| By Steven J.
Belmonte March 1, 2011 Last week, I received a phone call from a hotelier who refused my advice two years earlier. In 2009, the owner was facing a $200,000 liquidated damages claim imposed by a franchise company. He contacted me to help him resolve the matter. Using my many years of hospitality industry experience and leveraging a long-time relationship with franchise executives, I quickly was able to reach what I felt was an equitable settlement of $65,000 structured on a payment plan. The owner wouldn't bite. Emotional and upset with the franchisor, he refused to pay the reduced penalty and counter-offered an unreasonable settlement of $20,000 -- which the franchisor rejected. The owner thanked me for my time, and said he would take his chances with litigation. The call I received last week began with the owner saying: "Help me! They are now suing me for $350,000!" The initial $200,000 liquidated damage claim had compounded and now contains interest, attorney fees and infringement costs. This true story is not uncommon, and it's a good lesson in weighing risk vs. peace of mind. Therefore, if you're still looking for a New Year's Resolution, here are a few to consider: In 2011 . . .
This is not a theory -- rather it's carved in stone in the form of a franchise agreement. Those stories and promises you casually shared with a franchise salesman over a beer are irrelevant. The franchise agreement is mostly all that matters. Remember: If you look at the percentages of franchisor vs. franchisee law suits, the odds are greatly in the franchisor's favor. Negotiator vs. Litigator Years ago I opened the industry's first franchise negotiations company because it was a service area that genuinely lacked expertise and direction. As former CEO of Ramada Hotels (among other executive-management roles) and also a former hotel owner, I had first-hand knowledge of both sides, fully understanding the intricacies of franchise contracts and spending more than 35 years building relationships with the leading franchise companies. Before Hospitality Solutions LLC was established in 2002, there was no other resource for hotel owners to turn to when needing assistance with liquidated damage claims or structuring a new, fair franchise agreement other than hiring a law firm. I'm not an attorney -- and that serves the
franchise
community especially well because by law, attorneys are required to
speak to
the franchise company's attorney. An attorney cannot go to the
franchise executive
team and enter into productive negotiations other than with another
attorney.
It's simply not allowed. And everyone knows what happens when two
attorneys get
together; because they are unaware of business conversations and/or
relationships that have been developed between the franchisor and
franchisee
over the years, it results in one attorney trying to impose his power
over the
other. Beware of Bait-and-Switch Since 2002, some attorneys have disguised themselves as professional franchise negotiation companies much to the dismay -- and sometimes eventual demise -- of the franchisee. Recently I have heard from some owners who
had been contacted
by an attorney advising not to hire a professional franchise negotiator
but to
work with the attorney instead. The hook is that the attorney will
charge
$1,000 less than the fees charged by a reputable negotiations firm. Here's the potential problem:
A month after the franchisee agrees
to
attorney negotiations, the litigator advises the owner that the "offer
of
settlement" is not attractive enough and recommends litigation.
Thus
the time-consuming and costly litigation cycle begins all over again. While low upfront fees may be attractive to
owners in
today's economy, unless the offer is coming from a proven, reputable
franchise
negotiations company -- and not an attorney -- franchisee beware! Your
goal
when entering into franchise negotiations is to avoid litigation --
period. Let me be clear. I am not anti-attorney.
It's an honorable
profession that many of us will need at some point in our lives. It's
just that
sometimes when business people communicate without attorneys,
settlement can
often be reached. So regardless which New Year's Resolution
you adopt (if any),
a goal for any hotel owner in 2011 should be to avoid litigation and
partner
with a reputable franchise negotiations specialist to either assist you
in
structuring your new, fair franchise agreement or settling your
liquidated
damages claim at a substantially reduced fee. That's a "hospitality
solution" that everyone can live with . . . and afford.  About Steven J. BelmonteSteven Belmonte is CEO of Hospitality Solutions, LLC, a company providing new franchise agreement negotiations, franchise termination and liquidated damage claim negotiations, mediation, expert witness, litigation support, insurance and payroll services. Former President and CEO of Ramada Hotels, Belmonte also served as Chairman of the American Hotel & Lodging Assn.’s Educational Foundation and serves on the Board of Directors of Arlington Hospitality Inc. and the Industry Relations Committee for the Asian American Hotel Owners Assn. For more information on Hospitality Solutions LLC, call (407) 654-4600, email [email protected] or visit www.stevenbelmonte.com. |