From England and Wales, the newest hotbed of innovation in the current legal marketplace, comes word that the first nationwide solicitor franchise is on its way. Legal Futures reports that Face2Face Solicitors “is initially aimed at small private client law firms and will provide franchisee solicitors with centralized back-office systems – including accounts, IT and regulatory compliance – and central marketing and business development, to enable them to focus on the legal work.” Face2Face would seem to fit the Alternative Business Structures model very well, and in fact, the company plans to register as an ABS when the starting gun sounds October 6.
Face2Face is compared to and contrasted with another British operation, Quality Solicitors, which has been around for longer. Quality Solicitors is a network of about 200 independent law firms across the UK, ranging in size from solos to firms with more than 40 partners. Face2Face characterizes QS’s business model as one that rebrands existing firms, whereas its own model is “targeting start-ups, breakaways and firms looking to be ‘reconstructed,’ especially if there is a need to consider succession/exit.” In practice, the two models probably won’t come across much differently to clients; in both cases, they’ll see a small law firm with a franchised brand and the promises that come with it.
The UK, of course, is also home to the still-mythical “Tesco Law,” the widely mooted example of what the ABS provisions of the Legal Services Act would enable: legal services sold by supermarkets. This too would be a franchise operation, albeit with the franchised firms operating inside the mega-stores rather than in downtown or suburban storefronts. Canada has something similar with the “President’s Choice” line of banking and insurance services offered through Loblaw’s or the Great Canadian Superstore supermarket chains. (I enjoy telling US audiences that the Tesco Law equivalent in Canada would be “Loblaw’s Law”).
President’s Choice aside, however, the idea of franchise law firms hasn’t taken off in North America. I still remember the launch, back in the mid-1990s, of First American Law (not to be confused with First American Title Insurance or the First American Law Center), which planned to build a fleet of small branded firms across the US and Canada. Perhaps because it was ahead of its time, FAL didn’t take. The idea hasn’t gone away, though: Richard Granat recently floated the idea that LegalZoom might get into the same kind of business, supporting small firms with a brand and a back-office processing center.
The common thread in all these companies and concepts is this: a series of small firms, from solos up to about five lawyers but conceivably larger, operating independently but under a single brand name and supported by centralized web-based back-office support and marketing functions, serving consumers and some small businesses in heavy-traffic areas of law like family, real estate, wills, and business law. Because the work is what lawyers like to call “commoditized,” the brand becomes extremely important. Among the promises that QS firms make to their clients, for instance, are “no hidden costs,” “direct lawyer contact,” “same day response” and “the first consultation free.”
That’s one vision of the future. At the opposite end of the spectrum lie the global giants, and they’re taking a much different approach. Most of these firms dread the “commodity work” label and strive to serve a high-end market of major corporate clients with complex, challenging, high-stakes work that engages lawyers intellectually and rewards them stunningly. And while smaller firms are turning to a faceless brand to give them an edge, the larger firms are counting on faces, very specific ones, as their salvation.
The Wall Street Journal‘s recent report on lateral hiring trends was one of a growing number of accounts of law firms raiding rival firms for superstar partners with large books of business. These laterals don’t come cheap: many new arrivals expect compensation up to ten times heftier than what some of their new colleagues are earning. The compensation gap is to be expected, of course: just as LeBron James is paid a lot of money because he’s expected to fill a lot of seats, laterals are expected to earn their keep and more. But it’s still interesting to hear DLA Piper chairman Frank Burch explain the rationale behind lateral hires: “We are focused on making big, strategic hires, who can allow us to achieve greater stature and visibility in the business community.” That’s not a productivity argument; that’s a marketing argument, a profile-augmentation rationale.
None of this is new, of course: smaller firms that sell what everyone else is selling need to find a market differentiator (hence the interest in brands), while large firms want to sell services of a type or quality that no one else is selling and make that the differentiator. The question, at this stage, is which of these approaches makes more sense in the marketplace of the near future? It seems to me that going forward, the branded commodity approach actually has more upside.
I was speaking at a retreat for an AmLaw 100 firm last summer, and one of the lawyers asked me about what the future held for both “commodity” work and “bet-the-company” work. My response was that virtually every law firm mid-size and higher insists that it wants to pursue the latter kind of work, that that’s what it wants to be known for in the market. The problem, I said, is that there’s actually relatively little work of that kind available — companies don’t bet themselves every day — and thousands of law firms are all chasing it. Compare that to the “commodity” work: there’s tons of it out there and hardly anyone wants to provide it (indeed, judging from the number of self-represented consumer clients, there’s a massive shortage of supply). Which of these two areas looks more promising from a business development perspective?
The high end of the legal market is over-served and the low end is under-served, and there’s two reasons for that. One is that many lawyers don’t find the low-end work “challenging” enough (to which I say, find me a high-paid M&A superstar who can last a week in family court without breaking down). The other, of course, is that the low-end doesn’t pay enough. But I’ve written before about how it doesn’t matter how much the client pays, it matters how much profit you make after the costs you incur are subtracted from the price you charge.
National branded legal franchises look like an excellent way to accomplish the goal of providing more with less to this market. Let us do the things you hate, the franchisors tell lawyers, like marketing and branding and administration and whatnot. You do the things you love, like practise law and serve clients. Our efficiencies reduce your costs, so you can price competitively yet still keep more of what you charge (with a slice to us, of course). As more and more legal tasks pass through Richard Susskind’s five declining stages of work, from bespoke to commodity, the “low-end” “commoditized” share of the market is going to grow. Firms that took a more enlightened approach to this sector should reap the rewards.
And the big firms, the global giants? They have plenty of marketing and branding firepower, without question, and they’re awfully good at what they do. But they’re also susceptible to the weakness inherent in the traditional law firm model: your assets walk out the door every night, and you need to pray they come back the next morning or else you don’t have a business. The Lawyer reported this month on a survey of nearly 2,000 partner moves in London from 2005-2010 that found almost half of those hires left their new firm within five years, and up to a third left after three. Do you think those acquisitions were good investments of those firms’ time, money and effort?
As legal work drifts towards commoditization, lawyers drift towards fungibility. All five partners in your branded storefront franchise walked out today? You can probably find five other lawyers with very similar skill sets to replace them — and in this economy, you can probably do so fairly quickly. But brand names and logos — they don’t leave. Now suppose that all five partners in your large firm’s biotechnology practice group walk out the door; you have a much bigger problem. A wise manager once said that if he discovers he has an irreplaceable employee, his mission become making that employee replaceable. Large firms that boast about the irreplaceability of their top earners perhaps don’t realize the double-edged nature of that particular sword.
The oldest axiom in the legal business is that clients buy the lawyer, not the firm. This is true and always will be true, insofar as the lawyer brings something unique to the table: extraordinary skills, outstanding personality, or perhaps most importantly, the ability to craft and perfect a trusted relationship. But absent those conditions — and those conditions, I expect, will become increasingly rare — and with bespoke legal work diminishing, clients’ buying criteria are going to expand to emphasize factors like price, accessibility and reliability. When you’re sliding towards those criteria, you’re walking into territory where national brands have developed a very strong home-field advantage.
Are you selling clients your lawyers or your firm? Think carefully about the ramifications of your answer, now and down the road, because clients are starting to ask themselves the same question.
Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.