For the first time, the foreign lawyers outnumbered their U.S. counterparts at the International Bar Association’s twice-yearly meeting held in conjunction with the International Franchise Association’s annual legal symposium in Washington, D.C.
Flying in for this meeting last May was not for the faint of butt, since the trip for many involved endless consecutive hours sitting on the aforementioned body part in a fairly unmovable position. With this in mind, a number of attendees flew in early and took advantage of the IFA’s portion of the symposium, which reciprocated by offering more international sessions than in years past, according to IFA’s Legal Symposium Chair Brian Schnell of BrightStar. John Baer of Greenfelder, Hemker & Gale in Chicago is the IBA’s franchise chair, as well as conference chair.
One of the advantages of being a small yet vocal group is that the room set-up for breakout sessions can be much more conducive to sharing information. Rather than sitting school style—with the speakers at the front of the room and everyone else facing front—seating was arranged in a square, which allowed everyone to be part of the conversation. With a nod to technology, the session agenda and papers were distributed on a flashdrive and session evaluation forms were emailed.
The first session covered a new theme: Private equity firms investing in international franchises, especially in master franchisees of large food brands. Andrew Loewinger of Nixon Peabody, Washington, D.C., moderated a panel made up of Ted Pearce, Driven Brands in Charlotte, North Carolina; James Goodman, Gemini Investors, Wellesley, Massachusetts; Carolyn Vardi, White & Case, New York City; and Gilles Menguy, Gast and Menguy, Paris, France.
"It used to be that if someone in the office spoke English with an accent, he was made the international director," one of the panel members quipped. Not so today. International deals are now being recognized as the complex, multi-faceted, legally challenging deals they are.
Some of the points the panel made were:
• Predictability of cash flow is the attraction of franchise deals for private equity firms;
• And while it makes sense for private equity firms to look at master franchisees, a cautionary note is that it creates a cumbersome three-tier relationship because the franchisor is also involved;
• Take the time and devote the resources necessary to understand the regulatory landscape.
Not surprisingly, communication was another topic that is complicated by international deals. Leonard Polsky, partner at Gowlings, Lafleur Henderson in Canada, and William Edwards, CEO of EGS in California, took the basic conversation of translation deeper into negotiations, contracts, adapting menus and documentation. While menus or services can be adapted, "what doesn’t change is the system," Edwards said. "Change the system and they can’t make money."
As Americans, U.S. representatives are required by their government to know who they’re doing business with, who owns them and what other businesses they’re in.
Philip Zeidman of DLA Piper commented that often in foreign deals, there’s a "halo around the small number of people who speak English, (which) raises their status far above their pay grade." Someone else mentioned that the person who handles the U.S. negotiator is often called the "barbarian-handler."
That title most likely is because Americans are perceived as coming from a "John Wayne culture." Too often, Edwards said, Americans "believe we should get off the plane and an hour later have the agreement. That’s not true in other cultures."
Being able to freely discuss what is true in other cultures is one of the biggest benefits of making that flight to D.C. every year.
