Rush on Business : Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

I ran across this informative article on whether you should hire a franchise broker to purchase a franchise via the Indiana Civil & Business Lawyer Blog. 

The article discusses how the Internet has changed the way people find a franchise.  With all the information available on the Internet it has produced "information overload" for prospective franchisees.  The Internet has paved the way for trusted intermediaries to sort through the morass.

The controversy is whether franchise brokers are trusted intermediaries.  As mentioned in the article it is important to remember that the franchise broker is not necessarily independent.  The brokers are paid a fee typically only if the sale is successful and brokers themselves usually do not represent all franchise opportunities.  Varying fees among franchises may encourage a broker to steer a prospective franchisee to one opportunity over another.

Other the other hand, I have had the good fortune to work with franchise brokers like Joe Cooney who are professionals and attempt to give objective information to prospective franchisees.  Professional franchise brokers will encourage you to conduct appropriate due diligence.  Professional franchise brokers will put your interests above their own.  Their long-term livelihood depends on that.  Not the one time sale. 

But nonetheless do your homework just like you would for any professional whether it be a business lawyer, accountant, real estate agent, financial representative, business broker, etc. 

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The Lance Armstrong Foundation has sued an Oklahoma pet collar manufacturer for trademark infringement over the use of its Barkstrong and Purrstrong animal collars.  The pet collars are sold by Animal Charity Collar Group, a Tulsa for-profit operation that sells its tic and flea collar for $6.99, while a "support collar" costs $4.99. The Oklahoma company allegedly began distributing the collars after a July 2005 marketing pitch to Armstrong foundation officials was rejected outright.

It will be interesting to see how this turns out but I can't help but notice that just about every "dog" and his brother are wearing wristbands that mimick the Livestrong wrist bands.  Why get so hot over the collar?

Maybe Iowa intellectual property attorney Brett Trout could weigh in on this issue for us.

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Charlie Longbrief picked up the phone on a Friday afternoon.  He was accustomed to these late Friday afternoon calls.   People with problems always seemed to call at this time because they need peace of mind over the weekend.  It was his friend Joe Smith who worked as sales manager for Shake, Rattle & Roll, Inc. a local baby toy manufacturer. 

"Charlie I need help.  I have just been fired from my job," said Joe.

"Tell me about it," replied Charlie.

"Well, I didn't like working there anyway and I was looking for another job.  I think I found one with a competitor but unfortunately my employer caught wind of it and they fired me.  I have a non-compete but of course they can't enforce that against me because I was fired, right?" asked Joe.

"Unfortunately Joe that is not always the case.  In Iowa, non-competes may be enforced even in situations where the employee has been fired.  It may be a factor to consider but the fact you were fired rather than quit does not necessarily invalidate the non-compete," Charlie said.

Joe shot back, "But I was told by my cousin Frank that works down at the loading dock that one of his friends said they couldn't uphold a non-compete against me if I was fired."

"I know that is a common belief but I am sorry to inform you that is not always the case.  It always depends on the circumstances of the particular case.  Every case is different but just because you are fired does not mean they can't enforce the non-compete," said Charlie with a little more emphasis this time.   

Charlie continued, "As you know I mostly represent businesses and I recently wrote an article on Protecting Your Iowa Business With a Non-Compete.  Why don't you take a look at it.   It outlines some of the key issues in determining whether a non-compete is valid in Iowa.  From an employee perspective it is never a bad idea to look at the situation from the employer's perspective and vise versa.  Read the article and then let's talk."

"Thanks, Charlie.  Not what I wanted to hear but at least I have a better idea of where I stand.  I'll give you a call back Monday," said Joe. 

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New Iowa law blogger, Larry McLellan, posts on challenges for cause in jury selection on Sullivan & Ward's Iowa Law Blog.

Larry references a great article on Building the Foundation for Cause Challenges by jury consultant Harry Plotkin.  If you are a trial lawyer it is definitely worth the read.

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I read with interest fellow IowaBiz author Victor Aspengren's article on Forget the Ratings in conducting annual performance reviews.  Victor points out that most companies use subjective rating systems in their performance reviews which leave everyone in the company, supervisors and employees alike, dreading the annual review process.

What happens next is what I call 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.  And Victor's ideas on creating a dialogue with your employees is on the mark as long as that dialogue is open, honest and holds employees accountable for their performance.

See also:  Considerations for Your Performance Evaluation and Employee Evaluations are Critical to Firing Decisions.

photo on flickr by Krista76

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Over on the Iowa Law Blog I discussed the fact that the number of lawsuits is down this past year for U.S. businesses.  The statistics are based upon a study from the international law firm of Fulbright & Jaworski.  But you need to read a little deeper to find a more intriguing statistic:

The survey showed that companies based in the Midwest settled more often than those in other parts of the country.

One surprising statistic is that smaller companies were actually less willing to settle their cases than mid-cap or billion dollar firms.

But no surprise that Midwest companies are more willing to settle.  My experiences have been that most Midwest lawyers, particularly here in Iowa, will work hard to get cases resolved.  Perhaps that is another reason why Iowa is not considered a litigious state.

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As regular readers of this blog know, I am engaged in a never ending search for blogs that present franchise opportunities in a fair and objective manner.  All too often franchise related sites are merely promotional pieces. 

FranchisePick is a site worth checking out.  Yes, there are some promotional pieces on the site.  But franchise marketing veteran, Sean Kelly, has done an excellent job of presenting worthwhile information on several franchises.   

For example, recent posts on 30 minute workout franchises are hard hitting and full of information.  The experiences shared on the site are invaluable for anyone who is interested in making an investment in a franchise.  Sean likes to have fun, including making fun of my name, but he is on a serious mission to expose unethical practices in the franchise industry and encourage best practices.

Sean has a number of other sites covering the franchise industry including FRANBEST, Franchisor Marketing, and Franchisee Marketing.  He is also the President of IdeaFarm which specializes in helping franchise companies achieve growth through brand development and innovative marketing techniques.

Thanks to Sean for reaching out to me and exposing me to his sites.

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West Des Moines financial planner Art Dinkin's story shows that identity theft can happen to anybody.  Be sure to read the comments for some helpful hints in what to do if identity theft strikes you.

Read my previous post if you are interested in Tips to Protect Your Business and Customers from Identity Theft.

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First with Drew McLellan on marketing, and now with Shirley Poertner on leadership, the IowaBiz.com free breakfast series is off to a fast start.  Shirley spoke yesterday about accountability in the workplace.  A concept that is frequently missing in many organizations.

Shirley says we have fallen into a "blame" society. 

• If you spill hot coffee in your lap while driving . . . sue McDonald's.
• If you invest money in a high risk portfolio and lose . . sue your broker.
• If your accountant misses the "S" Election . . . blame the lawyer. (Shirley really didn't say this one I just needed to poke fun at Joe one more time). 

This notion of blaming others permeates the workplace.  "It's not my fault" becomes the rallying cry of employees and supervisors alike. 

So how do we hold others accountable in the workplace according to Shirley? 

1. Set clear expectations.  You may think you have set clear expectations but would your employees say the same thing?  You might be surprised by the answers.
2. Consider Both Motivation and Ability.  Your initial thought may be that your employees are lazy or just want to make your life miserable.  Have you thought about other factors that may be influencing behavior?  What about whether the employees have the skill and knowledge to complete the task?  Is there a bureaucracy in your organization preventing work from getting done?    
3. To Hold Others Accountable:  Skillfully Handle the Hazardous Half Minute. 

• Describe the gap.  Make a statement about what you expected and what occurred.  Ex.  You made a commitment to get the project done by Friday.  It's the following Wednesday and the project is not completed.
• End with a question.  What happened?
• Then listen.  What's going on?  Is it about motivation or ability or both?

These strategies for accountability in the workplace will not only provide you happier employees and greater productivity but it may also help you reduce workplace litigation.  Treating employees with respect and effective communication are two of the cornerstones on how to avoid lawsuits from employees. 

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I've got baseball on the brain over on Sullivan & Ward's new Iowa Law Blog thanks to HR Capitalist.  Go Tribe!

photo on flickr by hyku

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Attorney Liz Overton has an excellent post on the need to carefully prepare job descriptions for small businesses over on Sullivan & Ward's Iowa Law Blog. 

I encourage you to check it out.

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I have written in the past about Iowa Franchise Law and Territorial Encroachment.  Franchisees generally want an exclusive territory that is protected from encroachment by other franchisees or the franchisor's company owned stores.  But have you considered the impact of Internet retailing by the franchisor or other franchisees?

Be sure to review the territory provisions in the franchise disclosure document and franchise agreement with an eye toward whether the franchisor or franchisees are able to conduct Internet retailing.  In many instances franchisors will have a Web site but franchisees are not permitted to conduct online retailing.  While I am a big believer in the Internet for marketing and sales you will possibly suffer the consequences if a franchisor has a strong Internet sales presence.  Do you really have an exclusive territory if the franchisor conducts sales online?

Franchisors must also balance the possibilities of territorial enforcement with the need of franchisees to conduct online retailing.  This is where local search marketing comes into play.  Are there opportunities for franchisees to compete fairly online without cannibalizing each other? 

There are no easy answers when it comes to franchise Internet retailing but it should be a part of your decision making process in determining whether to buy a franchise.

Photo on flickr by aranarth

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At this past week's ABA Forum on Franchising I attended an insightful presentation with Michael Levitz, Kenneth Milner and Robert Purvin.  Purvin is from the American Association of Franchisees and Dealers which has some helpful tips and resources on its Web site to evaluate franchise opportunities.

While the presentation covered many areas of successful franchisee representation the concept of assembling a team to evaluate the franchise was probably most important.  In addition to the franchise lawyer, the presenters said successful franchisees will also contact the following:

1. Accountant - to examine the financials of the franchisor, costs and expenses to buy the franchise and financial projections of the business.
2. Real Estate Agent - to help you decide which location is best for you.  It is a mistake to rely completely on the franchisor in this context.  Most franchisors will be from out of the state and probably do not have a complete handle on the real estate market or trends in the community.
3. Marketing Professional - evaluate the marketing plan of the franchisor, develop your own marketing plan and assess whether the franchise opportunity is right for your region of the country.

I would also add that each prospective franchisee should also have a banker and an insurance agent to help them along in the process.  Assembling the right team is critical to success.

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This past week I had the opportunity to attend the ABA's Forum on Franchising.  What a great event!  First and foremost, it was an opportunity to network with some of the best franchise lawyers in America.   Second, I really enjoyed hanging out with fellow Iowa franchise lawyers, Matt Krigbaum of Cedar Rapids and David Bright of Iowa City.  These guys are excellent lawyers and terrific individuals.  If you are Eastern Iowa I recommend you talk with them regarding your franchising questions.

The initial seminar session I attended was the Fundamentals on Franchising.  Some top-notch franchise lawyers spoke during this 4 1/2 hour session but of particular interest to me was the talk by Ron Gardner of the Dady and Garner Law Firm in Minneapolis.   The law firm is regarded as one of the best firms in the country representing franchisees in disputes with franchisors.  In my franchise law work I counsel and negotiate on behalf of franchisees so the talk was very informative.

Some highlights of Gardner's talk:

1. If a franchisor is making certain promises you should attempt to have those promises included in the franchise agreement.  Often a franchisor will say certain things to entice a franchisee to enter into the franchise agreement.  But when you read the agreement these promises are no where to be found.  Get those promises in writing.  If not, you should have no expectation the franchisor will follow through on its promises.
2. Franchisees and their lawyers must communicate together on much more than just the franchise disclosure document or the franchise agreement.  In order to advise you properly it is important to know your background, your needs and your expectations.  Without this information it is often difficult to know what it important for you in a negotiation and what is not. 
3. Run Away from Franchisors that Won't Negotiate.  Some franchisors will tell you that they won't negotiate their agreements, or worse, tell you the laws and regulations do not allow them to negotiate their agreements.  Tell them to take a long walk off a short dock!  Ask youself whether you want to be in business with a franchisor that will not consider your busines goals and needs.  Fortunately, my experience has been that many franchisors will negotiate at least certain key terms and conditions.
4. Key Disclosure Issues.  Key disclosure issues generally include litigation, initial investment, vendor rebates, earnings, outlets and financial statements.  It is important to closely review the information regarding outlets. Carefully study the number of transfers and not just the number of closures.  A high number of transfers may be an indication that franchisees in the system are struggling but bad stores have not been shut down.  As I have preached franchise due diligence must include interviews of franchisees, including those that have left the system, in order to get a full picture of the franchise system.
5. Be Willing to Walk Away.  I have touched on this before.  This is the paradox of negotiation.  You should not fall in love with the deal.  Prospective franchisees who are willing to walk away usually get much more from those who have decided to sign at all costs. 

More to follow on other aspects of franchising in other posts this week.

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It took us awhile but Sullivan & Ward's Iowa Law Blog is now live.  It was designed with the able assistance of LexBlog.  (The same company that designed and maintains this blog).

While Rush on Business tends to focus only on issues impacting Iowa businesses, we are taking a broader approach with the Iowa Law Blog to cover many different aspects of Iowa law.  I know many believe that a law blog (or any blog for that matter) should cover a niche topic.  However, I believe that a broader blog is better than no blog and it is frankly tough for a law firm of our size to have eight different niche blogs.  Besides the New Jersey Law Blog is a prime example of how a state law blog can achieve remarkable blogging success.

The Iowa Law Blog will focus on several legal areas including:

• Utility law (the core of the law firm's work for over 70 years);
• Business Law;
• Trust and Estates;
• Trial and Mediation;
• Employment Law;
• Regulatory Compliance;
• Family Law; and
• Real Estate

Similar to what Stark and Stark has done in New Jersey, we hope to keep businesses and individuals updated on legal and legislative developments in the Hawkeye State.  (Yes, you read that correctly despite the lack of wins and no offense).

We hope you find valuable information on the Iowa Law Blog and look forward to your comments.

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The ABA's Forum on Franchising is this week in Phoenix.  This all-star seminar features intensive programs on the Fundamentals of Franchising and the amended FTC rule in addition to many other terrific programs.

Of particular interest is a talk by Brian Johnson about how to become the fluent, confident communicator you've always wanted to be - the always articulate attorney.

Stay tuned for updates on the seminar later this week.

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In this month's ABA Journal there is a story on 50 Ways to Market Your Practice.  I read it once.  Then again.  And just to be sure I read it one more time - this time a little more carefully.

But sure enough blogging was not included in the Top 50 Tips to market your law practice.  Honestly after reading the article I almost felt like Marty McFly in Back to the Future.  Take Tip #46:

46.  Write an e-mail newsletter about your practice area and send it to other lawyers.  Archive the newsletters online.

Sadly, that was the closest that we came to the concept of a blog. 

Now don't get me wrong, many of the ideas are terrific.  In fact, I follow many of the tips outlined.  But so many of the Top 50 Tips are enhanced by blogging.  For example Tip #5:

5.  Offer to write an article for your local paper on a topic such as why everyone should have a will or questions to ask a contractor.  Make sure the byline includes the name of your firm and, if possible, your e-mail address. 

Sure, that might work.  But since I started blogging the media has actually reached out to me and begun to quote my material or asked me to provide quotes for their articles.  I know other blogging lawyers have had the same experiences.  It is amazing how blogging can enable you to take incredible leaps and become recognized as an expert with local AND national media.

Now blogging is probably not for every lawyer.  It takes time and commitment.  But I have found nothing - including all of the Top 50 Tips published in the ABA article - that has made a bigger impact on my ability to generate new business.  Let's add blogging as Tip #51.  What do you say?

 Photo on flickr by genesis3000.

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The Central Iowa Blogga Nostra gathers this Friday morning (Oct. 5) at the Panera on University in West Des Moines.  I encourage you to come join us.  What a diverse and interesting group!  It is absolutely amazing how this group has supported one another.  Collectively we have achieved much more than we could have on our own.  We have marketers, blog coaches, consultants, small business owners, financial gurus, accountants, tech geeks, growth capitalists, executive coaches and  . . . even lawyers. 

Some of my favorite posts over the past week from fellow Central Iowa Bloggers:

Taking Responsibility by Michael Libbie of Insight Advertising.  Michael follows-up on my blog post about the disclosure of anonymous bloggers.  Michael is a big believer that responsible blogging means you should not be able to hide behind your anonymity and say any darn thing you want.

Now THIS is an Elevator Speech by Timothy Johnson of Carpe Factum.  Too funny!

Lessons Learned from a Game of Tag by Central Iowa Financial Planner Art Dinken of Moment on Money.  As Art says,

An experienced professional, in any field, is not just someone who knows what to do. Equally important are the lessons they have learned from past experiences which have taught them when NOT to do.

Also, congratulations to Tom Green and Amy Hunold-VanGundy on the launch of their Runners Lounge Web site.  This running community site is pretty cool and already has a great following thanks to their blog started this past May.

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Shanti Atkins of the Compliance Training Blog has an interesting blog post about the crippling trend of wage and hour litigation.  The post references a recent BusinessWeek article discussing how plaintiffs' employment lawyers are "printing" money  with wage and hour cases.  One of the plaintiff's lawyers is quoted as saying,

"I can hit a company with a hundred sexual harassment lawsuits, and it will not inflict anywhere near the damage that [a wage and hour suit] will."

In my experience, wage and hour issues are often misunderstood by employers.  Employers tend to run into problems when they ignore overtime regulations.  If you have questions I suggest checking out this handy reference guide to the Fair Labor Standards Act (FLSA) and consulting your employment lawyer.  You might also consider a wage and hour review to avoid misclassification of employees.

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A federal court jury in New York says Isiah Thomas and the New York Knicks are liable for the sexual harassment of a former female executive.  The jury found the former employee was subjected to unwanted sexual advances and verbal insults.  A retaliation claim also was alleged.  While Isiah Thomas still maintains his innocence and vows an appeal,  the jury has spoken.  The Verdict:  the Knicks and its owner owe nearly $12 million in damages.  (Thomas escaped punitive damages but his employer was not so lucky).

Could the harassment lawsuit have been avoided?  

Employers have an obligation to prevent sexual and other forms of harassment in the workplace.  At times employees will screw up but an employer must be prepared.  Some ways to avoid harassment claims include the following:

• Have a written policy against harassment which should include an anti-retaliation provision for those employees who report harassment.
• Provide and communicate in writing multiple channels for your complaint procedure. Employees should be able to report harassment to more than one person within the company.  The complaint process should be clearly defined in your employment manual.
• Make sure you train supervisors each year and require supervisors to report harassing conduct.
• Once notified of harassing conduct - take immediate action to investigate fully.
• Do not retaliate against employees that make a complaint.
• Discipline or terminate the offender as appropriate.

Michael Moore of the Pennsylvania Employment Law Blog has a great post on this issue and the particular problems created by complaints by high level executives.

The executive absolutely cannot have any direct or indirect control over the investigation.  Claims involving the company's CEO may require HR to go directly to the board of directors to protect the company.  Obviously, such action puts HR in an impossible position, so consider using outside counsel to manage the situation.

It is never easy dealing with claims of this nature but do not sweep it under the rug just because a high level employee is involved.  The stakes are high and you must follow your written policies and take the complaints seriously.  Ignore the behavior or retaliate at your peril.

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Bloggers who hide their real identities may want to pay particular attention to a recent case.  A Texas judge has ordered the discovery of an anonymous blogger who posted alleged defamatory comments about a hospital located in Paris, Texas.  The ruling is likely to be appealed.

Anonymous users also posted comments on the blog which the hospital claims is confidential patient information.  The hospital claims that some of the commenters and perhaps the blog operator are current or former employees and the disclosure of such information violates HIPAA.

The Citizen Media Law Project does a nice job of framing the legal issue:

The primary question in cases seeking to uncover the identity of an anonymous defendant is how to balance the defendant's First Amendment protected interest in engaging in anonymous speech against the plaintiff's interest in pursuing a valid cause of action for the effects of nonprotected speech.

The post goes on to discuss the various standards used in determining whether an anonymous blogger's identify should be revealed.  Right now, this issue is not settled among the courts and different standards have been applied in various cases.  But one thing is clear.  If you are a modern day Lone Ranger or Zorro, you should not have the expectation that your anonymity gives you the right to say anything you wish about other people and organizations. 

Even in Delaware, which has applied the most stringent standard, a plaintiff is not required to fully prove its case before an identity is revealed.  And in the Texas case it doesn't appear any evidence was required before the plaintiff could learn the identity of the mysterious blogger. 

If you are concerned about material you are publishing it is probably best to seek the pre-publication advice of a media lawyer.   

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Mark Toth, Chief Legal Officer of Manpower, has a terrific employment law blog post any small business owner should read.  Toth's blog is creative and fun and his advice is right on the mark.  Follow his greatest hits and you are much more likely to stay out of trouble with your employees.

I particularly agree with Toth's Employment Law Golden Rule:

Treat all employees the way you would want to be treated — honestly, objectively, consistently and fairly on a timely basis.

See also my blog post on Seven Ways to Avoid Employee Lawsuits.  Toth and I have very similar thoughts on this subject.  My number 1:  Treat Employees with Respect.  Seems like a basic philosophy but it is amazing how many employers forget to treat their employees with respect.  Employees that are humilated or treated in a disrespectful way are much more likely to sue your company.

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