Big news this past week in business/employment law. The FTC is proposing legislation banning noncompete clauses. The agency estimates this could increase workers’ salaries by nearly $300 billion per year.

I’ve never been a fan of noncompete clauses for lower paid workers. But I’ve always believed there is some validity to a business protecting their customer base. There should be a balance between restricting someone’s ability to earn a living v. allowing someone to raid their employer’s customers when they leave employment.

The proposed legislation would generally prohibit employers from using noncompete clauses. Specifically, it would be illegal for an employer:

  • enter into or attempt to enter into a noncompete with a worker;
  • maintain a noncompete with a worker; or
  • represent to a worker, under certain circumstances, that the worker is subject to a noncompete.

The proposed rule would also apply to independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to rescind existing noncompete clauses and actively inform workers that they are no longer in effect.

The proposed rule would generally not apply to other types of employment restrictions, like non-disclosure agreements. However, other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as noncompete clauses.

The FTC is asking for comments so the proposed legislation could change from the proposal. However, one thing is clear – noncompete clauses are heading to extinction. The trend has been heading in this direction and this proposal could accelerate that trend even faster.

It will also be interesting to see whether this proposal has an impact in franchisor-franchisee situations. It seems franchises will need to be ready to deal with the fact that noncompete clauses could go away. Time will tell.

Last week I wrote about how the franchise industry has it wrong. But don’t misunderstand me, that doesn’t mean the future of franchising isn’t bright. In fact, the breadth of the franchising industry is pretty staggering.

Red Boswell writes on the FranchiseWire blog that the 2023 will be the best year ever in franchising. He says there are 12 reasons why the future looks bright for franchising. I go through his points below adding some of my own comments. Make sure to read his article. I did find his perspective interesting.

  1. Franchise Brands are joining forces. Boswell says there are strength in numbers. With brands joining forces the organizations are becoming more professional with stronger systems and support for franchises.
  2. Franchising is attracting more professionals. I have been noticing this for many years. Former corporate managers and executives are turning to franchising as the alternative to start their own businesses.
  3. Franchise consultants are going mainstream. Here’s one to be careful on though. All franchise consultants are not the same. Find a consultant that is independent and not beholden to any particular franchise brand(s). Joel Libava has an entire guide on how to hire a franchise consultant.
  4. Private equity loves franchising. In my experience that is a positive but at times is also a negative for franchisees. Private equity loves franchising, but mostly private equity loves making money. So often the founder driven franchise changes when private equity takes over, sometimes for the better and other times not so much. But I agree that private equity allows for more sustainable growth.
  5. There are more ways to get together. There are many conferences and events to connect and learn about franchising.
  6. Innovations are making franchises better. Many franchises are leveraging technology to improve their brands.
  7. Franchise education is growing. Colleges and universities are introducing franchise and entrepreneurship majors bring more educated and qualified people to the industry.
  8. The industry is prioritizing inclusion. There is always work to be done in this regard but I agree the franchise industry is working on becoming more diverse.
  9. There are more franchise opportunities in more sectors. Franchising is not just fast food. One of the largest growing segments is the home services industry where I have had several clients buy franchises over the past couple of years with success.
  10. There is a wealth of information about franchise opportunities. There are so many sites out there about franchising you could drown. Find reputable sites that provide independent information. (I’ll write a blog post on some of my favorite reliable sites soon).
  11. Financial Disclosure. Item 19 of the FDD allows franchisors to disclose their financial performance representations. More and more franchisors are taken advantage of the opportunity to inform prospective franchisees of their finances. Always be sure to investigate these financial performance representations carefully.
  12. Franchising Support. Boswell points out the the International Franchise Association (IFA) is always advocating for the industry. This is true. As a prospective franchisee though, always try to find independent sources. As an example the IFA loves to tout that franchising gives you a better chance to be successful than independent businesses. The truth and the reality is that franchise businesses fail at roughly the same rate as independent businesses.

What do you think? Do you see a bright future for franchising?

You may want to own your own business but you also don’t want to quit your day job. Is it possible to find the elusive extra income to add to your bottom line and possibly even give you the freedom to quit your job in the future?

Kimberly Crossland has a great post on the Franchise Direct blog discussing just how you might be able to start your own franchise side hustle.

Is it easy?

Of course not.

But she discusses some basic elements you should look for when trying to find a franchise side hustle. Those elements include:

BACK OFFICE SUPPORT

If you are going to have a side hustle, back office support is essential. Things to look for include call centers to help with marketing, accounting support, billing, and appointment booking.

TURNKEY OPERATIONS AND PROCESSES

The benefits of owning a franchise in theory are the turnkey operations and processes. But in my experience, all franchises are not created equal in this regard. Really examine this factor hard and put the franchise to the test. Talk with several franchisees to determine if the franchisor’s processes are effective and beneficial.

RECURRING REVENUE MODELS

A recurring revenue model is ideal. It is tough to chase customers all the time. And if this is a side hustle, you want to avoid that. Find a business where customers need to use your service over and over again.

FEWER SALES; MORE SERVICE BASED

Again, a side hustle is tough if you are constantly selling. Service based models enable you to manage operations and grow while not going all-in with the business from the beginning.

The place where I am seeing the biggest opportunity in franchise side hustles is the home services industry. Many of home services franchises meet the elements discussed above. Right now though keep in mind that hiring employees is one of the most significant challenges faced in starting a side hustle. One franchisee I represented recently told me his business was really taking off, but the only problem was finding enough employees to grow. No matter what count on it being work. There is no such thing as an easy side hustle.

I have reviewed hundreds of franchise disclosure documents (FDDs) and franchise agreements at this point in my career. And mostly, my review always solicits one question in my mind:

Do franchisors need these overwhelmingly restrictive franchise agreements?

Most FDDs and franchise agreements disclaim just about any real obligation to do anything on behalf of franchisees. Don’t believe me? Read them yourself. Show me where I am wrong.

Don’t franchisors have some obligation to support their franchisees and help them be successful financially? And while that seems like a simple thought most franchisors should have, I can tell you from experience it is not a common mindset. Many franchisors, from what I can tell, do not really care all that much about franchisees. What they care most about is receiving fees. They care about protecting themselves against defaulting franchisees. And they care about their own interests often to the detriment of franchisees.

What I am NOT suggesting is that franchisors should put franchisees first. Of course franchisors need to protect their businesses and systems. Of course franchisors should be concerned about their own profitability. What I am suggesting is that franchisors take a franchisee-centered approach. What does a franchisee-centered approach entail? To me, it means having empathy for franchisees. It means practicing attentiveness to franchisees’ questions and issues. It means communicating regularly with franchisees (which remarkably does not occur with many franchisors). It means developing effortless experiences with franchisees in terms of ease of doing business, training, and helping franchisees innovate their businesses. And finally, it means adding value for franchisees so the franchisor has created franchisees for life.

For many franchisors this may require a shift in mindset. A mindset that is not so rigid like your typical franchise agreement along with system rules, but instead that is more of a growth mindset where there is an emphasis on learning what works and does not work. And this mindset may require franchisors to listen much more to franchisees in order to improve in the future. And in the end, it is my strong belief that Franchisors who can take this franchisee-centered approach will set themselves apart to dominate the competition. If you find a franchise-centered franchise, be sure to reach out to me and let me know about it. I’d love to see some great examples.

Are you thinking about starting a new business in Iowa? Here are 10 tips to get you on your way.

  1. Save up as much money as possible before starting.
  2. Start on a shoestring. Don’t get the fanciest office or hire lots of employees.
  3. Protect your personal assets. Form a corporation or limited liability company (LLC).
  4. Understand how–and if–you will make a profit.
  5. Make a business plan, no matter how short.
  6. Get and keep a competitive edge.
  7. Put all agreements in writing.
  8. Hire and keep good people.
  9. Pay attention to the legal status of your workers.
  10. Pay your bills early and your taxes on time. 

The best business people I know are generally quite conservative when it comes to spending money, especially in the beginning. Make sure not only to pay income taxes but also payroll, sales and use taxes. The failure to pay those taxes can be costly with interest and possible fines. It is also important to know that a corporation or LLC will not keep you from personal liability if you fail to pay those taxes.

Really interesting article in this weekend’s Wall St. Journal on how private equity firms are buying up car washes and turning them into regional chains. There is a trend in private equity to buy up small businesses is to bundle the businesses in order to “roll-up” those businesses and find new ways for them to make money. The goal is to create more valuable companies that can be sold for multiples of what the private equity investors paid.

This is happening in all kinds of businesses such as dentist offices, auto-repair shops and dry cleaners. It is happening in the franchise industry as well. It is a trend that seems to have some legs and something to keep watching.

I made this observation on Twitter recently. Franchisors should stand by their trademarks.

What? Why would you say this? Doesn’t every franchisor stand by their trademarks?

No. No they don’t.

If you look closely at your franchise agreement, it is very likely the franchisor will not indemnify its franchisees against trademark infringement by third parties. This means the franchisor isn’t willing to protect its franchisees from challenges to the name of the franchise and its brand. Franchisees are really buying two main things from a franchisor. One is the system. And the other is the license to the name or brand.

If your franchise won’t indemnify, defend and hold you harmless from trademark infringement, you should negotiate to have such a clause inserted into your franchise agreement. And if your proposed franchisor won’t agree to it, then perhaps you should think twice about whether this is a franchise for you.

A business owner approaches you to invest in his business. He comes up with an idea to “sell” a portion of his equity in the business. You listen to the business owner’s pitch and likes the idea. You decides to invest in exchange for “ownership.” The problem? Nothing is in writing, you have invested the money, and there is nothing that documents whether you are entitled to ownership, whether it was a loan, or perhaps even a gift.

I cannot tell you how many times I’ve seen something like that happen. I have seen people invest hundreds of thousands of dollars without a written agreement signed by the parties. It seems incredulous to me that someone could part with that without assurances in writing but I have seen it happen between friends and complete strangers alike. Why does this occur?

I think it boils down to trust. Most people are just too trusting. They believe things will work out and many do not want to confront or offend the other person. Maybe, they want to be the kind of person that does business by a handshake. Or, they’re just plain stupid (but I prefer the trust angle). So by all means have a healthy respect for your business partner, but make sure to get it in writing BEFORE you invest money in a business.

*This blog post was originally written for the Greater Des Moines Partnership.

I am fascinated by the mindset of high performers regardless of their profession. Because I am a sports nut, I am particularly drawn to the champion mindset of athletes. How are the very best able to achieve at such high levels? For me, it’s fun to listen to these high performers share their background and insight on what has made them so successful. There is no singular path or right way. There are no hacks, tricks or secrets. If you listen to these high performers, you will see consistent themes that weave through their minds. And the great thing is this high-performing mindset is available to everyone. We all have it in us. You do not need to be the most gifted or talented to improve your performance dramatically with the most optimized internal mindset.

It is no surprise soccer star Mia Hamm’s keynote at the recent Greater Des Moines Partnership Annual Dinner was a treasure trove on how to optimize your mindset for high performance. But it was surprising to hear her confession to the audience that she suffers from self-confidence issues. This hurdle did not stop her from becoming perhaps the greatest soccer player of her generation garnering two World Cup championships and two Olympic championships, becoming a 4X NCAA champion and two-time FIFA Player of the Year and retiring as the leading goal scorer in international play. How did she accomplish all of this? Her focused mindset undoubtedly set her apart and helped her overcome any doubts she had about herself.

Achieving in Sports + In Life

Some of Hamm’s key takeaways on how to achieve at an elite level.

  1. You must learn how to work. It is important to get comfortable with being uncomfortable as you push yourself beyond limits. You cannot be afraid to fail. Hamm started on the national team at the age of 15 and realized “she was not very good.” But fortunately, her winning mindset pushed her to continue working hard through all the ups and downs.
  2. You must make the decision to flip on the light switch every day. Most only do it part of the time. It must be an all the time thing.
  3. Each day will throw obstacles at you. Do not let these obstacles throw you off from your goals. Be flexible and adapt in difficult situations.
  4. It can be lonely at the top. Lots of people will want you to conform. You may be viewed as different or strange. You must be OK with this and comfortable in your own skin.
  5. How do you elevate over other elites? You need to find a way to improve in some aspect of the game/profession every day. There can be no wasted opportunities. The best players are always on. It just matters to them more. Do not just seek to win. You seek to dominate. Because you deserve to be as good as you can be.
  6. If you want to be a great leader you must carry the water. Do the little things. Grab the ball bag. Pick up the trash. Be the example in the small moments, not just when you are standing on the podium. Assume someone is watching you all the time.
  7. We all want to know we are valued. So, treat people the right way. Be a team player. Be optimistic and positive with people.
  8. You do not need to be the best in every aspect. Play to your strengths and understand your weaknesses. There is incredible strength in the vulnerability that comes from knowing that you do not know everything or that you are not the best in everything. It allows you to grow as a person and an elite performer.
  9. Be invincible even when you fail. It is OK to fail. What you really are doing is learning for the future.
  10. You are on the team for a reason. Be confident.
  11. Give back to your profession. You likely did not get to where you are without the help of others. Be there for the future generation and help pave the way for others to become even more successful.

A special thanks to Mia Hamm for sharing her insights and to WHO-TV reporter, Justin Surrency, for his work as the moderator of her talk. Hamm’s humble approach combined with an incredible work ethic and determination undoubtedly has made her not only a world-class athlete but also a world-class person.

In March of 1995, Michael Jordan had one of the shortest press releases announcing his return to basketball. He simply said,

I’m back

Well, I may not be the caliber of Michael Jordan, but after a long hiatus I am announcing I am back to blogging. I have been blogging (for the most part continuously) since 2006. I started my own entrepreneurial venture in late 2020, and maybe just needed a break, so I took the past year off blogging. But I return energized and anxious to take this blog to another level. While I still cover legal issues with the blog I do intend to expand beyond just the law and also focus on business success and franchise opportunities.

I also have plans for a podcast which I put on hold for the past year but will be coming soon. I think you are going to enjoy it!