Franchisors need to embrace the principles of, and train their entire organisation in, smart communication. Smart communication is the art of communicating with franchisees and others in a way that will decrease the risk of litigation and help you to win a case should litigation arise.

The six basic principles of smart communication are as follows:

  • Communicate what you mean and mean what you communicate - while this may sound trite, it is not. By communicating what you mean, you avoid creating ambiguities between parties and you create a transparency that builds trust. For example, if you communicate what you mean, you will not threaten termination when you know that you are unwilling to take that step. Following this simple rule, you can provide clarity and decrease the likelihood of misunderstandings and distrust.
  • Know when to create a written communication - avoid admissions, as they may come back to haunt you if you do end up in litigation. As a general rule, stick to the facts and avoid opinions. For example, envision a situation involving a failing franchisee. No one in the franchisor organisation wants to take the blame, so people in various departments begin to point fingers at one another. Perhaps the franchise development team says the problem was caused by a lack of operational support, while the operations team says the problem was due to lack of effective advertising and the marketing team says that the development team erred by selling the franchise to the individual in the first place because he was undercapitalised. While playing the blame game, they are also building a good case for the franchisee to bring against the franchisor. All of these communications are discoverable in a lawsuit. When deciding what to put in writing, try to create an exhibit that will win the case, rather than one that could lose the case.
  • Understand the significance of the words you communicate - certain words have legal meanings that are undesirable in the franchise context. For example, you should avoid referring to your franchisee as your 'partner' or your 'agent'. Also, do not identify yourself or your relationship as 'fiduciary'. In your franchise documents, you should always have the 'right' to do something, rather than the 'discretion' to do it.
  • Never allow an inaccurate writing to be the last writing - you do not want to make an admission by your silence. For example, if a prospective franchisee sends an email thanking you for the discussion on earnings information, when there was no such discussion, you will need to set the written record straight.
  • Understand the limits of the attorney-client privilege - the attorney-client privilege applies only to advice given on legal issues. Thus, just because you copy your attorney on an email that discusses marketing strategies, that communication is not necessarily protected under the privilege.
  • Beware of email communications - special care needs to be exercised when communicating by email. Emails are often drafted casually and sometimes carelessly. It is too easy to hit the 'send' button without considering the wording and tone of the communication. It is also too easy to send the email to the wrong person or hit the 'reply to all' button when you do not intend the email to go to everyone. Often there is a false sense of privacy and a false expectation of the ability to delete the writing or recall the email.

By following these six common sense rules, you will help minimise your litigation risks.

For further information on this topic please contact Mary Beth Brody at Faegre & Benson LLP by telephone (+1 612 766 7000), fax (+1 612 766 1600) or email ([email protected]).

This update is published with the permission of Franchise Solutions.