Avoid Mistakes in Franchise Process by Digging into the Details

I read an interesting article on Why Some Franchise Buyers Almost Always Make Mistakes written by franchise lawyer Michael Garner. Michael recommends digging into the information contained in Item 20 which consists of the five tables that show the status of the outlets within the system. The article is well worth the read.

My experience is that prospective franchisees will come to me very excited with a great story of how a franchisor is expanding and growing. But often, the tables in Item 20 paint a different picture. A story where franchise locations are being closed or transferred (a red flag) or where company-owned locations are closing. It is important not to fall into the sales hype. See the facts for yourself by investigating Item 20 carefully.

Successful Franchises Continue to Evolve

I found this article from Entrepreneur Magazine interesting regarding several franchises that are now offering delivery (some franchise on this list and others do not). The most successful franchises are continually evolving and adapting their concepts to meet consumer demands.

What about your franchisor? Are they evolving and adapting?

Rush Nigut Again Named to Best Lawyers List

Rush Nigut has been selected by his peers for inclusion in the 2016 Edition of the Best Lawyers in America© in the practice areas of Business Organizations (including LLCs and Partnerships) and Franchise Law. This is the second year in a row Rush has been recognized by the publication.

Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Best Lawyers is based on an exhaustive peer-review survey. Over 52,000 leading attorneys cast more than 5.5 million votes on the legal abilities of other lawyers in their practice areas. Lawyers are not required or allowed to pay a fee to be listed; therefore inclusion in Best Lawyers is considered a singular honor. Corporate Counsel magazine has called Best Lawyers “the most respected referral list of attorneys in practice.”

Additionally, Rush was selected as a Top Rated Lawyer in Labor and Employment for 2015 by American Lawyer Media and Martindale-Hubbell™ . This is the third year in a row Rush has been recognized as top rated in the Labor and Employment practice area.  He holds an AV Preeminent Rating® from his peers which is the highest rating in legal ability and ethical standards.


Please note:  The fact that a lawyer has been voted by his or her peers into Best Lawyers in a legal practice area does not signify that the lawyer has been certified by a state board of legal specialization in that practice area or specialty. A listing in Best Lawyers does not guarantee a desired legal result. – Best Lawyers

Martindale-Hubbell™ is the facilitator of a peer review rating process. Ratings reflect the confidential opinions of members of the Bar and the judiciary. Martindale-Hubbell™ ratings fall into two categories – legal ability and general ethical standards. – Martindale-Hubbell™.

Are Your Company’s Employee Performance Reviews a Waste of Time?

I read this article from Inc. magazine explaining why employee performance reviews are a waste of time and money. While I don’t necessarily disagree, my experience tells me they usually are awful for different reasons. In my opinion, most reviews are not conducted honestly. This leads to problems down the road with employee performance and then legal issues when employers seek to terminate poorly performing employees.

I like to call this the Lake Wobegon effect:  Every employee becomes “above average” because supervisors are unwilling to hold employees accountable.  Then when it comes time to discipline or terminate employees companies are often shocked when I tell them it may be difficult to discipline or terminate an employee because of their employee evaluations.

Employee evaluations are valuable proof in an employment lawsuit.  Make sure poor performance is properly documented.  Otherwise, the judge or jury will not believe you when you say the employee performed poorly but all their evaluations are excellent.  You should conduct the evaluations on a regular basis, usually at least once per year but periodically as discussed in the Inc. article is a good concept if pulled off by supervisors.   It is important to create a dialogue with your employees as long as that dialogue is open, honest and holds employees accountable for their performance.


Women-Owned Business Grants

I am often asked about business grants for women and minorities. In my experience these grants can be difficult to come by but they do exist. Here is an article from Entrepreneur discussing grants for women-owned businesses and also a link to the Targeted Small Business site with the Iowa Department of Economic Development.

Business Ownership Isn’t For Everyone

My social media news feed is full of articles and stories about business ownership. I am a business lawyer. I represent business people. So it benefits me if I promote business ownership and in general I try to do just that. However, I am here to tell you that despite the mountains of articles talking about how successful you can become the truth is that business ownership isn’t for everyone. In fact, it probably isn’t for most people.

Unfortunately, I see the heartache all too often. People who have invested their life savings, only to lose much of it –and sometimes–all of it. People who have bills, stress and anxiety due to a failing business. Most people are just meant to work for other people. They should be employees, not business owners. Sorry but the cold hard truth isn’t said enough in today’s social media channels.

Now, if you aren’t scared off by this point and you’re just bound and determined to move forward with business ownership, the following are some of the more important keys to consider before diving in:

  1. Is there a market for your product/service? Not just a perceived market or a hunch, but is there a REAL market for your product/service? This requires you to some research and hitting the streets to talk to potential customers. If at all possible, can you pre-sell your product or service?
  2. Is there a real need for your product/service? If your business doesn’t fulfill a need it is not likely to be successful. To me, this is also a different question that No. 1 above. Trust me, I have seen too many businesses fail because the product/service did not fulfill a true need. Ask yourself, “Is this something people need to have?” I remember hearing the story of a billionaire who started as a roofer. He got into that business because “even Jesus needed a roof.” Businesses that fulfill a need have a greater chance of success.
  3. Do you have the ability to sell the product/service? If you don’t you have the ability to sell you better get someone on board that does. The greatest idea in the world isn’t any good if you can’t sell it. Execution is more important than the idea and that requires sales. Don’t fall in love with the idea. Fall in love with selling the idea!
  4. How are you going to pay for the business? Bootstrapping may garner headlines but most businesses require capital. Make sure you have enough capital to survive the difficult early periods.  And always keep enough in reserves to weather hard times. And remember you’ll need more than you think you need, so just double your initial estimates to be safe.

The failure to properly answer these questions has been the downfall of many business owners. Don’t let that be you. Ask the tough questions before you invest your hard earned savings.


Unlimited Vacation, Free Beer and Kids at Work. Is this the Future Workplace?

CEOs and leaders of all organizations covet the creative culture of companies like Google or Zappos — it feels out of reach, but it may be right under their finger tips. The Iowa Creativity Summit is featuring Nancy Lyons of Clockwork in Minneapolis on May 28. Free beer, unlimited vacation and other fun perks are just a normal part of her work place, but is there something more to her culture?

Under Nancy’s leadership, Clockwork has received more than 16 “Best Workplace” awards, has won the Psychologically Healthy Workplace, Diversity in Business, Best Women Owned Business, and Bicycle Friendly Business awards to name a few. In June of 2014 Nancy spoke on the structure of the workplace at the inaugural White House Summit for Working Families in Washington, DC and now she’s coming to Drake University on May 28 to talk about what creativity really looks like.

Tickets are on sale at the Iowa Creativity Summit’s website: iowacreativitysummit.com


Looking to Buy a Franchise? Don’t Make These Mistakes

Inc.Magazine has a great article on the 5 Biggest Mistakes People Make When Buying a Franchise.

The one I want to touch on in this post is #4 – Not learning how to implement the franchise system. All too often, would be franchise owners think they are “buying their own business.” This is not really true. What you are really buying is a franchise system. (Well, at least you hope it is a system because far too many franchises have no system at all but that’s for a different blog post). You will need to implement the system and training programs into the business. But make no mistake – the franchisor is not interested in your plans to change their system or develop your own system. They are looking for you to run THEIR system. If you can’t do that franchising is definitely not for you.

I encourage you to read the full Inc. article.

Franchiseless in Seattle?

I had to share an excellent blog post on Seattle’s $15 Minimum Wage: Not Unconstitutionally Discriminatory? by Shannon McCarthy of the ZorBlog. My tongue-in-cheek title unfortunately rings some truth. If you read Shannon’s post you will see that the Seattle mayor and city council members are, shall we say, less than welcoming to franchisors and franchisees alike.

The issue is that most local franchise businesses are your small, local, mom-and-pop operation. They’re a small business much like the local business down the street. The thought of paying $15.00 minimum wage to employees is daunting at the very least and perhaps impossible if the local franchisee hopes to make a profit. They are the same people you sit by at your high school sports events, attend your church and serve on local boards.

The problem is that Seattle has said that small employers have seven years to conform to the wage minimum while large employers have only three years to comply (four years if they provide health insurance). Large employers are defined as companies that employ over 500 people AND all franchisees associated with a franshisor or network of franchisors that employs more than 500 people aggregate in the United States.

Try telling your local franchisee that he or she is a large employer. They would probably look at you with bewilderment! Perhaps downright shocked. But Seattle’s mayor and city council certainly don’t seem to care and if a franchise or two (or hundreds) are lost along the way then so be it. The perception is that these franchises are big business. Not your local mom-and-pop.

This is just another example of why you need to carefully consider franchising as a potential business option. It is important to understand that franchising presents just as many risks as opening your own independent business, and in some cases the risks could even be greater.