Everyone loves to complain about lawyers. They like to talk (and talk). They relish in completely rewriting contracts. They love to argue. And they bill by the hour—often many hours. Yes, such criticism is sometimes deserved. However, there is no reason that outside legal counsel cannot be a collaborative partner and play a critical role in helping restaurants execute on growth plans coming out of the COVID-19 pandemic.
As COVID case numbers trend downward and more vaccinations are administered every day, the quick-service industry expects a surge in consumer demand in the latter half of 2021 and all of 2022. Brands do not want to miss this tremendous revenue opportunity and should look to maximize usage of their outside counsel in negotiating lease and acquisition deals as part of an overall strategy to increase location counts. Now is a perfect time for industry players in growth mode to reevaluate and reconsider how they use outside legal counsel.
Capacity and Capability
Legal needs for a company adding one or two new locations per year will be vastly different if the same company expects to add ten or more locations in a year, especially if there are plans to expand into new geography. Does current legal counsel have the capacity and personnel to take on a substantial increase in deal flow? The answer can make or break a company’s growth plans.
Outside counsel should have a deep bench of attorneys who are experienced in negotiating retail deals and have a track record of success handling clients with large real estate portfolios. A company’s desired increase in deal flow should not be hampered by outside counsel’s inability to keep up with the additional workload.
Innovation: Technology and Data
Ask any quick-service restaurant development director how long it takes on average to negotiate and sign a new lease and the answer will usually be some variation of “three to four months.” That estimate is almost never accurate. Outside counsel should be tracking this data and be able to quickly produce the exact number of days for deal cycle time. Optimally, outside counsel should also track specific data subsets for average deal cycle time, including cycle time by individual outside attorney, individual company real estate professional, city, region, and deal type. Such data tracking will allow a company and its legal counsel to analyze costs, trends, and training opportunities (both internally and externally) in order to collaboratively improve deal cycle time.
If outside counsel is not using technology to track data, then it should. Otherwise, a client is flying blind with its outside counsel. Other data outside counsel should track and report on a real-time basis can include spent legal fees, current status of active deals, and key contract dates and milestones. Ideally, outside counsel will develop an interactive client website tailored to the client’s specific data and reporting needs. Such a website can also be a repository for form documents, executed documents and training materials. Easy to access information is critical for keeping track of goals and determining strategies to overcome obstacles.
Gone are the days when lawyers are expected to merely write up an agreement. Lawyers are now expected to be business advisors, therapists, and project managers. Unfortunately, most lawyers do not have those skills, especially when it comes to project management. The good news is that more and more law firms are hiring and utilizing legal project managers (LPMs). LPMs can provide service well beyond standard legal work such as:
Process Mapping/Process Improvement: A quick-service restaurant in the midst of rapidly expanding its footprint will likely need to revamp its various internal processes (e.g., lease negotiations, due diligence, and construction) to successfully scale growth. LPMs can assist in the rethinking and retooling of each process through process mapping and implementation of process improvement strategies.
Technology Build-Out: LPMs will work with a quick-service restaurant to identify how technology can best address problems and pressing needs and then build out a tailored, technology-based solution, including individualized client-law firm websites, document automation, and the use of programmable bots that can analyze documents and even perform some basic drafting.
Special Projects: Every quick-service restaurant growth story will have its ups and downs and share of surprises. LPMs become indispensable when aiding outside counsel to handle complex problems so that store growth is not interrupted. LPMs can quickly devise strategies and solutions to deal with unwanted bumps in the road so that legal counsel can focus on actual contract negotiation.
Lowest Cost Versus Best Value
Try to avoid too quickly pulling the trigger for the lowest cost legal provider at the expense of the provider that brings the most value. Sometimes you get what you pay for. The cost of a single lawsuit because of sloppy drafting in a lease, for example, can wipe away the entirety of any savings realized by using the cheapest option. Additionally, painfully slow negotiations will lead to greater opportunity loss.
Legal providers are now moving away from the traditional hourly billing model. There is a growing movement in the legal industry to offer “Alternative Fee Arrangements” and the trend has only been accelerated by the pandemic. Innovative fee structures can include:
Capped Fees: Legal fees for a deal cannot exceed an agreed upon cap.
Fixed Fees: Legal fees for a deal will be a set fee regardless of how many hours are spent to complete a deal.
Portfolio Fee: Counsel is paid a set fee on a monthly, quarterly, bi-annual or annual basis to be used for all deals handled during the applicable fee period.
These Alternative Fee Arrangement options incentivize outside counsel to be aligned with the quick-service restaurant’s own business and growth strategies.
In determining outside counsel needs, it is important to thoughtfully balance cost with provided value, including the considerations discussed above. The real estate market is starting to heat up and there will surely be fierce competition for much sought after “Main-and-Main” locations across the country. Using the right outside counsel can provide the extra edge in both “on-the-ground” contract negotiations and the overall programmatic approach to successfully realize growth plans. Outside legal counsel does not have to be an unwanted impediment and instead can be an invaluable partner in accomplishing expansion goals.
Eric M. Greenberg is a Partner at Seyfarth Shaw LLP, a full-service law firm, and also serves as Co-Chair of the firm’s National Leasing Practice Group. He manages teams of attorneys, paralegals and legal project managers handling over 750 retail deals per year for many prominent and fast-growing regional and national retailers. His collaborative client relationships have been recognized with accolades and awards from the Association of Corporate Counsel (Value Co-Champion Award), The American Lawyer (Best Client/Law Firm Team Award) and The Financial Times (Innovation in Collaboration Honor).