Each year, Entrepreneur magazine releases its list of the top 500 franchise companies in the United States. This year, 40 Texas-based companies made the list from a number of different industries, with 7-Eleven leading the pack at No. 10.

The list, in its 40th year of publication, is determined by a number of criteria, including what Entrepreneur calls the five pillars: cost and fees, size and growth, support, brand strength, and financial strength and stability.

In addition to 7-Eleven, Pizza Hut and Sports Clips helped round out a solid Lone Star representation in the top 20 at 16 and 17, respectively. Smoothie King missed the top 20 by two places at No. 22. (Scroll for a complete list of all 40 Texas-based companies, their rank, industry and where they are based.)

Texas Lawyer reached out to the GCs at two of these top companies to find out what legal support is required to help achieve their status. Below are their emailed responses, edited for length and clarity.

Bonnie DePasse, vice president and general counsel, HomeVestors of America Inc.

Texas Lawyer: How much of your franchise work is handled in-house and how much of it is outsourced? Who is your go-to firm?

Bonnie DePasse: We handle almost all day-to-day franchise work in-house. This includes finalizing the agreements for new franchise sales and franchise transfers—there were over 250 in 2018! We also handle the process and agreements when a franchise transfers territories, renews, terminates, changes owners, and so on. The legal department also plays a large role in making sure the franchise population runs their businesses according to the terms of their franchise agreements, such as making sure brand standards are met and the assisting with advertising issues (there are over 1,000 franchises in 2018).

Probably less than 10 percent of our franchise work is outsourced. We utilize outside counsel when we update the annual franchise disclosure document (which includes an updated franchise agreement), and he registers the document with the registration states every year. He is also always a phone call away when we have franchise and complex corporate law issues. Our go-to firm for franchise law is Locke Lord, and the attorney is Kevin L. Twining.

TL: What qualities do you look for in outside counsel?

BD: In general, when looking for outside counsel, we seek lawyers highly recommended by other counsel in the community. Our franchise counsel has over 30 years experience in franchise law, and represents other large and growing franchisors. Other qualities we seek are lawyers who respond timely to our inquiries and who offer either competitive rates or non-traditional, flexible billing arrangements. We also prefer to work with counsel who are accessible and unpretentious—we want to like talking to you!

TL: What's the greatest challenge for a legal department in a growing company like this?

We are unique in that our two-lawyer legal department serves over 1,000 franchise customers, in addition to our in-house clients. That means we may have to cover multiple areas of the law in one day and know the franchise agreement inside and out. We enjoy such a varied and fast-paced environment, but it also creates our greatest challenge in that we have to prioritize issues on a daily basis and at the same time give all of those issues the time and attention they deserve. We have a great support team of two paralegals, a legal assistant, two auditors and a collections specialist who work hard and prioritize efficiently and timely.

TL: Anything else you'd like to add?

Teamwork is a core value for our growing company.

Stephen Polozola, executive vice president and general counsel, Urban Air Adventure Park

Texas Lawyer: How much of your franchise work is handled in-house and how much of it is outsourced? Who is your go-to firm?

Stephen Polozola: We handle a large portion of the franchise work in-house. We prepare our franchise agreements internally and update the franchise agreement annually. However, we rely heavily on Sarah Walters with DLA Piper in Dallas to consult with us on our franchise disclosure document filings and interaction with the various state examiners.

TL: What qualities do you look for in outside counsel?

SP: Having spent almost 20 years in private practice and now two years as general counsel, I have seen and understand both sides of the spectrum. The qualities I look for in an outside counsel are as follows. First, meaningful experience in the area being handled. Too many lawyers try to be a jack of all trades. I would rather outside counsel refer me to the legal expert, regardless of whether the referral is with a separate firm. I will always have more respect for the referral then trying to perform work that the OC is not qualified to handle. Second, regular communication is key to a successful relationship with outside counsel. Nothing is more upsetting then when your counsel fails to keep you abreast of developments, filings or rulings within the case. Third, transparency on billing and limiting the attorneys that work the file to those that are absolutely necessary. Overbilling is the easiest way to get replaced! Fourth, timely communication on deadlines. It is very frustrating than when counsel calls you the day before a deadline to obtain evidence, sign affidavits or assist with filings.

TL: What's the greatest challenge for a legal department in a growing company like this?

SP: Without a doubt, the greatest challenge is convincing our staff that every problem is not a legal problem and does not require the involvement of the general counsel. Too often, the first person staff goes to with a conflict is the general counsel instead of trying to problem solve on their own.

TL: Anything else you'd like to add?

SP: There is no question that the transition from private practice to general counsel has been a tremendous learning opportunity and great experience. I am honored that I had the opportunity to join Urban Air, be involved in the direction of the company, and be an integral part of its amazing growth and success. My family and I look forward to the years to come!