In the last post I talked about using social media as evidence and its legal relevancy to the litigation process.  Today’s post will be full of legalese, but my blawg is designed to help entrepreneurs of all types and that includes my fellow solopreneurs and small law firm attorneys.  As always, I will be discussing today’s subject in general and informative terms, and any procedural stuff will be with respect to Federal Rules.

Therefore, if you are a non-lawyer feel free to stick around, but today’s information is geared to others in the legal profession.  I thank you for stopping by and I will soon be getting back to some relevant posts to general small business situations.  However, before you go be aware that there are certain ethical rules that lawyers and those attached to them must follow.  For example, a lawyer cannot pose as a fictitious person and friend you on Facebook to get your information.

That being said just remember you should always be guarded about what you put out for the public using social media. Have a review process and if you have questions feel free to check my earlier posts on Social Media Policy.

Areas of the Law and Social Media as Evidence

Social media evidence has found a place in criminal and divorce (especially, with the flirtations that go back and forth between people).  It also has great use with corporate and employment law. Social media is good for providing alibis for criminal proceedings, discrediting a witness, and investigating people that are a part of the case.

In terms of torts, corporate blogs and statements put out by employees are great for products liability and personal injury situations.  While disputes of discrimination, emotional distress, and workers’ compensation fraud cases are backed up with Facebook pictures and Twitter posts.  Many bloggers use pictures, clips, and text freely from IP covered sources.

Some cases to consider:

  • EEOC v. Simple Storage Mgmt (2010) – refuting a claim of emotional distress from discriminatory conduct
  • TEKsystems, Inc. v. Hammernick (2010) – where plaintiff alleges that defendants violated a non-solicit agreement via their LinkedIn account

When to Gather Evidence

Consider poking around early.  If  you think your client may be sued or wants to sue someone else see what the opposing side has already put out there.  Basically, find out what you freely can about your opponent.  If they regularly use social media, consider it an opportunity to get information on them for free.  Once litigation commences, posts get deleted, privacy settings get set to maximum, and the ease of just screen-capping or printing a webpage is gone.

The flip side is that once discovery commences you will be allowed to use more formal methods to try and compel social media evidence.  Some ideas on the procedural formalities:

  • Interrogatories – should be used to identify the opponent’s screen or avatar names and the underlying social media account that is connected to each of those names;
  • Requests for production – should seek blog entries and postings, and if you can, use the date and timestamp connect to them;
  • Requests for admission – these should then be designed to backup and authenticate any such information gathered.

A Rule 26(f) conference should lay out the ground rules for social media production.

Defending Your Use of Social Media as Evidence

Watch how people connected you talk about your products and services. Make sure employees and paid bloggers disclose anything you gave them in connection with touting your business's products and services.

Be prepared to defend all of that valuable evidence that you have discovered.  I discussed relevancy last week, but also hearsay and authentication enter into the equation.  Normally, it is sufficient that the witness who has personal knowledge that the evidence is in fact what it is purported to be.  Courts have accepted that website printouts need not be authenticated by the original poster or the site’s owner, but by an attorney that testified that they visited the site, recognized it as opposing party’s, and printed the screen. (Jarritos, Inc. v. Los Jarritos)(2007)

In general, for authentication issues, ask yourself the following two questions:

  1. Whether the exhibit is really a printout from the site you are claiming it to be from?
  2. And whether the printout can be satisfactorily shown to have arisen from the where you are claiming it came from?

For a more in-depth look at authentication of social media the ABA has provided an excellent article on the matter written by David I. Schoen and can be found here.

As always if you like this post or any of my other series please Subscribe to this blawg to receive updates to your e-mail.  In addition, follow me on Twitter @Rkhewesq and Like Me on Facebook under Ryan K. Hew.  If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

Next time I will continue looking at other issues of using social media as evidence.  Namely, collecting and then preserving it.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

I was fortunate enough to be able to attend Hawaii Business Magazine’s SmallBiz Lunch and Learn: Leveraging Technology and Social Media to Grow Your Business.

It was a great event and I was able to learn some great advice and thought of some good ideas.  The experts that had on had were as follows: 1) Roxanne Darling of Bare Feet Studios and the Founder of Social Media Club; 2) Cyrus Driver, VP of Oceanic Time Warner Cable Business Class; and 3) Bernard Uy Co-Founder of Wall-to-Wall Studios.

This is NOT a Social Media and the Law post.  It is a post on some of the nuggets of practical wisdom that I gathered from the lunch and would like to share.  I also feel this gives you some of that business perspective I was mention in my posts as a JD who has his MBA.

They are the following, in no particular order of priority:

  • Thanks to social media EVERY business is a technology business, you will use it some aspect;
  • always thanks to social media your customers OWN your brand – they have become self-publishers;
  • because of the prior two points, LISTEN to your customers;
  • in fact, use them as informal discussion and research group on new marketing plans;
  • ask your customers who they think your competitors are for defining your brand;
  • if you get a negative review on Yelp or the like, it’s good thing – gives you an opportunity to show how you respond and change;
  • use video, there are some great apps on smartphones that you can upload to your Youtube account;
  • be more personal, less cookie-cutter in your usage of social media;
  • if you cannot compete on price, location, and the like – compete on YOU, make sure your customer/clients like working with you;
  • always update and double–check your links, dead links help no one.

As a solopreneur I don’t know if I will get to make use of all these ideas, but I definitely think that any business, great or small should definitely think about these things and it offers a great starting point.

See you on Monday or Tuesday next week when I continue discussing evidentiary matters in the context of Social Media.

Have an awesome weekend!

-RKH

In the last post I talked about leasing and subleasing the location of your business, continuing in the vein of location I will briefly discuss buying a location and or using your home.

Buying the land and/or building for the Business

Considerations – space is very valuable in Hawaii and if you are fortunate enough to have the capital to purchase and own the land or building in which your business will sit that removes a lot of concerns with paying rent or dealing with an uncooperative landlord or property manager.   However, you will also then be responsible for a lot of those things that they had to handle, such as property taxes, utilities arrangements, construction and maintenance fees, and basically, you would be adding a land and property management to your property costs.  Lastly, from the legal perspective Hawaii is unique as it has two state land-recording systems.  Therefore, you will want expert help in drafting and executing any land conveyance documents and make sure they are filing in the correct system.

Right of First Refusal – one option that might be good for you starting out is start out with a lease arrangement, but have a “right of first refusal” clause or option attached to have the owner ask you if you would like to buy the property should they consider selling.  Therefore, you get to see if you like the space, can work with it, and ultimately if the landlord leaves you get asked to become the new owner before they approach new buyers.

Using your Home as a Business

This is everyone’s dream, right?  Work at home?  I’ll be honest I do it too when I am drafting lengthy agreement for clients.  It’s comfortable and does not require a 45-minute drive from the suburbs to Downtown Honolulu and allows you to focus without distraction.  It is sometimes very suitable for your business, especially if it is consulting, internet sales, marketing, or the like to have a home business.  Here are some things to think about:

  • Taxes– so long as we do not get drastic changes to the IRS code, there may be ways for you to deduct some of the expenses you incur in setting up your home office.  The biggest problem is satisfying the IRS that you are not some fly by night or hobby business. Some of the tests are complicated and specific.  Therefore, seek some professional advice on how best to approach.

  • Insurance – your homeowner’s or renter’s insurance may not cover owning and operating a business; that kind of insurance protects you from loss if there is a fire, but more importantly protect you if you are sued for negligently causing harm to a person on your property.  If it does not protect those situations, your guests or clients, may sue you and you will have to defend yourself.  First of all read your policy and then if it does not extend to a home-business situation contact your insurer and see if you can get an extension or a policy to cover.
  • Private Regulations – condo associations are governed by binding documents that affect what you can and cannot do in your building, such as starting and operating a business.  The same goes for many of those neighborhood associations or communities.  They have a restrictive covenant in place and it is all designed to keep the building or neighborhood a quiet peaceful place.  You will want to read the document and see if there are such covenants, and if there are it still may be possible to negotiate an exemption or change in the document to allow you to operate.

Once again, this is not an exhaustive list of factors you will need to consider for a home business, but a starting point to get you thinking.  As always if things seem overwhelming seek help from the experts to help mitigate unforeseen problems and bring up creative solutions. Next time I will be discussing zoning matters and how they can determine where you setup your business.

As always if you like this post or any of my other series please Subscribe to this blawg to receive updates to your e-mail.  In addition, follow me on Twitter @Rkhewesq and Like Me on Facebook under Ryan K. Hew.  If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

See you on the next Draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

For the past several weeks I have discussed the concerns of just putting things on your Facebook, Twitter, and other social media accounts.  I shared with you a few of the scenarios and stories that companies, employees, and people go through when social media goes awry at the workplace.
However, how does this stuff come up, legally speaking?  That’s where we have the Rules of Evidence.  For you readers that are laypeople I will try to keep this as simple as possible, but bear in mind you will be exposed to some legal terms.   For attorneys and law students, we will be sticking to Federal Rules, even though I am in Hawaii.

The Starting Point: Relevancy

Generally speaking, for evidence to be admissible it has to be relevant.  Yes, it is an extremely low threshold and in the realm of fast postings, easy tweets, and tons of drinking pictures that is kind of scary.  Is it relevant that you posted a picture of you jumping up and down partying at the bar?

Yeah, it might be, if you are in a battle over workers’ compensation with your employer and its insurance company over your work-related back injury and that picture was taken after your claim.

Thus, many things in the realm of social media become pieces that lawyers will use to try and craft a story on a matter in a case.  Another words, all those posts, tweets, pics, videos, and whatever else you are throwing up on your account could be fair game as evidence.

What about my Right to Privacy?

While the threshold for admitting evidence is relatively easy, it just needs to be relevant, don’t you lawyers have all these exceptions to the rule?  Can I not claim the stuff I put on my Facebook and Twitter accounts is private stuff?

Yes, we have exceptions.  But, the Right to Privacy in social media is NOT one of them.   This case simply illustrates the principle of why you cannot post or tweet something believing it will be protected.  In Romano v. Steelcase, Inc., 2010 WL 3703242, the New York Supreme Court ordered one party to turnover their MySpace and Facebook content to the opposing party.  For this matter content includes photographs, posts, and even recent deletions.  Why?  The court stated when a person chooses to disclose or share such information their ability to then say that is private is weakened.   If you choose to put it up, then how can you reasonably say you think it will be private?

What about the Terms of Service or Privacy Policy? Won’t that Protect Me?

Facebook, Twitter, and all the other social media sites all have varying Terms of Service and Privacy Policies, but they do remind you that while striving to maintain privacy and giving you the utmost control over your information there is no such thing as perfect privacy in social media.

Risks inherent in sharing information. Although we allow you to set privacy options that limit access to your information, please be aware that no security measures are perfect or impenetrable. We cannot control the actions of other users with whom you share your information. We cannot guarantee that only authorized persons will view your information. We cannot ensure that information you share on Facebook will not become publicly available. We are not responsible for third party circumvention of any privacy settings or security measures on Facebook. You can reduce these risks by using common sense security practices such as choosing a strong password, using different passwords for different services, and using up to date antivirus software.

(emphasis added) Take from Section 8 of Facebook’s Privacy Policy page.

If You are Worried About It, Don’t Post It

As many professionals both in social media and legal circles have told me.  Once you post something it does not go away.  Therefore, in situations where you claimed one thing to one person, but your social media posts clearly shows something else you could find yourself in trouble unexpectedly.  For instance you called in sick to work, but you are showing pictures of yourself at the beach.

Bottom line:  If you don’t want something used against you in court, don’t post it.

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Next time, I will continue the discussion of social media information usage in trial and litigation work and some of the rules and cases that are shaping the laws interaction with these forms of communication.

Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Last week’s Draw the Law post I discussed buying a business or into an established franchise, but let’s go back to the original proposition you started your own business now you are looking for a place to settle.
Where am I going to sell by service and/or products?  Do I need an office Downtown?  Or a retail space or warehouse in Kaka’ako?  That kind of determination will be largely based on what type of industry you are in.  Moreover, a business planner and market researcher can help you narrow down a location suitable for you needs.  Today is mainly about commercial leases and some of the terms and clauses you will see in such agreements.

Leasing: Know What you are Signing

For the vast majority of small businesses here you will probably get a commercial space of some sort. While, each location you look at for your office or retail space will have some different considerations there are some basic clauses that landlords like to throw at you to legally bind you into some one-sided arrangements.  Remember that whether the lease is a generic “one-size fits all” or a custom one, that an attorney probably helped the landlord create it.  You also have the option of having an attorney review the lease and go over it to help your negotiating position.  In addition, one only need join me on my running route through King St. to realize that there are a lot of open spaces right now (2011).  So some of the following terms and clauses that I will discuss are negotiable, as the landlord would rather have someone fill the space than leave it empty.

Clauses and Terms: Things to be Aware of in Your Lease

  • Base Rent – what does it cost you to use the property for your business?  It is calculated by taking the square footage of the space and multiplying it by a set dollar amount.  Remember that the usable amount of square footage will be less than the base square footage.
  • Additional Rent – wait, what is this “additional rent”?  This is a place for negotiating or determining if your landlord is trying nickel and dime you. It is usually a catchall term to include a lot of extra things that base rent does not capture.  Ask and have the landlord define this term and spell out what it includes.  Does it include taxes, insurance, and/or utilities or are those in the base rent?
  • Operating Expenses – this is another clause whether the landlord or property manager will try and past off the expenses to you.  Watch out for the phrase “without limitation” and if you are in a mall don’t let them try and pass on a higher common area maintenance (CAM) rate to you because they gave a lower rate to an “anchor” store.  As a small business you do not want to be paying the same or more to maintain the common areas that are more trafficked by the big box stores.

  • Parking – does parking come with the space?  Do you have to maintain it?  Do you get parking for the duration of the lease or can the landlord/property manager change at will?  Parking is a premium in this state and you need to know if you are going to have it for you, your employees, and customers or you will have to come up with other solutions.
  • Option to Expand – can you knock down a wall and add the space to yours?
  • Termination – do you have a way to extract yourself?  A landlord is reluctant to let you go if they have extracted a lot of assurances and money from you.  If you terminate early that usually messes up their projects and it takes time to find another tenant.  They may force you to accelerate payment if you terminate early.
  • Use – you will state how you will use the space, don’t be too specific and use general terms.  You don’t want to pigeonhole yourself.
  • ADA Compliance – is the building compliant with the American Disabilities Act (ADA) and if it isn’t is the landlord trying to pass on some of those costs to you?
  • Signage – what are the requirements and restrictions of the use of signs for your business?

There are still other terms and clauses to be on the watch out for, like tenant improvements, occupancy and commencement, relocation,, option to renew, and the security deposit.  Be mindful of state and city and county level requirements, such as zoning restrictions and requirements of spacing.  You may have a landlord try and lease you a space for a food business knowing full well you will not be able install a require grease trap or venting system, and then you would be stuck.

In general, if you do not understand something ask the landlord for an explanation of clarification. If they are not being helpful seek out expert advice.  This is your lease and your business will be tied to the location for a significant amount of time.  You do not want to be stuck in a position with unfavorable terms due to the lease and unable to move or do anything about it.   In addition, ask some of the current tenants what their feelings are dealing with the landlord or property manager.  Find out if you would be dealing with a landlord who does their job or is an absentee who just collects the rent.

Subleasing

If you are leasing from a tenant, then you are subleasing.  You would be the called sublessee.  Your agreement is with the tenant and does not put you into connection with the landlord.  This has certain ramifications.  The legal agreement is between the tenant and the landlord, therefore if the tenant fails to pay the landlord cannot come after you.

Even though, you are subleasing from the tenant you should still ask to see the main lease agreement.  Why?  Whatever, is affecting the tenant will then trickle down and affect you.  In addition, trying to sublease to you may be a violation of clause in the lease agreement or there may be stipulations on how to sublease.  By subleasing the space out the tenant acts like a competitor to the landlord.  Remember, you can always arrange for a sublease yourself and become a mini-landlord.  However, you would have to make sure that you are collecting payments for your sublessee and paying your landlord on time.  If not you would be the one in default and the landlord would come after you.

Last Word

In general, lease agreements will always be lengthy documents with a lot of clauses that will probably not work in your favor.  However, with so many rental spaces available right now (2011) you should try to negotiate to get the best deal as possible.  This requires a lot of reading, researching, and even talking.  Find out what is going on around the area and not just the building.  Also be aware that the broker may actually be representing the landlord, so make sure you get your own expert on your side.

Bottom line: be aware of what you are signing!

Next time I will discuss about owning a property for your business and using your home as your primary business location.  Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.

See you on the next draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Hey everyone!  Today’s post will be short and sweet as I have a lot of projects on my plate.  The main point of today’s post is to get you to think about crafting a good Social Media Policy for your company or organization.  The last several posts should be a reminder of the limitations of a Social Media Policy and how far you can go.

In several instances, overboard policies will be scrutinized and open you to lawsuits.  Completely lax or non-existent ones can also get you in trouble for not taking care of your employees’ posting behaviors during work time.   You should strive to think about what would be best practices for your company and the kind of policy that would make a good fit for it.   Lastly, you can draft your own policies, but if you are unsure the right kind of language or how such a policy would play out legally it is best to seek an expert to review and edit.   In addition, even if you don’t have time someone can work with you to come up with a policy for your review and approval.

Now let’s discuss some tips and considerations for your Social Media Policy:

  1. Purpose or goal – what are trying to accomplish with your policy?  – it is always helpful to have a starting point and place you are trying to get to with any project, and crafting a policy is not any different;
  2. Can do vs. Thou Shall Not – your policy should contain a mixture of what an employee should not do versus positive reinforcement of what they can do with social media, a lot of transparent and social organizations find great success in openness and encouragement of good behaviors;
  3. Internal vs. External – who is your audience? You can always breakdown your social media into categories, subgroups, or types of actions – the policy can start out focusing employees and how to responsibly use social media and then be expanded to how the company views social media usage when delivering its marketing and communications to the outside world;
  4. Authenticity and Accountability – make sure you are writing something genuine and that you care about, in addition, make sure your employees take responsibility with what they write and post – a lot of people feel it is ok to type whatever they feel like and shoot it off into the ether thinking a) no one is paying attention and b) there are no consequences even if they are reading – be sure to make it clear these thoughts are wrong;
  5. Respect for Intellectual Property – make sure to check with the owner of images and works if you can use them, and be sure to always attribute and not take credit for what is not yours;
  6. Protecting your Property – in the same vein that your employees should respect others, they should so respect the owner and the company, which employees them – openness does not necessarily mean sharing your trade secrets
  7. Simplicity – just because the trouble you and your employees can get into involves a lot of legality and technicalities does not necessarily mean that the policy itself has to be written that way – vague, obtuse, and unclear legalese does not help anyone figure out where you stand on a certain behavior or action; it should be clear and concise.

Thanks for reading these simple tips and remember if you always have questions or doubts seek out help!

Next time for Social Media and the Law we will be moving out of creating a Social Media Policy and entering the legal realm of evidence.  These posts will concentrate on a lot of case law and discussing the impact social media is having on the legal system.  While, most laypeople and businesses probably won’t be too interested feel free to follow along.  These posts are more for fellow attorneys curious about how social media has been brought into play during trials and litigations.

As always if you were interested in this series or my other series, like Draw the Law.  Feel free to subscribe by clicking on the “Subscribe” button on the right-hand side of this page.  You can also follow me on Twitter @RKHewesq or Like Me at “Ryan K. Hew” on Facebook.

See you next time!

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

In my previous post I discussed raising capital through governmental loans and programs.  Today’s Draw the Law topic is about deciding to buy a business or its assets and franchise agreements.

Say you come to the realization that you don’t mind owning a business that someone else has built up.  The culture, the image, the stuff walls and tiles – all of it looks great!  You probably would then explore buying the business or if it is a part of a chain entering into a franchise agreement.

Buying a Business: Why Start from Scratch?

Exchanging Information: Getting to Know Each Other

Let’s say you want to buy the mom and pop store that makes shave ice down the road.  The first thing you will always need, and it remains true of all business transactions, is information.   The information you will need is your credit worthiness, financials, and the like – why?  Because the seller of the business wants to know if you can afford the business and in exchange you will ask for the books from the shave ice store.  Just because the business is always crowded with tourists does not necessarily make it the moneymaker you are expecting.  You want to know if they own the space they are in or leasing, is all the equipment paid up or are there liens on them, what are the terms of the current employees’ contracts, etc . . .  The only way you as the buyer of the business know it is worth it for you is to see if you are getting what you bargained for, and that means you will need to prove to the seller that you can pay them the price you will settle on.

Buy the Business or the Assets?

Do you want the body or the guts?  That is one of the most basic questions you want to know.  Do you just want the stuff that makes up the business, which includes equipment, facilities, and intangible property like trademarks?  Or has the business been successful over the years because of the contracts it has in place (as it is the business entity that signed all those agreements)?

You will have to decide which is more beneficial.  Just buying the assets is like removing the hermit crab from its shell; you leave behind the corporate entity and anything attached to it similar to how an anemone is left on the shell when the crab moves.  Similarly, any contracts, lawsuits, and such liabilities are left with the corporation.

The Process: Start to Close

In general, the process is a lot of review, negotiating, and the finalizing of details.  Are the sellers telling you everything?  Can you get a look at the records and books?  How will you pay for the business?  If it is in monthly installments how will they accept payment?  Operationally, how will the transfer work out?  Like the transfer of accounts, titles, etc. . . .  Finally, when all that is reduced to writing you can sign the contract.  Of course, this does not happen overnight and you will probably need to work with a group of experts, such as a business broker, an accountant, your banker, an attorney, and the seller’s people to get this to all happen.

Non-compete Agreement and Warranties

Non-competes and warranties are things you will agree to before the deal is completed, but care about what happens after the business is in your hands.  The business you just bought or its assets are not worth much if the seller goes and starts the same exact business.   Therefore, you get assurances from the seller that they will not be your competition by placing a non-compete clause in the sales agreement or draft a completely separate document.  Either way, there are some restrictions on how much you can limit or prevent the seller from starting a similar business. Oft times, a buyer will actually retain the seller on as an employee or consultant to ease the transition, and thus is another way to prevent competition from the former business owner.

A warranty gives you, the buyer a right to go after the seller if an undisclosed liability comes up after the transaction is complete.  Let’s say you buy the shave ice store, but the former owners forgot to tell you that some of their customers had gotten stomachaches from food poisoning.  Those customers then sue you, as you have become the new owner of the business.  If you had a proper warranty clause you would be able to go after the former owners for what the customers are suing you for.

Franchising: What Comes with the Name?

When you buy a franchise you are buying a business.  Generally, it is a business with brand recognition and with that recognition comes all the inner workings of that brand from its trademark to its secret recipes you get it all.  It even includes how the storefront will look.  Typically, especially if it is one of the national brands, you will be paying a lot of money, and why not?  You would be paying for a brand name that has a proven track record (but like any business, you should realize that does not always mean success).

Pros

  • Experience – the franchisor (the entity you are buying the franchise from) will help you with all their experience and knowledge get started.  If you are new, this is definitely something that will help you get up to speed.
  • Advertising – you are now apart of the franchises chain of distribution, therefore it is in their interest to coordinate marketing and advertising with you.  National sales campaign?  You will probably be sent all the material and have it all set-up for you.
  • Established – all the time spent creating a name and image has paid off for the company, and you are paying a fee or royalties so you can use that name and everything associated with it.
  • Lower operational costs – because you are getting all your products and supplies from the franchisor it is usually at a reduced cost and therefore, it is less costly for you to operate than if you had to buy all that stuff on your own.

Cons

  • Lost of control – the strength of a brand name and image comes from consistency.  When you enter a famous fast food chain in another state or even country you expect the same products and services you would expect locally.  To accomplish this feat, the franchisor restricts what you can do with the storefront.
  • Favoring the Franchisor – the franchisor is in the business of making money, naturally, the agreement they are going to have you sign favors them.  Some factors that favor them are the following:
    • Royalty fees – usually, paid on monthly gross sales and not profit, therefore you pay even if you aren’t making money
    • Restriction on transfer – you may not be able to sell the franchise and it may only be back to the franchisor
    • Termination at their discretion – the franchisor may end the agreement when they feel you are not cooperating leaving you high and dry
    • Competition – the franchisor can sell as many franchises as they wish, which includes your neighbor who also wants to buy into the franchise
    • Trapped – you might be forced to only buy supplies and products from the franchisor and be unable to go to outside supplies
    • Paperwork – the franchise wants to see you are making the most of your relationship with them, and thus would like to see reports from you, on a monthly, even weekly basis.

Just as a heads up the next several draw the posts will concern itself selecting a location for your business and the people involved with your business (employees, vendors, and customers).  Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.

See you on the next draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.


Last post was about creating a Social Media Policy with respect to the employer-employee relationship.  The idea is to minimize potential suits between the employee and employer.  Issues like prohibiting certain behaviors, such as posting negative comments or former employees taking company information should be the concern with an internal policy.

However, many businesses are coming to realize the potential power of blogs, Twitter, and Facebook and readily use social media as a marketing and advertising tool.  And why not?  It is free, relatively easy to set-up, and allows you a good amount of control over content.  However, just like internal disputes you can quickly wind up with external disputes with other companies, commenters, and the like over issues of intellectual property infringement and defamation.

Advertising Statements: Puffing Yourself Up and Tearing Down the Competition

FTC and Endorsements: Disclose Your Relationship

Generally, marketing, advertising, and public relations specialists are comfortable with using mere words of puffery.  They also know that it has been the law that if an ad features an endorser who’s a relative or employee of the marketer or if that endorse has been give something of value in exchange for praise of the marketer’s product or service the ad must disclose the connection.  The point is that knowing about the connection helps the reader or watcher evaluate the quality of the endorsement.

This attitude comes into play when using social media as well.  Specifically, the FTC has issued guidelines about how bloggers, and social media specialists talk about a company’s product or services.  This includes your employees, as well as any marketer, advertiser, or in generally someone speaking on your behalf and you give them something expecting endorsements.

Say you have a new delicious musubi (rice ball) that you want people in Honolulu to know about.  One of your employees is a well-known food blogger.  You give her a sample of the product with the intention that she is to eat it and then rave about it on her blog.  If she does not state that she is your an employee you would be violating the FTC guidelines.

Defamation: Don’t Start Ugly Rumors

On the flip side is going after the competition.  If you or your employees typically engage in discussions via Twitter, Facebook, or comments on your company’s blog you may sometimes start joking with one another.  It is easy to see that this leads to making fun of the competition’s products and services.  However, going too far may mean making false statements that damages their reputation.  In this situation, you may be slapped with a defamation suit.

The general better policy in a situation like this is to remind people to be positive in their postings rather than taking the low road.  Above all do not engage in the rumor mill thinking that the amount of information going out there will protect you.  Once something gets sent out onto the Internet it is almost impossible to take back.  Just look at some of our politicians and celebrities to realize the truth of that fact.

Intellectual Property: Using Other Works

Many people love to share images or quotes on their Facebook posts, Twitter feeds, or blogs.  Generally, they search the web for a cute image and slap it on their post and think they are done.  While, they think that is ok, what they are unaware is that they are infringing on the person who took or made that image’s intellectual property (IP) rights.  When it comes to business the stakes are higher because the owner believes you are using their working to make a profit.

Copyright and Trademark Infringement

In general, when using images and phrases the best policy is to create your own or license it out.  Do not take images and words from another’s website and slap it on your own trying to claim it as your own.  For a prime example of this you can look at my own blog.  Many of the images I use are stock photos,  if I were to go to another law firm’s website and start taking their images and pdf files and posting them here, and claiming them as my own those would be violations of the firm’s intellectual property rights.  While, there may be a  “fair use” exemption it is less likely you will get to use it for your money-making company blog, Twitter, or Facebook page.

Best policies are to create or license the images you want to use, be sure to use attribution links and short quotes from another site.  The last thing in the social mediaverse is you want to be known as a thief of people’s IP.  Always clear use of photos, music, works, etc . . . if you don’t know where they come from.

By the way, remember that people do have publicity rights this includes their image, likeness, and name much like a company controls their trademarks and copyrights, celebrities and people control their image.

Last Words

Next week, I will wrap-up this section with some general tips of crafting a policy and what to think about and some other miscellany.  In general, if you are concerned or feel that your company and employees need a re-training or updating on social media and the laws talk to an expert and have an attorney review and draft your policies.

Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.

See you next time!

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.


Hey everyone, today’s Draw the Law will be brief, in anticipation of your 4th of July weekend!  Remember to enjoy yourself, be safe, and that the next post will be for Social Media and the Law on Tuesday, July 5th. Anyway, let’s get to it!

In the last post, I discussed raising capital from private sources such as institutional lenders, banks, or wealthy individuals or organizations, such as angel investors.  Today, I will discuss some of options through the government.

US Government Programs

The United States government does not lend money to small businesses.  Instead it has designed guarantee programs to encourage banks and other financial institutions to lend money to small businesses.  The main organization responsible for this is the Small Business Administration (SBA).  There are three main loan programs that the SBA offers to small business owners.

7(a) Loan Program

The 7(a) Loan Program provides financial help for businesses with certain special or unique requirements.  For instance, funds are made available to businesses that operate in underserved communities, in the export business, or operate in rural areas.   In general, the 7(a) Loan Program has a variety of sub-programs designed to promote very specific kind of businesses.

Microloan Program

The Microloan Program is exactly as it sounds.  It is made to provide small, short-term loans to small businesses and not-for-profit child-centers.  The maximum loan is for $50,000, but the average tends to be $13,000.  The monies received under this program come with certain restrictions.  Mainly, it cannot be used to buy real estate or pay off existing debt.  The money can be used for the following purposes: 1) working capital; 2) purchase of inventory or supplies; 3) the purchase of furniture and or fixtures; or 4) purchase of machinery or equipment.  Finally, the intermediary lender (the bank) is required to put you, the business owner, through certain training programs.

CDC/504 Program

The CDC/504 Program has the purpose of acting as an economic development tool for communities.  It basically operates through a Certified Development Company (CDC), a private, nonprofit corporation, which in turn works with the SBA and private lenders to provide financing to small businesses in the area.  It selectively targets businesses and then injects them with fixed-rate financing to acquire major fixed assets for expansion or modernization, thus insuring there is investment in infrastructure and development for the community. The funds must be used for fixed assets, for example: 1) purchase of land (including with buildings); 2) improving the area, such as grading, streets, utilities, parking lots, and landscaping; 3) the construction of new facilities or modernizing, renovating or converting existing ones; and/or 4) purchase of long-term machinery and equipment.  The funds CANNOT be used for working capital, inventory, or for the consolidating/repaying of debt, or financing.

*Please note I could spend dozens of posts talking about the variety of other loans and grants from other governmental departments and agencies.  Those tend to be heavily industry-specific types of programs, such as the US Department of Agriculture’s Farm Loans Program, designed for family-sized farmers and ranchers.  Today’s post is about very general small businesses.

Office of Hawaiian Affairs Programs

The State of Hawaii, as with many others states, has some unique funds or programs to help foster community and business development.  Those with Native Hawaiian ancestry have a couple of programs to look towards to help starting or growing a business.

Mālama Loan Program

First off, there is the Office of Hawaiian Affairs (OHA) Mālama Loan Program.  In this program OHA partners with First Hawaiian Bank to provide lending services to Native Hawaiian consumers and businesses.  Loan approval goes through the Native Hawaiian Revolving Loan Fund Board of Directors.  Some of the features of the loan are a 5-year, 5% fixed rate up to $75,000 for eligible businesses.  Typically, the business is used for business growth.  For more information, visit OHA at their website.

Kau Inoa Small Grants Program

The second program that I would like to mention is the Kau Inoa Small Grants Program.  This grant is dedicated to providing monetary incentive to encourage individuals and organizations for the purpose of nation-building. OHA suggests activities that grantees could participate, such as registering Hawaiians for Kau Inoa, conducting/hosting educational presentations, and/or the staffing of informational sites.  In general, this type of program is specifically geared toward events or short-term projects.  There is no non-profit or residency requirement.  The award amount is dependent on the type of event and hours of work required.  In certain cases, the award can be made on an accumulative and ongoing basis for a defined period of time, instead of singular events.  If you are interested please check out this link.

An Injection of Cash:  Not a Long-Term Financing Relationship

If you notice some these government guarantee-backed loans and grant programs are intended to be just quick shots of cash, especially like the SBA’s Microloan or the Kau Inoa Small Grants Program.  However, may be that is all you need to get over the expensive startup requirements your endeavor requires or that’s all you need to get your idea out there to gain supporters, customers, or clients.  For those with the entrepreneurial spirit, you might want to view your capital raising strategy as a three-legged stool with injections of money coming from all three sources.

For example, if you are one of those fortunate to qualify and receive a government-backed loan you could combine that with your personal money to get you past the startup phase. After you purchase all your equipment (usually the most expensive) part you can then use investors or private lending to get your company to the next stage of growth.

Last Word

The programs discussed today by no means represents an exhaustive list of everything that exists.  You should be aware that many loans or programs are hard to obtain given the overall problems with the economy.  However, remember sometimes the best times to start a business is during downturn, especially with commercial spaces very low, the cutting of valuable government services, and learning lean strategies to survive.  If you are seeking government-backed loans it is best to be prepared for some of the extensive requirements of the programs (i.e. lots of paperwork!).   It is best to have experts help you by developing strategies, processes, or general advice to address your concerns or compliance issues.

Next time I will discuss starting a business through “faster” methods.  Namely, buying an existing business or into a franchise.

See you on the next draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

In this series of Social Media and the Law I have touched upon some of the major legal areas of concern when dealing with social media and employment.  To see what was talked about or for a refresher click on the following links:

Having a Social Media Policy

First of all, let me say I understand that a lot of this can be overwhelming.  You may feel that even crafting a Social Media policy is not even a part of the bottom line and seems to be difficult endeavor, especially if you are a small business owner worried about inventory or keeping customers, now you have to think about Facebook, Twitter, and blogs?  So you have one of these initial responses: a) close your eyes and hope for the best; b) create a social media policy that is so general that it is unenforceable or has no meaning; or c) completely ban social media use.

I find a lot of smaller organizations feel this way because they feel they do not have the resources to be effective in this matter.  First of all, smaller organizations are closer to their employees and can directly work with them to craft a good policy.  Secondly, there are many affordable attorneys that can either review what you create or draft something as a pat of your handbook and employee agreements package.

With that being said let’s look at some of the things you should think about when creating a social media policy.  I will start out with the legal landmines you want to avoid when crafting a policy.  It will be followed with some business questions you should ask yourself.

Legal Considerations

One of the goals of a good media policy is one that should help protect the employer from lawsuits.  I will do a brief run through of the various laws that affect your policy, and use examples of what might be considered a good response or way to handle the situation.

Employment Law

Protected Statuses and Discrimination – remember that certain demographics of the population have protected statuses under both federal and state laws.  Therefore, in this area you should avoid using an applicant’s Facebook page to make the decision to hire them.  Once again, remember Hawaii now protects gender expression.

Harassment – as an employer you are legally obligated to create a safe work environment for your employees.  Therefore, if you have a case of “sexting” (sexual texts) or cyberbullying you need to take action or run the risk of violating the law.

Fair Credit Reporting – remember if you use a third party to obtain background information on a potential employee you must get their permission.  As part of the hiring process you could have potential hires fill out authorization forms.

National Labor Relations Act (NLRA) – the National Relations Board, which enforces the NLRA has been keen on clamping down on employers that have broad social media policies that ban protected activities or respond to negative postings on Facebook/Twitter by firing the offending employee.  A couple things about this situation:

  1. Narrow the scope of your social media policy.  Avoid blanket policies that prohibit everything and implement a review policy if you find an offending comment by an employee on a social network site.  Be careful and make sure the comment is offensive and not a commentary on the working environment.
  2. Create a grievance process. If your employees are bad-mouthing your company or managers you may not have a good venting mechanism or allow them to air their grievances.  So they are turning to an outlet, which gives them control over their complaints.  You might need to investigate where the tension is coming from.

Intellectual Property

Trade Secrets – remember that if an employee discloses protected information to a new employer, that new employer could be faced with liability from the former employer.  In general, all companies that have an employee who has access to sensitive information should have that employee sign non-disclosure and non-compete agreements.  In addition, if you are in the habit of providing electronic communication devices (i.e cellphones, laptops, etc . . .) you should remind the employee that the equipment is company property along with all the data contained on it.   You also want to make sure your employees do not post things that are supposed to be secret.

While, this is not a trade secrets situation, this video report by KITV news on a Honolulu Liquor Commission employee highlights the problems of Facebook posting when an employee has access to sensitive information (which includes the identity of fellow employees).

Specific Professions

HIPAA – if you are medical provider or a business affiliate of one should be highly sensitive to staff having access to protected health information on their computers that have Internet access.  Recall that a woman got in trouble for posting a patient’ HIV status on her MySpace.  Excellent training and careful security protocols are a must in this area.

Legal Ethics – attorneys, your paralegals and secretaries should avoid talking about what they are doing at work.  If you have a client who does not want to be identified, and a paralegal inadvertently identifies them through a Tweet or posting a picture you will be in violation of legal ethical rules.  Similar to HIPAA, a lot of training and explicit policies should help you prevent such problems.

Business Considerations

This is not meant to be a comprehensive list, but from a business owner/manager’s perspective these are some questions you should consider when crafting your social media policy:

  • What is your corporate culture?
  • What is the function/nature of your business?  Does it require a lot of confidentiality?
  • Who would you like to have access to the company’s information?
  • Does your company use social media for its advertising and marketing?
  • What is the size of your company?
  • When (during the day/week) is your company in operation?  What is your break-time policy?
  • How sophisticated is your workforce?
  • How important is computing, Internet access, and mobile usage to your company?

You should have some realistic expectations about creating a social policy and then implementing it.  Having absurd goals, like you are going to check all your employee’s Facebook pages at the end of the workday does not do you any favors.   Your policy should be fair and practical because at the end of the day you are are the one who has to get it to work.

Before I get to implementation considerations I will touch upon another aspect of creating a Social Media policy.  As we have seen Facebook, Twitter, and the like do not solely affect your relationship with your employees.  These platforms are sometimes integrated into a company’s marketing strategy and there are certain legal concerns of their use when you engage the world outside the organization.  So next time, (which will be July 5th due to 4th of July celebrating) I will discuss Crafting a Social Media Policy and the Outside World.

Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.  See you next time.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.