Writing the Better Contract from Anita Campbell- Part II

Former general counsel and small business owner, Anita Campbell, offers sage advice in her post on the Build a Solo Practice Blog about how to write a better contract .  What is the better contract in Anita's view?

  1. First and foremost, the better contract protects the client.
  2. The better contract is written in plain English.  (A novel concept indeed!)
  3. The better contract is written for a 12th grade education or lower.
  4. The better contract incorporates standardization.

A word of caution concerning standardization of contracts:  Clients will often take a standardized contract and fail to adapt it appropriately for the current business transaction.  Clients should be reminded that it is a good idea to have the business lawyer review the agreement to make sure it adequately protects the client in the current transaction, contains the actual terms of the current transaction and fulfills the goals of the current transaction.  I can't tell you how many times I have seen the embarassing situation where a business person took a standardized contract and failed to revise it appropriately for the situation.  It happens often when people pilfer agreements from the Internet and fail to modify the terms.  If litigation occurs, the result of this carelessness could be a verdict against the client.

Anita's solution involves providing a set of instructions to the client along with the standarized contract.  Included in the instruction sheet is the direction to have the business manager consult the corporate lawyer before signing or implementing the agreement.  This may work well with organizations that have in-house counsel but is probably less intuitive for businesses with outside counsel.  I offer the reminder to always have contracts reviewed by your business lawyer.

Hat tip to Susan Cartier Liebel and her Build a Solo Practice Blog.  Susan is passionately building one of the best blogs in the country.  Notice I didn't limit it to legal related blogs either.

 

SBA and FranNet Team Up to Offer Online Training for Franchising

The Small Business Administration (SBA) and FranNet have teamed up to offer an online training course for those interested in franchising.

The free online course on franchise basics provides three key sections that examine more than 10 essential areas relating to franchising, including Whether Franchising Right for You and How to Choose the Right Franchise. The course also covers franchising options, strategies for growth, and pitfalls to avoid. Course participants will be able to better understand franchising and decide if it is the best small business option for them.

For more information please be sure to contact Joe Cooney who is the FranNet consultant for the Iowa / Nebraska region.  I have found Joe to be a very helpful resource.

Franchising? Check Out These Resources

Teri Rasmussen of the Ohio Practical Business Law Counsel blog has gathered some excellent resources for those who are interested in pursuing a franchise to start a business.

Thanks to Teri for referring to a couple of my blog posts but I also recommend checking out the Small Business Administration's consumer guide to buying a franchise as well as attorney Mike Hamblin's 4-part series on franchising.

 

Evaluate the Strength of a Franchisor

Are you considering a franchise business?  Read this blog post on evaluating the strength of your franchisor before signing on from the First Prize Franchise blog.

Time and time again I see people invest their life savings into franchise operations.  Some of these people achieve great results but others do not.  There is no validity to the claim that franchise operations are less likely to fail than non-franchise operations.  One critical aspect to consider in my view is the brand itself.  Is the brand recognizable?  If not, the franchise better have a fantastic system, unique concept or protected intellectual property.  Otherwise, I think you need to question whether the franchise is right for you.

Rush Nigut Joins Brick Gentry, P.C. Law Firm

Today is my last day with the Sullivan & Ward law firm.  This coming Monday I am taking a hop, skip and a jump over to the law firm of Brick Gentry, P.C. in West Des Moines, Iowa.  This is actually almost literally true as the Brick Gentry law firm is located across the parking lot just to the west of my current office location. 

It is difficult to leave my friends at the Sullivan & Ward firm but I am excited by this new opportunity.  Brick Gentry is a growing law firm with an excellent reputation in the Des Moines legal community for over 40 years.  The firm now consists of approximately twenty-five lawyers practicing in a wide range of areas including business law, municipal law, health care law, employment law, litigation and real estate.   

I'll join the firm as a shareholder and continue to work with my current business law clients and litigation matters.  Rush on Business will also continue although you will notice some changes to the links and contact information on the blog in the next couple of days. 

My new contact information is:

Rush Nigut, Brick Gentry, P.C., 6701 Westown Parkway, Suite 100, West Des Moines, IA 50266.  Phone:  515-274-1450; Fax:  515-274-1488; email:  rush.nigut@brickgentrylaw.com

Thank you again to all of you that read this blog.  I appreciate your support and look forward to this next step in the journey.  Stay tuned for more because I have a few plans ahead to mix it up and enhance the blog.  I'll need to settled in but I am looking forward to working on some new challenges very soon. 

photo on flickr by phxpma

 

 

Key Differences Between UFOC and New Franchise Disclosure Document

As disclosed in the last post the new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Here are some key differences between the former rule and the new rule:

  • Use of unaudited financial statements.  Start-up franchisors may phase-in the use of audited financial statements.  In this case the franchisor must clearly and conspicuously disclose that the franchise has not been in business for three or more years and cannot include all required financial statements.  (There may still be requirements to submit audited opening balance sheets in registration states).  Franchisees should make sure to review the financials carefully as always.
  • Financial Statements.  The FTC will allow the use of financial statements prepared according to U.S. generally accepted accounting principles ("GAAP").  There must be separate audited financial statements for any parent that "commits to perform post-sale obligations for the franchisor or guarantees the franchisor's obligations" in the disclosure document.
  • No Broker Disclosures.  The Amended FTC rule eliminates the broker disclosure requirement.  However, the broker will need to be listed on the Receipt Page because the Receipt Page requires the franchisor to identify all "franchise sellers".
  • Litigation.  Franchisors will be required to disclose material franchisor-initiated litigation against its franchisees.  The rule will be more lenient as a franchisor will only have to disclose actions that the franchisor filed during its last fiscal year - not the last 10 years. Further,  a full description of the case will not be necessary.  If a counterclaim is filed against a franchisee the disclosure will need to be treated as any other franchisee-initiated action and the regular, full disclosure will be required.  (Franchisees will need to more fully investigate whether franchisor-initiated litigation occurred whether it is in the disclosure document or not).
  • Financial Performance Representations.  The new rule encourages franchisors to provide financial performance representations but it is still voluntary.  Franchisors may provide a more detailed cost and expense analysis which could be helpful for prospective franchisees.  Also, franchisors may provide financial representations based upon a subset that shares the same characteristics. 

There are other differences so be sure to talk with an attorney experienced in franchise matters if you are looking at purchasing a franchise.

 

Franchise Disclosure Document Pitfalls

Interested in franchising your business and have an extra 36 minutes? 

You may want to listen to this informative podcast on AllBusiness featuring franchise lawyers Julie Lusthaus and Warren Lewis discuss the pitfalls of the Franchise Disclosure Document (formerly known as the UFOC).

The new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Stay tuned for the next post on some of the differences between the new franchise disclosure document and the UFOC.

Blawg Review #147

Welcome to a RAGBRAI inspired Blawg Review.  What is RAGBRAI?  The Register's Annual Great Bicycle Ride Across Iowa is an annual seven-day ride across the state.  Heading into its 36th year, RAGBRAI is the longest, largest and oldest touring bicycle ride in the world.  It's not a race.  It's an experience.   And since Blawg Review is a carnival, nothing says carnival in an uniquely Iowa way like bicycles, spandex, pork chops, pie, frivolity and 10,000 of your closest friends!

The weather in Iowa is frigid this winter.  As the weekend of this Blawg Review approaches Iowans brace for another heavy snow.  Our friend Charlie Longbrief looks at the floor below his stationary bike and dreams of summer.  A person can stand only so many YMCA spinning classes.  He thinks back to his first RAGBRAI as a twenty year old when law school hadn't yet entered his mind and the biggest celebrity on the ride was Oakland Raiders great and Miller Lite spokeman Ben Davidson.  Now it's nothing to see the likes of lawyer turned politician John Edwards or the bicycling legend himself, Lance Armstrong.  Armstrong may have participated in the famous New York City Marathon but his heart will always belong with RAGBRAI.  Listen for yourself:

Day 1:  Missouri Valley to Harlan  - 58 miles

This year's ride starts in the river town of Missouri Valley.  While performing the traditional dip of his back tire in the Missouri River, Charlie sees Liz Overton of the Iowa Law Blog who warns him that because of the $350,000 settlement in a 2004 RAGBRAI death bicyclers better beware of the new proposed legislation from the Iowa State Association of Counties.

Unfazed Charlie gets on his bike and sets out on his adventure.  But as he rides off he does ask himself whether Mad Kane is right.  Is it wise to travel with friends particularly where tents are involved?

About 15 miles down the road Charlie takes a break and starts getting an earful from New Yorker Eric Turkewitz about how State Farm has been hit with a RICO lawsuit over alleged sham medical exams.  That hasn't been reported elsewhere and Charlie worries whether State Farm might be doing the same thing in Iowa.  Charlie is so interested he and Eric ride the rest of the way to Harlan together.  Although its only the first day Turkewitz remarks that he agrees with Lance Armstrong . . . RAGBRAI is a hell of lot more fun than his beloved New York City Marathon.

As he pulls into Harlan, Charlie finds himself a little short on cash and heads off to find an ATM.  There he sees John Crenshaw who starts telling him about the biggest scams banks are pulling off everyday. Charlie just shakes his head in agreement as he pays the $2.00 charge to get the money out of the ATM.  After a little angel hair pasta its time to hit the sleeping bag.  There is a big week ahead and unfortunately Charlie isn't twenty any longer.

Day 2:  Harlan to Jefferson - 83 miles

The next morning Charlie wakes up bright and early and sets off for Jefferson.  He has some clients that are buying a business nearby and that reminds him he should heed Larry Staton Jr.'s advice to know what you are getting when you buy a trademark from an existing business.

About half way to Jefferson our city boy is a little mesmerized by the miles and miles of corn.  It makes him wonder whether Farmer David will be able to pay that large patent judgment he now owes Monsanto as reported by the Patent Baristas.

In Scranton, just short of Jefferson, Charlie sees a big group of people gathered in a park off the town's main drag.  There he sees Dan Slater of the WSJ Law Blog who explains that all the hoopla is because the M & M boys have turned their attention to the RAGBRAI water slides because the Naked Cowboy drove them outta of Dodge.  The revelers love it and the log jam causes a very slow ride into Jefferson that evening.

Day 3:  Jefferson to Ames - 56 miles

It's a big day for politicians on the way to Ames, home of Iowa State University.  Barack Obama and John McCain are expected to make appearances today.  Hillary Clinton is here too and keeps talking about how the Florida and Michigan delegates must count.  Obama shrugs it off by saying even his six year old knows it wouldn't be fair to count votes where there was no campaign.  But at least Florida has made significant strides in improving its jury system according to Juries.  While Diane Levin points out voters can learn a lot from the field of negotiationEugene Volokh shares that John Mellencamp may be able to stop McCain from playing his songs after all.

All the political talk has people addressing serious issues on the road today.  Riding on a three person tandum, Leon Gettler of Sox First tells Charlie that Sarbanes-Oxley not only failed to stop the subprime meltdown, it contributed by giving investors the false confidence that they could rely on the law, and not prudence to protect their market holdingsScott Greenfield shares that Congress has a pending bill that may immunize banks from paying billions in dollars to a small Plano, Texas companyPatently-O adds that although DataTreasury is not directly mentioned in the bill it is pretty clear that Section 14 is directed primarily at the company

As Charlie rides into Ames he sees Kevin O'Keefe and  Holden Oliver of What About Clients engaged in a heated discussion about whether corporate clients really want a lawyer that blogs.  O'Keefe says yes while Oliver says no.  It then gets a little personal when O'Keefe accuses Oliver of being someone else.  Charlie blames Teri Rasmussen who started the whole thing when she said every client should want a lawyer who blawgs.

Day 4:  Ames to Tama-Toledo - 75 miles

Charlie gets ready to head off to Iowa's version of the twin cities today.  In the pancake breakfast line he meets Connie Crosby who is kind enough to introduce him to David Bilinsky.  David tells Charlie all about how there is a great need for law firms to turn their senior partners into business leadersDavid Maister overhears them and chimes in that one-firm firms are often quite successful.

After an uneventful morning Charlie witnesses an accident on today's route where someone goes to the hospital.  It looks like the rider will be okay but David Harlow of HealthBlawg warns that hospital-acquired infections are a real problem.  Iowa estate lawyer Matt Gardner says that even if the rider makes it through he should still think about the disposition of his bodily remains.

 As he enters Tama (or is it Toledo), John Phillips of the Word on Employment Law almost runs smack into a little beagle that darts in front of him.  The incident causes John to conclude that beagles should no longer be excluded from the Animal Employment Protection Act (AEPA).  John is obviously a little excited about the near miss and starts rambling about how he handled the situation a whole lot better than Roger Clemens handled the accusations from Brian McNamee.

Day 5:  Tama-Toledo to North Liberty - 82 miles

Now that we have passed the mid-way point for this year's ride, everyone is a little loosey-goosey today.  Charlie's cadence starts to pick up as the wind blows with the sweet smell of pork chops.  That could only mean that Mr. Pork Chop is nearby.  As he pulls off the roadside to visit our pork chop hero, Charlie sees that Iowa legal blogger extraordinaire Brett Trout and his band of Iowa legal bloggers are engaging Mr. Pork Chop in a battle of wills to determine who has the loudest pork chop call.  Sadly, while Trout may be Iowa's toughest attorney he is no match for Mr. Pork Chop in this arena.  Hear why:

 

After a pork chop and a short nap Charlie rides along to catch up with Michael Moore who discusses risk management in employee terminations and explains sometimes the "How" is as important as the "Why".  Pretty soon both of them come across a big party along the roadside.  A crowd is gathered around Dennis Kennedy who apparently is still celebrating his blawgiversary and birthday.  During the party Tulane Law Professor Alan Childress wonders aloud whether any Iowa legal counselors had ever been in trouble like the lawyer that got into trouble with his state bar by trying to talk his way out of a ticket for deer hunting.

Still a little full from his banana cream pie, Charlie and his new friend Charles H. Green ride along at an easy pace discussing that as more and more banks and consumers walk away from loans--and contracts gone bad, we are reminded that legally binding contracts are often only as strong as the morality of those signing them.

That evening after dinner there is lots of entertainment in North Liberty.  At a concert Cathy Gellis proclaims, "I need a husband!"  The revelation causes Jon Hyman to explain what happens when office romances go bad.  But Cynthia Shapiro, who received her RAGBRAI pass from George's Employment Blawg, says you might be able to have that office romance if you know a few secrets.  When Jennifer Jaskolka-Brown overhears them she warns them that email has made it much easier to collect damaging evidence in divorce cases.

Day 6:  North Liberty to Tipton - 62 miles

Charlie decides to join the Lance Armstrong peloton this morning for some fun.  As you might expect with Armstrong the ride is a little faster paced today.  There are several others brave enough to join the pack this morning:

 

Day 7: Tipton to LeClaire - 55 miles

The last day!  On his ride to LeClaire, Charlie meets up with the anonymous Editor of Blawg Review to tell him the ride has been worth it.  Together they dip their front tires into the Mississippi River where Charlie quips that normally what happens on RAGBRAI stays on RAGRBRAI, but this year what happens on RAGBRAI ends up on Blawg Review!

 * Legal Disclaimer:  This Blawg Review is a work of fiction.  Names, characters, places, events and incidents either are the product of the author's imagination or are used fictitiously.  Any resemblance to actual persons, living or dead, events or locales is entirely coincidental.

Blawg Review has information about next week’s host, and instructions how to get your blawg posts reviewed in upcoming issues.  My dear friend and fellow Iowa legal blogger Brett Trout takes the helm next week.  We wish him well as he tries to best the excellence of his previous effort on Blawg Review #106.

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 Flickr Photo Creditsjohnedwards2008, wade, blmurch, MNgilen, IaRuth, wade and artandscience

Focus on Doing It Right the First Time

Chris Moander of the Wisconsin Business Law and Litigation Blog shares his take on the timeless advice that business people can pay for it now . . . or pay for it later.  Chris points out that many business people sadly lump legal services into the "too costly" or "unnecessary" categories when it comes to starting or running a business.  And while good legal services are not cheap it may actually save you in the long run.  Here are some of the downsides for not seeking professional advice as described by Chris:

  • Purchased form documents create a false sense of security as “boilerplate” terms are assumed by the entrepreneurs to be “safe,” which is hardly the case. Owners who are not getting along and decide to split may find themselves mired in extremely expensive litigation over a long period of time, all of which could have been avoided by spending a fraction of the litigation costs on quality document drafting by an attorney.
  • Technical faults in any number of license or regulatory filings go unnoticed until the company is audited, a criminal investigation occurs, or some other form of litigation begins. The litigation costs dwarf up-front legal costs due to the belief that preventative legal advice was not necessary or worthwhile.
  • Buyers and sellers throw together an amalgam of words, believing that the resulting document reflects a mutual understanding. Eventually, one party feels aggrieved and suddenly the so-called contract is revealed as imprecise and nebulous…and so costly litigation commences.

My favorite blogging CPA, Joe Kristan, also shares similar advice over on IowaBiz.com.  Joe's moral?

When you mess with the ownership of your business, it's a lot cheaper to call a business lawyer and a tax guy before you do the deal; it costs a lot more to repair a deal than to do it right in the first place. 

Focus on doing it right the first time.  You will never regret it.

Business Lawyer Says Every Client Should Want a Lawyer that Blogs

Terri Rasmussen of the Ohio Practical Business Law Counsel blog says that every client should want a lawyer that blogs.  As you might guess, I agree. 

Why is it important, you ask?  Terri shares her thoughts (with some comments by me):

  1. Knowledgeable Entrepreneur.  The blogging lawyer thinks in broader terms about what they want to know and what they can offer to clients.
  2. Communication 101.  Connecting in a simple, straight-forward manner is key.
  3. Authenticy and Real Voice.  You get to see the personality of the lawyer. 
  4. Quality and Competence.  There is some ability to assess the quality and competence of the lawyer you are thinking about hiring.  No way to do that with a yellow pages ad.  This is where Terri makes perhaps her best point.  Any lawyer that is willing to put themselves out there and open up to scrutiny ought to be high on the list of any client.
  5. Commitment to the Law Made Practical.  Most clients want to deal with a lawyer that just isn't in it for the money.  Why not consider a blogging lawyer that not only spends their spares time writing but also GIVES AWAY practical information to help people?  Blogging lawyers care.

Like Terri, I strive to have fun and help people through my blog and there is no question it has made me a much more effective lawyer.  Blogging is an educational process.  Not just for the reader but especially for the writer.  Without blogging I would never get to learn from great lawyers like Terri.

Humbled and Having Fun!

It's always nice when people say great things about you but I am particularly humbled by a recent post from What About Clients?  WAC? is one of the great blogs (and I do mean great as evidenced by their award as the Best All Business Blog for 2007 by the ABA).  I respect Dan Hull and his gang for their absolute passion to delivering superior customer service.  WAC? is really just an extension of that passion.  As a young lawyer it was drilled into me that you do whatever it takes to serve clients and even a little bit more.  It's apparent Dan Hull lives that motto every day - 24/7.

But now there is a little pressure for the Blawg Review on February 18th.  Between WAC? and the comments from the wildly popular Iowa patent attorney Brett Trout I better not disappoint.

Assembling the Right Team Critical to Your Business Success

 I often tell clients it is important to establish relationships with at least four individuals when they start a business:

  • Lawyer
  • Accountant
  • Banker
  • Insurance Agent

But in order to have a starting five we need to add a fifth professional.  Who would I add?  How about a marketer

But the real reason I wrote this post was so I could shamelessly plug the best team in Iowa.  The Drake Bulldogs basketball team has now moved to 19-1 with a hard fought win over Creighton last night.  The 16th-ranked Bulldogs are clutch this year and have found ways to win at the end of the close games.  Excellent free throw shooting never hurts and last night was no different.  It was a great crowd and great fun.  If you get a chance be sure to catch a game this magical season.

It's been a long time Drake fans had this much to cheer about.  Go Bulldogs!

Prospective Franchisees: Help us, Help You

When searching my feed reader last night I ran into this distressful thread on BlueMauMau.org, a pro-franchisee Web site.  In the comments below the initial post, franchise lawyer Richard Solomon says he is giving up on trying to help franchisees.  Richard says,

I'm about ready to climb down off the due diligence cross and go do something less stressful, like crisis management counseling. In crisis management, people really do want help and are willing to provide a budget for it.

I'll admit it.  There have been times where I have felt the same way as Richard when trying to assist franchisees in reviewing their franchise agreement and conducting due diligence.  There are times when a franchisee is going to do the deal come hell or high water.  But at this point I am not willing to stop trying to help these people. 

I think Richard's point is simple.  Isn't it unbelievable that people would be willing to invest their life savings in a franchise business but refuse to spend a little time and small expense to properly conduct due diligence?

The purpose of a franchise agreement and disclosure document review is not for the lawyer to talk the client out of their franchise business opportunity.  An appropriate review will help point out the legal and business risks and possible areas of negotiation.  After the review, the client must still  make their own decision about whether to proceed forward.  I have been told by more than one client that a review opened their eyes to help them better understand the franchise opportunity.  Some moved forward while others backed away from their deal.

I have been very fortunate to work with prospective franchisees that are serious about their due diligence.   Recently I had a prospective franchisee client that encountered all the classic warning signs from a franchisor.  I know this client felt disappointed the deal didn't go through but I was sure proud they were willing to walk away.  Only someone serious about their business would have done so.   

So don't give up Richard (and other franchisee lawyers).  It takes just one client to make you see this is all worthwhile and they definitely need our help.

 

Franchises: Four Things to Make You Go 'Hmm

If you are looking at a franchise opportunity perhaps you should beware if your prospective franchisor says the following:

  1. You don't need a lawyer to review the agreement. 
  2. I would prefer you don't talk with the other franchisees.  You should only talk with me.
  3. We won't negotiate any terms.
  4. Trust us, we can't (and won't) change the agreement but we won't really hold you to that provision anyway.

Like many people you may be considering an investment of your retirement savings in a franchise.  You owe it to yourself to do the best job possible investigating that franchise and performing the most due diligence possible.  That includes hiring franchisee counsel to review the franchise agreement and disclosure document and talking with as many franchisees as possible.  Some franchisors won't negotiate but many will consider your needs.  And never, I mean NEVER, believe the franchisor that tells you they won't hold you to the terms of their written agreement.  You can be assured that the franchisor's lawyer in any lawsuit will never acknowledge that statement was ever made and most franchise agreements are written so that any such statement could not be used as evidence anyway.

Trust your gut.  Don't believe the hype.  Be willing to walk.

photo on flickr by Picture Perfect Pose.

Iowa Caucus Issue: What about Small Business?

The Iowa Caucus is approaching quickly.  If you attend campaign rallies for the candidates or listen to TV ads you will almost never hear anything about small business. 

But in reality, America's small businesses are the driver of our economy.  Consider these facts from the Small Business Administration (SBA) as outlined in February 2006:

10. Small businesses make up 99.7 percent of all United States employers.

9. Small businesses create more than 50 percent of the American nonfarm private gross domestic product (GDP).

8. Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.

7. The more than 24 million small businesses in the United States are located in every community and neighborhood.

6. Small businesses employ 50.1 percent of the United States’s non-farm private sector workers.

5. Home-based businesses account for 53 percent of all small businesses.

4. Small businesses are 97 percent of America’s exporters and produce 26 percent of all export value.

3. United States saw an estimated 580,865 new small firms with employees start-up in the last year measured.

2. There are approximately 4,115,900 minority-owned businesses and 6,492,795 women-owned businesses in the United States, and almost all of them are small businesses.

1. The latest figures show that small business creates 65 percent or more of America’s net new jobs.

I encourage you to find out where the candidates stand on America's small business issues.  It's an issue vital to our economy.  You are unlikely to find an express position regarding small business on any of the major candidates' Web sites, so you will need to ask them.  Seriously, can anyone tell me where their candidates stands on SPECIFIC small business issues? 

 

Edwards Campaigns with Most Famous Client Before Iowa Caucus

Abe Lincoln, Freedom Fighter (1978)
Abe: I don't know about this politician business.
Judge: What do you mean by that?
Abe: If I have to sacrifice my integrity for politics, I guess I'll just have to stay a lawyer!
 

Up to this point I have avoided blogging on politics and the Iowa caucus.  It's a no win situation for me.  I have clients on both sides of the aisle and a policy not to debate politics with clients has served me well.    Besides, Iowa lawyers like Gordon Fischer and Ted Sporer do a tremendous job of covering politics with their blogs so I'll leave the debate to the experts.

But one campaign strategy surprised me.  Many of the candidates are lawyers.  But as Joe Kristan recently pointed out, lawyers are not exactly the apple of the public's eye.  It's probably part of the reason why lawyer candidates tend to rarely emphasize their legal careers.  But one candidate has decided to go against the grain.  Trial lawyer extraordinaire John Edwards is campaigning in Iowa today with his most famous client.

As detailed in his book, Four Trials, Edwards obtained a $25 million judgment on behalf of Valerie Lakey and her parents.  Valerie nearly lost her life when she was disemboweled by a swimming pool drain that was incorrectly attached.  He has sent out mailings featuring the Lakeys and is now campaigning with them.  He also unabashedly points to his career as a trial lawyer as an example of how he will stand up and fight against corporate and special interests.    It's a bold but risky move given the public opinion of trial lawyers in particular.  But I am proud of Edwards for not shying away from his tremendous career as a lawyer. 

While the image of lawyers could be improved, it should start with lawyers being proud of the profession they have chosen.  We offer society a valuable and important service.  My thanks goes to lawyers like Edwards who aren't afraid to talk about it.   

Photo on flickr by alexdecarvalho  

  

Iowa Franchisors Picking Up Steam?

Iowa has never been the hot bed for franchisors but it seems as though some Iowa franchisors are really picking up steam.  According to the Des Moines Register this morning Chocolaterie Stam stores have expanded to Ames, Chapel Hill N.C., and Wauwatosa, Wisconsin.  Upcoming stores including Minneapolis and Steamboat Springs (that would be my personal favorite) and also is contemplating stores in Kansas City or West Des Moines.

Another expanding local franchise is Maid-Rite.  It is my understanding Maid-Rite is growing rapidly with plans to head into Florida and Texas and with the new store design it's easy to see why.  This definitely is not your father's Maid-Rite.

But if you are considering these franchises be sure to conduct your due diligence and consider the fundamentals for franchisees in your negotiations.  Don't fall in love with the deal.  (I know it's tough with chocolate but control yourself). 

Franchising in the Iowa Small Business Zone

Doug Mitchell interviews Steve Reese who is the owner of Fitness Together franchise in Clive, Iowa in his first podcast of the Iowa Small Business Zone.  Listen and you will find that Steve is an enthusiastic proponent of franchising.   I was also impressed with Steve's impression of the potential benefits of blogging from someone who is new to the medium.  He views it as a way to improve communication with existing clients first and foremost. 

Steve's key in choosing a franchise?  Make sure the franchise has a proven track record.

Doug is a natural in the interview process.  I look forward to more podcasts in the Iowa Small Business Zone.

Should You Hire a Franchise Broker?

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. 

Looking for a Franchise? Be Sure to "Pick" the Right Resources

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.

 

Franchisees Must Consider Internet Retailing Encroachment

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

Good Habits of Successful Franchisee Representation

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.

 

 

Fundamentals of Franchising: Franchisee's Perspective

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 AwayI 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.

 

Sullivan & Ward's Iowa Law Blog Goes Live

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.

Franchise Forum This Week in Phoenix

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.

Where Should You Incorporate Your Iowa Small Business?

Where should you incorporate your Iowa small business?  This question is asked a lot by Iowa_picmany prospective small business owners.  The question used to be surprising but after seeing and hearing numerous advertisements for Delaware and Nevada corporations on the Internet and on satellite radio it is definitely a legitimate question.

Delaware has reputation and history on its side.  Delaware's Division of Corporations boasts that more than a half a million business entities make their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.  Businesses, especially large ones, choose Delaware because of the state's business laws and respected Court of Chancery.  Most observers say it is because of Delaware's predictability. 

Nevada has recently exploded in popularity for many businesses.  This is due to Nevada's pro-business climate, low-tax mentality and the lack of an information sharing agreement with the IRS.

Delaware or Nevada may offer viable options for some companies but in general most Iowa small businesses are probably wise to incorporate in Iowa.  First, Iowa has very low fees when it comes to incorporating your business.  It is a $50.00 fee to file Articles of Incorporation for a domestic corporation in the state of Iowa.  Further, it only a $30.00 fee every two years for a biennial report if you file online.  These fees are extremely low compared to other states.

Second, you won't avoid Iowa taxes by incorporating your Iowa small business in Nevada or Delaware if you are doing business here in Iowa.  The tax and corporation laws of Iowa will require you to register your company and pay fees as a foreign corporation in Iowa and you will be required to pay Iowa state income taxes for any income earned.  (You also do not avoid federal income taxes by incorporating in Nevada despite the lack of an information sharing agreement with the IRS).

And the perceived court advantages in Delaware?  That might be fine for a large business that is actually going to litigate a case in Delaware but it is probably not cost effective for most Iowa small businesses to litigate their cases in Delaware.  Besides unless you have well-written forum selection clause in contracts your Iowa small business will likely end up in Iowa courts anyway.

If you have questions regarding where you should incoporate your Iowa small business be sure to contact a business attorney licensed in Iowa. 

Photo on flickr by rsgranne.

Small Business Trends: Blawg Review #126

I encourage you to check out Blawg Review #126 written by Anita Campbell of Small Business Trends.  Anita is a lawyer by training but an entrepreneur at heart.  Her award winning Web site was the "Best of the Web" according to Forbes Magazine for small business blogs.

The lineup of small business experts on Anita's site is impressive.  The articles are well-written and informative.  Fellow IowaBiz authors should especially take notice.  The site is something to which we should aspire. 

And thank you to Anita for including my post on whether Licensing is a Viable Option Rather than Franchising?

Is Licensing a Viable Option Rather Than Franchising?

Congratulations to What's For Dinner - Des Moines and its owners, Dawn Angus and Kristen Severs for their feature article in the Des Moines Business Record.  The success of their meal assembly business has brought multiple inquiries from would be entrepreneurs who are wondering whether they offer franchises opportunities for their business.  The thought of expanding beyond the single store operation had intrigued the owners but the investment of time and money is substantial.  A franchise also opens you up to FTC and state regulations which require disclosure statements such as an offering circular.

The article discusses how Dawn and Kristen were presented an opportunity to offer a license of their recipes, Web site and logo.  In these particular circumstances we were able to craft an agreement which provided them the opportunity to expand their reach beyond the single location but without all the hassles and expense of a franchise. 

So is licensing a viable option for businesses looking to expand rather than franchising in all circumstances?  Absolutely not.  Whether or not licensing is right for you is completely dependent upon the facts and circumstances of your own individual situation.  (See Don't Let Your Distribution or Licensing Agreement Become an Inadvertent Franchise).

Iowa has very specific laws on franchising and other business opportunity promotions.  In order to license your business product here in Iowa you must fall within the exceptions to the franchise and business opportunity promotions.  Particularly if you are offering a business system or marketing plan to a new business it may be difficult to fall within the exceptions to these important regulations. 

In order to determine if licensing is right for you be sure to consult a business and/or franchise lawyer before acting. 

  

 

 

Information for Franchisees

In the never ending search for objective franchise information  I discovered Blue MauMau.  The site is a franchisee community designed to share insight, comments and stories about buying and running a franchise.

A few of recent blog entries worth reading are:

If you are considering a franchise it is important to research and conduct due diligence about the franchise system.  The notion that franchised businesses cannot fail is false.  Not everyone is cut out for owning their own business and not everyone is cut out for franchising.  Here are two suggestions if you are considering a franchise:

  1. Talk with as many franchisees as possible in your due diligence.  Ask probing questions to get an accurate picture of the franchise and the prospects for success.  You will learn both from the positive and negative comments. 
  2. Consider working in the franchise system for six months to a year before purchasing the franchise.  There is no substitute for working in the system before purchasing the franchise.  Don't think you can afford to do this?  Perhaps you should consider whether you can afford NOT to do this.