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, so feel free
to call.)
· 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
11601 Wilshire Blvd., Suite 500
Los Angeles, CA 90025
· 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 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 thirteen years experience primarily devoted to business
opportunity licensing.
· Personal: Bob became a widower
in October of 2008 after 44 years of marriage.
He has two grown daughters (with
terrific sons-in-law), one daughter is a UCLA PhD graduate and professor of law
at Tulane University Law School and the other is a NYU graduate and former
trader on Wall Street who now is a full time wife and mom in Los Angeles. He has three young grandchildren (a toddler
and two six year olds).
· No 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 13 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.
Important
Notice and Disclaimer
Robert Townsend is licensed to practice law in
