LeadershipOperations

Would you do anything to avoid litigation?

Great Clips, Inc. will do anything within reason to avoid litigation. However, if all other efforts to resolve a dispute are exhausted and litigation becomes the only option, Great Clips’ strategy is to win. In the company’s 37-year history, it has litigated with franchisees just nine times and has been successful in all cases. In a company the size of Great Clips, risk management is always top of mind.

For some members of ISBN who have faced few, if any, issues that have escalated to the courtroom, nine court battles might seem like a lot. However, with Great Clips’ status as the largest hair care brand in the world with over 4,300 salons owned and operated by 1200 franchisees, it is actually pretty remarkable.

Great Clips attributes its success in avoiding litigation to its culture and consistent adherence to its policies and procedures. You all know how ethical our vice-president and past ISBN president Rhoda Olsen is; well that approach permeates the entire culture of Great Clips. The executive team operates under the adage “If we make a mistake, we will correct it.”

But Great Clips’ aversion to litigation also has other roots. Most litigation must, by law, be included in the Franchisee Disclosure Document, commonly known as the “FDD”. When litigation is required to be disclosed, it is important for franchise organizations to be able to show prospective franchisees that the litigation was necessary and the result was a positive one for the franchise system. Another concern is that occasionally, Great Clips will be improperly named in litigation that stems from the operations in a salon owed by a franchisee. In those cases, Great Clips works assiduously to have Great Clips, Inc. removed as a party in such litigation.

To limit and manage any conflict between Great Clips and its franchisees, Great Clips has developed systems and procedures which allow the company to deal early on with franchisee violations to the Franchise Agreement. Most violations are addressed in the Great Clips Compliance Policy – a document that explains to franchisees what would be considered a violation and how the company will respond. For instance, if a member of the field staff is performing a Quality Service Review on a salon and notices that the facilities and/or operations are not up to standard, the franchisee is given a warning and time to rectify. If that doesn’t happen, the franchisee is given “restriction points” that will affect the franchisees’ potential to grow within the Great Clips brand. The more serious the violation, the more serious the consequences. Such transparency helps Great Clips deal with issues before they escalate, or puts Great Clips in a good position should the company need to take more serious action.

Despite the Great Clips culture and its carefully crafted systems and procedures, the company now faces new challenges surrounding the ever changing legal issues that pertain to technology. With technical innovations quickly affecting how companies function, every legal team across the county is struggling to keep up. The rules are changing and every business must strive to keep up to avoid costly financial and reputational consequences.

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Sandra

Sandra

With more than 30 years in franchising, Sandra brings experience and insights into not just legal compliance, but also into issues that affect the everyday workings of a franchise business.

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