>> Tiffany Bittner: Hello. In our caller segment we are talking about a franchise. When you buy a franchise, what are you buying? Does it share risks? How does it work? Give us a call 1-855-LAW-1955. It’s important to know what you are saying yes to when you sign those forms at the doctor’s office. We explain medical consent. If your marriage is all but over, it doesn’t have to end in the courtroom. We’ll talk about divorce mediation and what is involved in that. We have personal injury attorney Ken Riley. Tonight’s question comes from Tabitha. Tabitha writes in saying, “I have a ride sharing company I got in a wreck with. Is his insurance supposed to cover this?” That’s a new problem out there because it’s a new thing, right?
>> Ken Riley: That’s right. It’s a new problem that we have to address. The more ride share companies in our cities, it’s an issue you have to weave your way through. I’ll tell you this. For the time being, ride share companies are required to carry a million dollars in coverage, the driver the vehicle is driving. You have good coverage there. It’s no different from a cab company at this stage, but there are attempts to make them independent contractors, which would change the way you pursue the action. In your case, you didn’t say who caused the wreck. If another person caused the wreck, that person would be responsible for your medical bills or lost wages. If the ride share driver caused the wreck, you would be able to claim the damages against the driver because you are a passenger in the vehicle. You are a paying passenger. If that’s the case, yes, you would be able to recover from the ride share company. You also have your insurance company. If the driver of the vehicle that hit you doesn’t have insurance, the ride share driver doesn’t have UIM coverage, yours can kick in. It’s complicated. It will get more complicated. You need a lawyer to iron that out.
>> Tiffany Bittner: Head to Ken’s website, deliveringjustice.com.
—- Side Bar —-
>> Kirby Farris: If I sign a consent form for an operation, do I lose my right to sue if something goes wrong? The consent doesn’t give the doctor the right to commit malpractice. The health provider is not relieved of the standard of care with each procedure. Before you sign anything, ask for the details. Ask your doctor to give you a full description of the surgery, the risks involved and the ramifications of not getting the treatment. If you can prove that your physician failed to warn you of the risks before surgery, you may have a call. I’m Kirby Farris of Farris, Riley & Pitt in Birmingham.
>> Tiffany Bittner: Glad to have you along tonight. It’s a show where if you are in a place where you are thinking of starting a business, you have a franchise, questions about who gets involved, who takes responsibility for all of that stuff. It’s a great way for you to call in. We are talking business tonight. It’s going to be a fun show.
>> Ken Riley: We have not done this for five or six years that we have been doing the show. We felt there are folks out there, entrepreneurs that have questions about getting started in business. What if I want to start a franchise? What if I want to buy a franchise? The best thing, we thought, was to get someone who’s worked with this for years to talk to you. Richard Duell is with us. Thanks for being here tonight.
>> Richard Duell: Well thank you for asking me to be here.
>> Ken Riley: Will you talk about the practice you cover?
>> Richard Duell: My practice is almost totally franchising. I work with franchisors and with prospective franchisees that want to buy a franchise.
>> Ken Riley: For folks that may not be clear on what a franchise is, will you talk to the folks about that? There may be folks that want to start a business and they hear the term thrown around but they are not sure what it is.
>> Richard Duell: It’s the single most successful concept. Some say it’s an industry. It’s more than that. It’s a method of distributing goods and services via a license. In plain terms, if it’s taking someone’s expertise, experience, method of doing business and their brand name and licensing it.
>> Tiffany Bittner: The whole package if you will. Let’s talk to Bob from Rainbow City. Hi, Bob.
>> Caller: Hi. I was listening to what you were saying about forming a franchise. The question is, you have a business doing $500,000 or better and you have someone that wants to be a franchisee. There is no legal percentage from the person that says they’ll be the finance — they’ll be the franchisee, but there’s no legal document.
>> Ken Riley: There’s a lot more that goes in. We were talking about it before the show. There is a lot more that goes into being a franchise business than writing down percentages, isn’t there?
>> Richard Duell: Absolutely. Franchising, when you are starting a franchise, you have to look at what does my business offer? Do I have replication to offer? My business, is it capable of being transcended to another party without difficulty? You need to have some economy of scale involved in that type of business.
>> Ken Riley: For somebody like Bob who has questions about, I have a business. I want to expand that business. I have friends or people interested in it. Do they need to contact a lawyer, or is that something they can write up amongst themselves? Or is the devil in the details?
>> Richard Duell: That’s when they come to me when things go wrong.
>> Ken Riley: When there wasn’t presentation on the front end.
>> Richard Duell: Franchising can be a complicated scenario. It’s governed by federal law and by state law. In order to have, first of all, in order to have a franchise, you have to have a license agreement. Franchising is a segment of licensing. So in order to have a good solid contract, you have to have a lawyer that’s involved that knows what he’s doing when he starts designing the franchise. It’s more than just a two-way contract. It’s designing a format of doing business.
>> Tiffany Bittner: We need to take a break. When we come back, more questions about buying or running a franchise. We’ll be right back.
>> Tiffany Bittner: Well, you may have heard lately about the use of mediation in legal battles. How does it work? Bob Prince explains in tonight’s Legal Brief.
—- Legal Brief —-
>> Bob Prince: Mediation can be used to settle a variety of disputes without a trial. Mediators are getting more calls about divorces. In many cases the people are happier coming to a mutual agreement rather than letting a third party like a judge determine what happens to their assets and arrangements with their chirp. Mediation is strictly voluntary. The mediator doesn’t have binding authority and if the mediation isn’t successful, the case can be tried. Mediation fees are billed on an hourly basis. The total cost will depend on how long it takes for the parties to come to an agreement. Still, for many people, mediation has turned an uncomfortable legal dispute into an outcome everyone can live with. That’s your legal brief tonight. I’m Tuscaloosa legal attorney Bob Prince. Back to you.
>> Tiffany Bittner: If you have ever considered buying your own franchise, give us a call tonight. We are talking about a franchise more specifically. What are the common mistakes you see with people that have gotten a franchise? What are the mistakes you see?
>> Richard Duell: The franchisee — they are often — they are not really — they try to get into a franchise and not follow the system. They want to do it their way. That happens after a couple of years. They feel they know more than the franchisor. I see a steady decline for franchisees at that point because they are not following the system. A good franchisor wants to ensure the system is standard. It’s the benefit of the franchisee. If you go to a restaurant and you have poor service or bad food, it reflects on the entire system. A good franchise company wants to enforce and ensure the system is standardized. When a franchisee is off on their own, that’s when the trouble starts. Possibly they shouldn’t have been in a franchise to start with. Say I want to buy a franchise. There are a few locations in Birmingham that are available. I want to go for it. What do I need to do? Where do I start? That’s a good question, really. The franchisor by law is required to give a — franchise disclosure document. It’s a perspective for a stop. However, with a Truth in Lending Statement in real estate, there are a number of categories of information that the franchisor must disclose in the document. The starting point is getting the disclosure document and then going to an attorney that understands franchising and knows what to look for, where the skeletons might be, what the investment might be. Having written a lot of franchise agreements, I know what they’ll negotiate. There are certain areas they will not negotiate. There are some areas they are free to negotiate in. That’s the starting point right there, getting the disclosure document and getting with a good franchise attorney.
>> Ken Riley: If you get the franchise agreement, and you are not a lawyer, you are trying to get into the restaurant business, you could get on the hook for something you are not prepared for.
>> Richard Duell: No question about it. When you get the franchise documents, they are a couple of hundred pages in length. They are all legal news. As an individual, unless you are totally familiar with the legal system, you could get on the hook and bad. You need to know up front what you are getting into, and make sure your investment is the kind of investment that will make the return that you feel like it should make. Part of that involves going through the exercise of due diligence and talking with franchisees that are in the system right now.
>> Tiffany Bittner: Do you have folks that come to you and are not sure which franchise they want to purchase, but they want to purchase a restaurant or whatever, and you help them navigating the right —
>> Richard Duell: I do. Not everyone is suited. You have to look at a person’s lifestyle. Restaurant business is a tough business with long hours. You need to, as a perspective franchisee, someone looking at buying a franchise, we sit down and talk to them about what do they want to do? Is it supplementing their income? Is this going to be their income? How many hours do they want to work? We see what their background is, are they restaurant people or another type of business people? All of that is critical as far as making a decision.
>> Tiffany Bittner: Okay, starting or buying a franchise. That’s our topic tonight. We’ll take a break and return with your questions and continue our discussion.
>> Tiffany Bittner: All right, here is our calendar for July. July 3rd, summertime injuries, July 10th, divorce and child custody matters. July 17th, DUI related phone calls and questions. As always, please join us for those shows and call in with questions you have. If you are watching this evening and you want to talk more about starting a franchise, or if you have a question for Richard, call him at 408-3025. Correct me, what did I say? Duell Law Firm will make sure you understand that. Duell Law Firm here in Birmingham, 408-3025. Call him if you have a question. Bob Prince (800) 536-1105 or princelaw.net. Ken Riley is here tonight representing Farris, Riley & Pitt. 324-1212 or deliveringjustice.com is his website. A great show. Interesting to hear things about franchises and the do’s and don’ts behind them. If you are watching and you have a question, it’s not too late to call us and ask the question. Richard, continuing the discussion, we talked about common mistakes. What makes a franchise successful? Following the guidelines, right?
>> Richard Duell: That’s for the franchisee. What makes a franchise company successful is having the determination and system in place that enables franchisees to follow it easily, and then that system can spread throughout the United States and internationally. Franchising, which really got his foothold in the United States has spread internationally. It’s big time internationally. I do a fair amount of international work with franchise companies. One thing that I think for a small business that’s thinking about franchising, I think the small business needs to look to see whether or not they have their business systemized so they can expand. Usually you can start a franchise with one prototype. It’s usually beneficial to have more than one. That’s how you develop those systems and get those systems in place, and then make sure the franchisor is the type wanting to make sure its franchisees are successful. If you have successful franchisees, you will have a successful franchise company.
>> Ken Riley: If you have franchisees for whatever reason, get into a deal and think, “this is not for me”, do you have those people come to you and say, “How do I get out”?
>> Richard Duell: Yes.
>> Ken Riley: Where do you start with that conversation?
>> Richard Duell: We start with what do they want to do? What kind of investment do they have in their business, and what is the franchisor willing to do? Franchisor doesn’t want any of its franchisees to fail because that causes blight on the franchise itself. Most of the time they are getting new leads and can direct the leads to the franchisee that wants to sell its business. That franchisee can get out of the business and recover the financial assets it had into the franchise to start with. That’s the first way of taking a look at it, is to try to work through the franchise. Of course, there are business brokers and everything else out there that help with selling businesses.
>> Tiffany Bittner: Does the franchise itself have any say in location where new businesses select to go in?
>> Richard Duell: Yes, and it really depends on the system itself because some franchise companies want to develop — say, Alabama, and they’ll focus their attention on Alabama and solicit franchisees only in Alabama. The franchisee, on the other hand, has a market that they are interested in, so that franchise company may not be interested in that market. They may have to go to another franchise company.
>> Tiffany Bittner: What about financing — how does financing if you are interested in purchasing a franchise, how does that work?
>> Richard Duell: The franchisee needs to have capitalization.
>> Tiffany Bittner: That’s different than starting a business where you can go to receive financing?
>> Richard Duell: Yes. There are all kinds of available franchising because franchising is such a recognized industry. That’s one of the benefits. FDA has financing as well as various institutions out there. Franchising, being a recognized mode of operating a business is well known, and most people that are financing SBA or banks will take a look at the system as a whole. That’s why it’s valuable for the system to succeed. When you are building equity in your own business, the system itself is growing. When the system is growing, you are growing equity in your business.
>> Ken Riley: If I’m watching tonight and I want to start a business, I don’t care about start ago franchise, but who knows, just starting a small business, is that somebody that needs a lawyer to talk about or draw up things, or is it simple as opening shop?
>> Richard Duell: It can be if it’s a Mom and Pop. It can be simple as opening up a shop. Usually, those are the types that fall into the pitfalls later on. When you don’t plan and don’t execute the plan, that’s usually when you have a problem downstream, down the road. My recommendation would be to talk to your financial accountant, talk to your lawyer, get their legal perspective. It’s simple as whether I start as a business as a sole proprietorship in your own name, or start an entity to start the business, which gives me legal protection. That alone can save a person that’s starting a business hundreds of thousands of dollars.
>> Tiffany Bittner: All right, Richard, thank you for coming in. We appreciate you coming in tonight. Ken Riley, great to see you. It’s the Fourth next week, so join us for LawCall next Sunday night.