are
always on the road to trouble.
And further, it is very difficult to get them straightened out, because
they have all this “wrong stuff” already done before it can be done
“right”, and the “wrong stuff” is always out there to
create liability to the poor soul who tried to do it himself.)
The “Big Question”: What Leg Do You Eliminate?
In its most simple terms, first you
have to decide what your business vision is in setting up the licensing model:
branding a name (“branding”) or providing assistance in marketing
of products or services (“Non-Branding”).
Branding
Situations
·
The branding situation usually (though not always) occurs
where you require the licensee to use
your trade name and/or logo as the name of licensees business.
·
When you eliminate the licensing of the trademark or common
name then the effect may be to eliminate the “branding” feature.
Non-Branding
Situations
·
Non-Branding is where the Licensor does not permit the Licensee to use Licensor’s trade name,
trademark, and/or logo as the name of Licensee’s business or in a
substantive or primary way.
·
Where the object is to sell product or services and this can
be done without branding, then allowing the licensee to operate under its own
name may be the avenue to take, because here the Licensor can exert certain limited controls on operations and
marketing that assist the Licensee in successfully selling the products or
services of the Licensor.
·
The application here is a license to distribute goods and
services in a manner that is designed to produce profits for Licensor and
Licensee.
·
Look out! Even if you are eliminating the branding
leg and keeping the operations and marketing control leg, the Licensor’s
controls cannot reach the status that the there is so much Licensor control
that the Licensee loses its legal capacity as an independent contractor,
or else the Licensee may become an employee or agent of the Licensor with dire
consequences. (See Below)
The Independent
Contractor Issue
·
The independent contractor issue is the basis of the legal
relationship between the Licensor and the Licensee. They are bound by a contract entered
into between them as two independent contractors.
·
In
General. The Internal
Revenue Service and the income taxing authorities of the various states have
guidelines to ascertain if the relationship between two parties is that of
employer-employee, principle and agent, or two independent contractors that
have entered into a contract for work or sale of goods or services. The essence of being an independent
contract is that (in this case) the Licensor cannot tell the Licensee how to do
the work required but can only tell him what the job is that needs to be done
under the contract. For instance,
one may not tell another the hours to do the work, equipment to use in doing
the work, the sequencing of the work, the customers for the work, etc. There are approximately 20 points in the guidelines to which an
independent contractor should comply to maintain that status.
·
Consequences of
Violating Independent Contractor Status.
The consequences of violating the independent contractor status of the
Licensee is (i) the IRS or a State will rule that the Licensee is an employee
of the Licensor and will seek all back withholding taxes plus interest and
penalties (this usually happens after about five years of operations, so the
taxes, etc are huge!), and (ii) that in the event that that Licensee incurs
civil liability for a tort (e.g. an accident) the Licensor will be held
responsible because the Licensee is deemed an agent of the Licensor…and
not an independent contractor.
·
Creates
Franchise. Also, the violation of the independent contractor
status of the Licensee may throw the structure from a lawful license into an
unregistered franchise situation.
If the licensee is truly an independent contractor and can do his work
in his licensed business in the manner, time, hours, and use of equipment etc.
that he chooses, then he will be a licensee. If there is even slightly more control,
then Licensee may slip into the area
of being involved in a franchise, and what Licensee thought was a license
arrangement may well be a franchise situation and Licensee is now a franchisor
that has not complied with the franchise laws.
The Business Opportunity
Statute Issue
·
Some States have what are called “Business Opportunity
Laws” or “Seller Assisted Marketing Plan” (SAMP) laws. These laws require the registration of
certain business opportunities offered in the State. They are of fairly recent vintage, as
laws go, and they were created to protect the people against the plethora of
fraudulent “business opportunities” that flood the media. The registration usually is not
difficult to do, but it may be costly (not as costly as franchising) and time
consuming.
·
DEALING WITH
THEM! One offering a business opportunity in
these States must either (i) avoid the factual situation that brings one within
these laws, (ii) obtain a waiver of these laws in the States where waivers are
acceptable, (iii) comply with the requirements of registration, or (iv) use a
combination of the above remedies. Check with counsel of the applicable State. The terms of the License Agreement will
often determine the path to take with regard to these statutes.
· At present there is no Federal legislation on business
opportunity laws, but for a couple of years now a proposed law has been out for
comment from the public.
A Synopsis: The Keys to Licensing a Business
Opportunity
1.
Create
Leverage So Licensee WANTS to Do What Licensor wants. An
additional key is to know the specific elements needed by the client to obtain
the similar or equivalent results as a Licensor that one might achieve as a
franchisor, and this is usually achieved by making conditions available so that
the licensee without coercion truly and voluntarily wants to do things the
licensor’s way.
2. Realize that Sometimes You Have to Franchise. Sometimes a potential Licensor must
accept the facts that in some situations using the licensing model in the
particular State cannot be done.
Sometimes he has to either (a) use a different business model, or (b)
register as a franchise. My
approach in preparing license agreements for licensing business opportunity
situations is to (a) first prepare get a list from the client of everything the
client (Licensor) would like in it [This
usually pertains to controls over the Licensee.], and then (b) go through
the list and see what the client really
needs and make cuts accordingly to be legally compliant, and (c) then I make
the cuts [or additions] to the agreement which make it lawful, and any
disagreements on my cuts are sorted out between the client and me.
SELLING
LICENSES
Introduction
to Selling Licenses. Of course
the first step is to have a license agreement available for licensees to sign.
The license agreement defines your relationship with the licensee, and you
cannot even begin to lawfully sell licenses and have a formal relationship
without clearly knowing the boundaries agreed to in that written
agreement. After establishing your
business vision, the first thing to do is to get the license arrangement in
writing. But this brings up the
issue of, “So I have a license agreement, how do I obtain the licensees
that will sign it?” Well,
here is how you do it.
The Two Essential Secrets.
Secret #1. Secret Number One to selling
business opportunity licenses is for you as the Licensor to be (i) genuine,
(ii) likable, and (iii) truthful, because potential licensees that are looking
at a business opportunity want two things: (1) a Licensor they like and trust,
and (2) an excellent chance to make a profit as a licensee. To be liked and trusted is essential,
because no one is going to choose “up front” to spend their time,
sweat, and money working with someone they don’t like and don’t
trust. Though it may happen, no one will intentionally start out that way. And the key to being a Licensor
that is liked and trusted is to have the
genuine attitude and feeling that the licensees are human beings that
deserve your general kindness and
that you manifest truthfully that you
want them to make a profit as your licensee. Licensors that are “hard
selling” to get the up-front initial license fees and who “down
deep” really don’t care how well the licensees do once that initial
fee is paid may receive the initial fees, but they don’t build a
sustaining licensing business with long term relationships of business kinship
and profit (and they usually get
sued or worse).
Secret #2. The second secret to selling business
opportunity licenses is that Licensors don’t sell licenses, licensees
do. It is the successful licensee
acting as an endorser and reference and giving testimony of success that
convinces new potential licensees to become licensees. The licensee-candidate for a license
wants to be convinced that someone else
has done this before and (i) they are successful or (ii) they are new but
certain that they are on the road to success. To the licensee-candidate, the Licensor
has a built in bias (which he does...he wants to sell a license); on the other
hand, the Licensee appears to have no such bias (He is not in the business of
selling licenses.) All the
reference-licensee has to do is to tell the truth. He has no motivation to do
otherwise. The licensee-candidate
knows this, the truth is what he is
seeking, and therefore the testimony has great value.
The Marketing Goal. The goal in marketing licenses is to drive
the licensee candidate to the unbiased testimony of an existing licensee to
confirm all that the candidates need confirmed in order to purchase a license;
i.e. someone is doing it and that someone is successful (or they are certain
that they are on the road to success).
I call this the “reference-license”. This is what closes the deal. But please note that it is better not to
advertise that there is a reference-licensee that will give great supporting
information to support the sale of a license, as this action by the licensor
tends to dramatically diminish the value of such a third party reference. You do not want to advertise a
cooperative effort between you and the referral-licensee. You have to wait for the licensee candidate to ask for a reference,
and then you tell them that getting such a reference is “no
problem”. Getting the
reference must be the
licensee-candidate’s idea.
And that “idea” always comes up in the
conversation…everybody wants to know that someone else has done it and
that they are successful, etc. And
later your “cooperative relationship” with the reference-licensee
will be understood AND appreciated,
as the potential licensee candidate observes the evidence that you and your
licensees get along just fine (See Secret#1), and they always like that.
Establishing the Reference-Licensee. Knowing that the odds of expanding your
business quickly through licensing dramatically increases with the availability
of a reference-licensee to help market licenses, the matter arises as to how to
establish the “reference-licensee”. Since you have much riding on the
success of your first licensee, it is smart for you to put a lot of time and
help in getting him/her started.
This involvement is important (a) in helping the licensee toward profitability
and a potential reference, and equally important (b) you learn much about the
licensor-licensee relationship which will be very helpful as your business
expands through added licenses.
Sometimes it is easier to seek out an initial licensee that is
geographically close to you, so that you can more easily spend time at the
licensee’s place of business.
Friends and relatives are often good candidates to be your initial
licensees. Remember that the cost
of each license may be different, so in order to get started you may lessen the
burden of the start-up license fee and the related costs. You don’t have to charge everyone
the same license fee. But if you
have to begin with a licensee that is not geographically close, with modern day
communications (e.g. video SKYPE), you can still give the needed assistance to
your initial licensee. It is
important to note that you should not advertise this added assistance in
seeking licensee-candidates, as this may take you into the area of a
“hidden franchise”.
Finding Potential Licensee-Candidates. In order to have an initial licensee
that will work as a reference-licensee, you must in the first place have an initial licensee. The “chicken and
egg” issue. The
first licensee is often the most
difficult to obtain, though in over half of my client situations the client has
decided to expand its business through licensing because someone has approached
them about being a licensee or franchisee.
So sometimes it is very easy to get the first licensee. To get the first licensee or all
the other licensees you have to start with marketing or as I have always called
it, “Ringing the bell to get the people inside the temple.” (Mixed religion metaphor of a ringing bell on a temple). In my opinion, the best way to do this
is through in expensive or free advertising. I suggest that you start in Craigslist
in a territory that you wish to develop.
Do some test advertising; make it work in that particular territory
before you expand elsewhere.
Don’t take an unsuccessful ad on the road! That is certain failure. Also, note that you can advertise your
business opportunity wherever franchisors advertise franchising opportunities. Look at magazine, trade journals, and
newspaper classifieds. The costs of
these ads vary, and again test the ad in a low cost media before you expand to
spending more money. Money should
not be the issue. Smart marketing
is more important; i.e. targeting your market, finding where the people are in
that market, and then give them the right message. Remember that the message is
to drive the targeted people ultimately to the referral-licensee. In today’s marketing, that “drive” will usually go through a website
that explains the licensing opportunity in such a manner that the
licensing-candidate wants more information from you before asking for the
referral-licensee. Trade shows are
also very good avenues to find potential licensees. If you don’t have the money to get
a booth, do hand-outs placed under hotel room doors with invitations to call
and meet. Or seek to share a
booth. You don’t have to pay
a lot of money to market, and ironically, this fact helps you establish a
better business.
FREQUENTLY ASKED QUESTIONS
1. How
about using marketing companies to sell licenses? This is one way of
doing it. This is how franchises
are sold, and licenses can be sold the same way. In this situation a marketing company
has commissioned salespeople selling the licenses. In my opinion this is not a very good
way of expanding a business. First,
the prices of the license have to be raised, because large commissions have to
be paid to the sales personnel. You
cannot raise money for your own purposes by the payment of the initial license
fees, because almost all of this fee goes to the salesperson
as a commission (including the company he works for). The other negative of using these
companies is that they have little motivation to tell the truth, and they
frequently misrepresent the facts when selling the licenses or franchises. The licensee is lead to believe that the
salesman is a good guy whom he will be working with when the fact is that the
salesman will collect his commission and move on to the next deal. Just the
relationship is misleading without going into what is represented. This results in many lawsuits for
misrepresentation. Another drawback
is that they usually want a separate fee from you (sometimes a large fee) to
set up the sales effort. I prefer
the low cost and more long-term effective approached discussed above.
2. How
do you determine the amount to charge for an initial license fee? As a Licensor you should know how much
profit (income less expenses) to project for a licensee operating a business
that you have licensed. Once you have determined that profit, then ask
yourself, “How much would you pay as an upfront license fee to work 60
hours a week, earn this projected amount of gross profit and then pay you a
continuing license fee of ten percent?” Test it on some friends. Also remember that different territories
have different profit potentials and thus the territories themselves have
different values. In
marketing licenses one of the factors is the income expectations of your
potential licensees. If they expect
to make $200,000 per year and your profit projection indicate a net profit
before taxes of $70,000, then you know who your targeted market is. Not this guy. It is someone who will be
satisfied with $70,000 per year. So
you market accordingly. Do not
inflate the expectations of profit, as this can only lead to problems which you
do not want. If you do the math and
the profit potential, the math may dictate that the profit margin after paying
a continuing licensing fee may be so small that you may have to sell a part-time licensing opportunity, which
is a different market altogether.
And sometimes the math just doesn’t add up to allow you to expand
by using licensing.
(NOTE: I will add new questions and answers
from time to time. So check back.)
Attorney Fees: What is this going to Cost the Client?
·
Some attorneys charge on an hourly basis while others charge
on a flat fee basis. I charge on a
flat fee basis, so that the client knows the full extent of the legal bill in
advance (Because of my unique method of practice, my fees are
approximately 50-to 70% lower than senior attorneys would charge for the same
work in a large law firm in my area.)
Fees vary from geographical area to quality of services
provided. Whatever the charge,
it is far less than franchising fees...and
in many cases you can achieve the same goal by less expensive licensing or
some other legal format. Most lawyers have free initial telephone conversation. This is my practice. Find out right away (i) if the client is
in the “ballpark” for “Licensing” or some other format
and (ii) let the client know what it is going to cost. These are the two things a client wants
to know.
Payment Terms? Clients often asked if there are
payment terms.
Some lawyers offer terms and other do
not. I offer payment terms based upon
the time the client wants the licensing documents delivered for use. This is based on the concept that the
people who pay the full fee at the time of signing the retainer should get
priority in service.
Note
on Article: The information in the above article is a synopsis of a book that he is
writing on the subject of “licensing”, which will be his second
book in his “Lawyers’ Guide” Series.
New Book Title:
LAWYERS’ GUIDE: Advising
Clients on Licensing Versus Franchising
Available in winter of 2010
INFORMATION
ON THE AUTHOR
· Robert Townsend
Law Offices of Robert Townsend
Hampshire House
11944 Mayfield,
·
Voice (310)
207-0180 (24/7)
·
Fax (310) 388-5690
·
SKYPE ADDRESS:
boblama (24/7)
·
E-mail: bob@townsend.net
(24/7)
· Education: Bob Townsend is a graduate of the
· Legal Experience: Bob’s legal
experience involves 20+ years in domestic transactions in nearly all the States
and 33 foreign countries. His areas
of experience are domestic and international transactions and licensing and the
separate field international private securities trading. He has twelve years experience primarily devoted to business
opportunity licensing.
·
Personal: Bob’s wife Sarita died in October of 2008
of cancer. They were married 44 years. He has two grown daughters (with
terrific son-in-laws), one daughter is a UCLA PhD graduate and professor of law
at
·
References: From time to time I am asked if I have
references. Law firms usually do
not have references, as the relationship with the clients is subject to a law
imposed confidential relationship…even the fact that the lawyer
represents the client is confidential.
Also, I do not like to have my clients bothered with inquiries about me
and my work, particularly when those making the inquiry are not serious about
really working with me. Usually the
fact that I have written a highly knowledgeable article on franchising and licensing,
(ii) that I prepare about 4 or 5 license agreements per month and have done so
for about 12 years, and (iii) along with the fact that I am a long time member
of the California Bar, and (iv) that I am available for an interview by the
prospective client usually assures most people that (a) I know what I am
talking about, and (b) will not run off with their money knowing I would get
disbarred and unable to earn a living if I did such a thing. Nevertheless, if someone convinces me
that they are serious about retaining my services and they still need a
reference, I will give them a reference from a satisfied client who have agreed in advance to be bothered on my behalf...which I
deeply appreciate.
Important Notice and Disclaimer
Robert Townsend is licensed to practice law in