If you’ve ever considered expanding your law firm’s reach, law firm franchising could be your best option. It can be a fresh start to grow in another province or city, while still maintaining your firm’s good reputation. We’ll break down how this process works to see if it’s worth considering by your partners and for your firm.
This article is for lawyers — whether in solo practice or in a firm — who are looking for business models to expand their legal practice. This can also be used by either side (franchisors or franchisees) in a potential law firm franchising arrangement.
What is law firm franchising?
Law firm franchising can be understood in two ways. First, it may refer to a law firm from a different jurisdiction establishing its presence in another through a local lawyer or firm. Working the other way around, it may also refer to a local lawyer or firm asking the law firm franchise of a larger firm. Either way, it simply means using an already-known firm’s name, brand, or trade name.
While it usually mirrors that of a commercial franchisee-franchisor relationship, there are just some tweaks when it comes to law firm franchises. Here, the franchisor firm may be the one who is seeking a franchisee — another lawyer in a different area — who may want to put up the presence of the franchisor in their area. This is sometimes a result of an outsourced work becoming larger, or a deliberate expansions strategy of the franchisor-firm.
Here's a video about a typical franchising business model that franchising of law firms also uses:
If you want to ask for help from colleagues about franchising a law firm in another area, you can check out our directory of the best franchise lawyers in Canada as ranked by Lexpert.
Law firm franchising vs. M&As
Franchising a law firm is one of the many ways firms can expand their reach and target market. For instance, we also have the classic mergers and acquisitions (M&A), wherein the larger firm acquires a smaller one, which then adopts the name of the acquiring firm.
However, there are differences between a law firm franchising and M&As:
- parties: M&As usually happen between entities that vary greatly in size and power; while franchising can be between two parties wanting to expand each other’s businesses and client reach
- costs: when structured properly, franchising may be cheaper than a full-blown M&A between two firms, not to mention that franchising of law firms can be done initially with smaller costs
How does law firm franchising work?
There's no hard-and-fast rule when it comes to setting up a law firm through a franchising agreement. In some cases, it may also be like opening a new firm. But as a starting point, here are the following steps on how franchising of law firms works:
- Having a strong franchisor-firm
- Looking for a target franchisee-lawyer or -firm
- Laying the foundation of the franchisee-lawyer or -firm
- Transferring technology and mentoring
- Expansion of the franchisee
We’ll discuss each step below. Note that, for clarity, we’ll be using the term “franchisors” for the law firm or lawyer who owns the brand or trademark being franchised. On the other hand, the “franchisee” refers to the other firm or lawyer/s who’ll be establishing the new firm in their area using the franchisor’s brand or trademark.
1. Having a strong franchisor-firm
Every success comes from the source, and in the case of a law firm franchising, that would be the franchisor-firm. It must have a good reputation to begin with, since it will surely affect the franchisee in all aspects: revenues, clients, and a lot more.
2. Looking for a target franchisee-lawyer or -firm
This is where your external, intimate connections may work. A target lawyer can be that colleague who settled down somewhere else, or that friend whom you still keep in touch with. Starting small will also not hurt; trimming the partners to one or two, along with a paralegal, can be a good start. This will also help in minimizing costs for the franchisor.
3. Laying the foundation of the franchisee-lawyer or –firm
At this stage, all technical requirements to jumpstart the franchise are complied with. Aside from the franchising requirements (discussed below), this would include all arrangements between the franchisor and the franchisee. This is also where quality and excellent client service starts — franchisor and franchisee supporting one another to keep the ball rolling.
Major consideration: the franchising agreement
Bulk of the negotiations between the two parties would be in drafting, approving, and signing of the franchising agreement. It may also include other documents, such as the franchise disclosure document. At this point, it’s also prudent to consult with a franchise agreement lawyer, who are knowledgeable in the ins and outs of franchises in Canadian laws.
Specific attention must be given to the following details in an agreement for a law firm franchise:
- rights and responsibilities of each party
- limitations and other restrictions on the franchisee
- conditions when closing the practice
4. Transferring technology and mentoring
Since the people in the franchisee will be bringing the brand of the franchisor, it’s important that they have all they need to live up to this name. This includes resources, not just monetary (although that’s also important), but also mentoring and support.
When both franchisee and franchisor operate in the same niche, then technology transfer wouldn’t be a problem. Otherwise, increased assistance may be needed for the new franchise.
5. Expansion of the franchisee
Give it some years and expansion to new horizons may now be possible. This can either be:
- the franchisee expanding to some nearby city or municipality within the province
- the franchisor establishing another franchise in a different province
Hiring additional partners and staff in the now-established franchisee can also be a good expansion idea.
What are the pros and cons of law firm franchising?
Other than comparing it with M&As, franchising of a law firm has its own advantages and disadvantages, although these will depend on a case-by-case basis:
Advantages of law firm franchising
Franchising a law firm involves a cheaper and simpler process when a firm wants to establish its presence in another area. Generally, it allows you to reach new clients while maintaining your own brand’s reputation.
Here are some of the additional perceived benefits when franchising a law firm:
Fewer operational costs
Opening a new office doesn’t necessarily involve taking a super large lease or space. In some cases, especially when things are still being tested, it may only start as a work-at-home or hybrid-work setting, or just in a coworking space for the franchisee-lawyer.
To add, there are cheaper options for parties when it comes to gadgets and technology available in the market nowadays. The point being: there’s no need to spend a lot of money when establishing a franchise whose operations may still be smaller (for now).
Lesser financial risks
Related to fewer costs, law firm franchising may incur fewer financial risks. If it fails, neither party to the franchising agreement has spent a lot of resources before and during the actual implementation of the franchise.
Human resources are also not wasted if the franchise doesn’t push through. Every opportunity and attempt to expand will always be valuable for both parties and are not taken against them.
Using a local’s knowledge
Hiring a local lawyer, who is already knowledgeable of that location’s market and court processes, is a better choice. Compare this to sending an associate who will establish the franchise, which is also more costly and will take a lot of time for adjustments.
Homegrown, regional lawyers are also a franchisor’s entry point in looking for more talents within the area. As such, this can eventually help the future expansion of the franchisee.
Transfer and guidance
One similarity between a commercial franchising contract and a law firm franchising is how franchisors would guide the franchisees, especially during the early stages.
However, law firms take it a notch higher. The franchisor firm doesn’t just ensure that the franchisee is up and running but that it is also well-equipped to handle niche cases on behalf of the franchisor.
After all, it’s the name of the franchisor that everyone is bringing to the table.
Two-way growth
Franchising a law firm is a great opportunity to grow the franchisor’s name and expand it to new areas. At the same time, lawyers in the franchisee can also grow professionally and later expand on their own.
The expansion of the franchisor will also not be at the expense of the work they originally set up. For example, the Toronto cases previously taken are continued, while taking new cases through the Vancouver franchisee.
When it comes to franchising a law firm, franchise lawyers can help their colleagues in the legal field big time. Find out more about franchise lawyers with this video from Canadian Lawyer Magazine, one of our sister publications:
There’s no better place to ask about law firm franchising than the law firms that are experts in the field of franchise law. Head over to our directory of the Lexpert-ranked best law firms for franchise law in Canada.
Disadvantages of law firm franchising
While the biggest advantage of law firm franchising is expansion and growth, it doesn’t come without hangups. Here are some of the cons of franchising a law firm’s brand that franchisees and franchisors may have to be wary about:
- potential conflicts between the lawyers of the franchisee and the franchisor
- risk of underperforming franchisees that can affect the franchisor’s name
- limited autonomy on the part of the franchisee when it comes to management
However, these disadvantages can be addressed early in the relationship, especially when brought to the table right at the start.
Is franchising a law firm regulated by law societies?
There are two things to keep in mind when franchising a law firm: the provincial laws on franchises and the law societies’ regulations, particularly:
- inter-provincial mobility
- registration of the law firm
- compliance with administrative rules
- rules on remote commissioning
Each of these will be shortly discussed below. Some of these rules from your law society may or may not apply, depending on how you structured your law firm franchising. This is why it’s important to always consult with a franchise lawyer, especially in the area where your potential franchisee will be established.
Provincial laws on franchises
Each province would have their own franchising act that may apply when franchising a law firm. Some highlights of these statutes are:
- every party’s responsibility to exercise their duty of fair dealing
- disclosure of material information through the disclosure document
- conditions for a valid rescission of the franchising agreement
Inter-provincial mobility
It’s really not necessary for a lawyer from the franchisor to apply for inter-provincial mobility, since there’s the local lawyer who will take care of the franchise’s operations. Nevertheless, it’s wise that lawyers in a law firm franchising keep these rules in mind, as there can be instances when it’s already indirectly violated.
Registration of the law firm
Registration of the franchisee-firm in the province where it will be operating may also be required. Aside from the federal registrations for tax purposes, it may include:
- provincial registration of the business name and the corporation
- business licensing at the municipal level
Compliance with administrative rules
A newly established franchise of a law firm must be quick on their toes when it comes to the administrative compliances by the law society. For instance, the franchisee may be required to:
- report the chosen business structure
- purchase the required professional liability insurance
- render annual reports and pay annual fees
- comply with continuing professional development (CPD) requirements
Rules on remote commissioning
Law societies have adopted certain measures to allow remote commissioning through the use of audio-visual technology. In law firm franchising, this may be applicable in certain circumstances. Lawyers from the franchisee and the franchisor must be knowledgeable of these rules on remote commissioning just to be sure.
Law firm franchising: opening doors to many possibilities
Nowadays, who would've thought that franchising would also apply to the legal profession. With the endless possibilities that we now have, borders are becoming less and less restrictive for one to practice law. With the right strategy and support, law firm franchising opens the door to new opportunities and growth.
You can also check out the Special Reports and Rankings page of Canadian Lawyer Magazine when looking for the best lawyers in different practice areas and locations when doing law firm franchising.