Crisis Options and Tactics

When franchise companies are about to come upon a crisis, it is extremely valuable to inventory goals, options and tactics.

What is frequently and unreliably assumed is that there is a unitary dispute package concerning which one is either right or wrong – it’s the principle of the thing.

How does one sort out how to proceed? Consider the following.

The franchisor may not wish to resolve the dispute if resolution must include a substantial hit on its financial performance. Despite a desire to retain its franchisees, it is rationally to be expected that who the company is and to whom company management is accountable may make accommodative resolution a less than top tier preferred option.

Franchisor management may consider it critical to accommodate its timing needs as much as resolution needs. Sometimes the quality of financial performance over the short term preempts positive qualitative consideration of the merits. The requirement to meet specified financial performance goals may trump any good faith/fair dealing impetus to attain resolution.

Where the company is publicly held, this is more normal than not. Where the company is privately held, but financing agreements have triggers that could be pulled by early on resolution tends to produce the same result.

Representation of crisis involved companies, especially in the franchise industry, requires the presentation of myriad tactical options to accommodate all the possible elements of the company’s short term game plan.

The franchisees have a defined set of issues. The contract is “tight” but not always slam dunk dispositive of those issues. There are lawyers out there who can turn contract language on its ear when it is apparent that the language is not even close to equitable in a particular fact pattern. They are always adamant. Though any victory they might achieve might be overturned on appeal that is not a comfort at the moment we are talking about.

It is never “the principle of the thing”. No one is ever absolutely right or wrong in business conflicts, except in that rare situation in which there is obvious intentional wrongful conduct. Rather, in my experience, there are always numerous principles vying for primacy, and they must be prioritized according to their immediate relevance, which may change frequently, and assigned the weight they deserve at the moment when a decision is to be made. And different decisions must be made frequently, requiring a resorting of variables each time. What we thought was right yesterday may not be what is best for us today. Crisis management counsel must constantly rethink all tactical assumptions and be ready to modify them moment by moment.

You have to be able to get up in the middle of the night and go see your client and clearly think through this moment’s emergency, providing options that can be plugged in and unplugged as the circumstances may demand.

You have to be ready to take risks that normally company counsel would never entertain. They don’t operate in any battlefield mode. They don’t know how to operate in a battlefield mode. What may need to be scuttled could be something they only recently blessed. They aren’t comfortable with that. The crisis management counsel has no investment in the decisions and programs that produced the crisis. That enables the flexibility that normal corporate counsel were trained to avoid at all costs. Crisis management counsel has to be free of any danger of being criticized for having been involved in any aspect of the history that led up to the present difficulties.

What I am describing is a situation in which there are so many dependent variables the mix of which are constantly in flux, that the edge of chaos is not a far horizon. If you have lived with this fire fight stress level many times and you don’t have a history with any of the disputant parties, you are probably exactly who they need..