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.

BIZ Luncheon Features Casey Niemann of AgriSync

If you are fresh off your spring break and looking for a great networking event I recommend attending the BIZ Luncheon this Wednesday, March 25th at the Ruan II Building, 601 Locust, Conference Room 101 in Downtown Des Moines. Casey will share the tale of his leap from the corporate world with Microsoft to the start-up of his new business, AgriSync. It will be sure to be a great event!

For more information click here.

Agricultural Lawyers Join Brick Gentry Law Firm

The Brick Gentry Law Firm is pleased to announce that three distinguished agricultural attorneys have joined the law firm effective February 2, 2015.

Those attorneys include (click for bios):

Eldon McAfee

Erin Herbold-Swalwell

Julia Vyskocil

All three bring a breadth of experience particularly in Ag law including trials and business work.  We are very excited to have them on board with our firm!

Business Owners: Don’t Neglect Succession Planning

All too often business owners neglect succession planning. In fact, according to a recent Inc Magazine article and Deloitte survey on the topic, 90 percent of business leaders recognize the success of their company depends on effective leadership succession but only 13 percent are confident about the succession plans they have made. And those are business leaders who have actually MADE succession plans. I’d venture to guess, based upon my experience, that the majority business owners have no real succession plan in place.

It may be hard to think of your business without you. After all, it’s YOUR baby. But in order to build real value you need to start building a framework for the business to run without you. The Inc Magazine article has suggestion on how to build this framework:

  1. Outline ideal leadership characteristics – what type of leader does your company need? And here is something to remember, it isn’t necessarily the No. 2 person in the company due for the promotion that is the best leader for the future. Get specific on the qualities needed from your future leaders. I’ve had clients who owned family businesses and determined that the organization needed a more professional manager than the children coming through the ranks. Sometimes tough decisions are required.
  2. Define what actions your new CEO needs to take –  is the company looking for growth, will it be merging, will staff need to be trimmed? The executive coach quoted in the article says,  “Focus your leadership development program on strengthening employees’ ability to deliver strong and credible results, to master new types of expertise, and to uphold behavioral standards that reflect the company culture and values.”
  3. Identify mentors to assist the new leaders. This is critically important. I’ve noticed with my clients and my own businesses that good mentors are critical if you hope to build a sustainable business. If you aren’t there to mentor you need to find someone, whether it’s inside or outside your organization, who can serve in that role.
  4. Outline the fast-track process. How will the new leader know he/she is taking over. Identify those leaders and begin equipping them with the training, incentives and added authority of that role. And keep your word provided the new leader performs. I’ve seen it get real ugly when a future leader is groomed for taking over but then the rug is pulled out from underneath them. In one case, I saw a future leader leave to start his own business and took nearly all the business away when he left.  All because the owner was simply too greedy to turn over the reins as agreed upon (But the example also helps explain why not only incentives but also a strong non-compete are important to tie your future leader with the company).
  5. Build performance metrics. Figure out ways to measure a future leader’s problem-solving and decision making skills. The article suggests following the lead of companies such as IBM and GE can help you develop standardized methods of leadership development.

I encourage you to read the Inc article.

20 Franchise Trends from Industry News Source

Franchise Times has an interesting article on 20 to Watch: franchise trendsetters in 2015.

One of the more interesting items to me was No. 18 – So Sue Me. Apparently one enterprising insurance executive has set up a suite of insurance products specifically designed for franchisors and franchisees to limit their risk against lawsuits. You can learn more at Franchiseperils.com. (I am not endorsing the product as I have not investigated it but I did find it interesting that someone is now designing insurance products specifically for franchises).

Also, funding for franchises as discussed in No. 20 will only continue to grow in my opinion as more venture capital folks learn that franchising can be a profitable business model when done well.

I encourage you to read the entire article if you are interested in franchising.

Iowa Specialty Business Court Off to Good Start

Back in January of 2013 I shared that the Iowa Supreme Court began a new specialty court for business cases. According to a recent article from the Des Moines Business Record it sounds as though the court is off to a good start. (Unfortunately the article is only available in the member’s section of the site).

The article has a breakdown of the first 10 cases in the program according to the article:

  • Damages over $200,000 included 8 cases
  • Injunctive or declaratory relief was sought in 5 cases.

And involved the following criteria:

  • Technology licensing agreement – 1 case
  • Internal affairs of a business – 6 cases
  • Business transactions – 7 cases
  • Shareholder derivative/commercial class action – 1 case
  • Commercial bank transactions – 1 case
  • Trade secrets, non-compete, confidentiality – 2 cases
  • Commercial real estate property – No cases
  • Antitrust or securities – No cases
  • Business Tort Claims – 7 cases

The main benefits I see to the program is that you have judges experienced with business issues. Another significant benefit is that one judge stays with your case throughout the life of the case. Lawyers quoted in the article expressed positive comments about the court thus far. Great to see it’s working well. I have called for such a court since 2008. The business court definitely gives Iowa an important leg up in serving Iowa businesses.

My Own (Informal) National Start a Business Day

I don’t know why or what’s in the water but November 17th must have been my own little national start a business day as I helped people form and start four businesses today. It is days like today that certainly keep you energized as a business lawyer and it is fun to see the excitement new business owners have for their mission!

Best of luck to these entrepreneurs!

 

 

Entrepreneur Magazine Says Hire a Good Lawyer When Starting Business

Entrepreneur Magazine columnists Courtney Spritzer and Stephanie Abrams list Hiring a Good Lawyer as one of the four things a start up business owner should do that may not be in the business plan. Another professional they suggest engaging is a knowledgeable accountant. And I could not agree more. In fact, I get worried when a client tells me they are not working with an accountant.

Two other professionals I strongly suggest seeking out:

  1. A business insurance professional. Notice I said “business” insurance professional. All insurance agents are not created equal and over the years I have seen clients that have serious gaps in coverage for their business. It is absolutely critical to work with an agent who is willing to learn the details of your business and what risks you face.
  2. A banker. A solid relationship with a banker is invaluable. Many business owners will bank with the most convenient bank or perhaps their personal bank and never seek to establish a relationship with a banker. This is a mistake. The time to establish a relationship with a banker is from the outset rather than waiting until you need a loan. And if you need a loan to get your business going, talk with your lawyer and accountant to get recommendations for a business friendly banker. All bankers are not created equal either.

I must admit I love it when I see articles from business publications discussing the need for a business lawyer. Just like the other professionals I mentioned it is important to establish a relationship with a business lawyer from the outset to get your business on the right track.

Watch for Alleged Yellow Page Advertising Scams

I was recently contacted by a business client whose employee signed a “contract” purporting to be from YELLOW PAGE IOWA that had been faxed to their business for what appeared to be a free Yellow Page or Facebook ad. The contract is misleading and deceptive and the fine print actually attempts to lock the client in to paying $99.00 per month for a two-year period all, payable one year in advance. The client has since received numerous bills and threatening letters from this organization apparently headquartered in Dubai despite numerous attempts to resolve the situation.

My client’s experience is like a business owner from New Jersey who apparently had the same thing happen.

Unfortunately it appears as though this is an all-too-routine scam according to the Iowa attorney general and Federal Trade Commission (FTC) Websites.

If you receive an contact by fax or otherwise from YELLOW PAGE IOWA or Yellow-Page-USA.com managed by Open Business Directory Ltd. you will want to be sure to throw it in the trash.  DO NOT sign the contract or send it back.  It is a good policy to steer clear of any fax solicitations for your business and to make sure that only authorized management employees sign agreements for your organization.

Wall St. Journal Lists Troubled Franchise Brands

A recent Wall St. Journal article discussed some of the franchise brands with higher-than-average default rates. The highest on the list? Planet Beach at a considerable 41.1.% default rate for SBA loans from 2004 through 2014 according to the article.

The franchising industry and its model of business does a wonderful job of marketing itself. I hear all the time from prospective franchisees about wanting to be a part of a “system” that helps them with the sales and marketing and a business that has processes in place. Unfortunately all too often the supposed “system” is broken, out-dated or maybe never existed. I can assure you that if you are looking for a franchise don’t expect extensive help with the sales and marketing. There are very few franchises that can boast about its sales and marketing assistance for its franchisees. Believe me, if it is to be, it is definitely up to you Mr. or Ms. Prospective Franchisee. Just because you own a franchise does not mean you can sit back and watch sales automatically walk through the door which is sadly what I think some prospective franchisees think will happen.

Am I down on franchising? Not necessarily. I’ve seen it work for franchisees, particularly those with significant resources and multiple locations. What troubles me most is the lack of accountability on the part of many franchisors for the success of their franchisees. Instead of hitting franchisees with significant fees and royalties in times of trouble, why don’t more franchisors put their money where their mouth is by offering reductions in fees and royalties during tough times, or perhaps suspending those fees and royalties entirely? Or what about letting franchisees out of their contracts after losing their life savings rather than sticking the franchisees with claims for lost royalties and fees. Shouldn’t a franchisor bear some responsibility for the failure? In my experience some franchisors will work with franchisees in that regard but all too often franchisors are unwilling to provide any assistance whatsoever to the struggling franchisee.

If you are considering franchising as an option, be sure to do your homework. All franchises are not created equal. And be sure to read the Wall St. Journal article.

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