Thom Singer, in his blog “Some Assembly Required”—The Business Development/Networking Blog” writes about a disagreement he, as a customer, is having with the owner of a Karate studio.Full Disclosure— Thom and I are members of the same Toastmasters club.
To bring you up to date, Thom’s wife signed a contract so that his daughter could take Karate lessons. When she no longer wanted to participate, Thom tried to negotiate his way out. The Karate studio owner has outsourced the handling of contracts to a third party. Neither that company, nor the studio owner is willing to budge. Their argument is that a signed contract is a signed contract. Let the buyer beware!
Thom has written several posts about this, and also a very long letter reprinted in full this weekend in our local neighborhood newspaper.
If you are a business owner who relies on contracts like this you probably are on the studio owner´s side. Good for you; after all, you have the law on your side. No doubt you believe that if you didn´t enforce these contracts you´d have more customers attempt to walk away after a few months. You might be forced to go out of business if you didn´t enforce these contracts.
What about the “business” side of the argument? In business you can focus on your product or service, or you can focus on your customers. Obviously, I believe the focus should be on the customer or I wouldn’t be writing this blog. I say let Thom buy out his contract. I’m sure that a lot of this studio’s marketing depends on referrals. Exactly how many referrals will he get from Thom and Thom’s friends, co-workers, and others who read Thom’s letter and posts? That´s right, zero
Business owners who rely on contracts like this should add a reasonable buy out clause to their contracts. "But Glenn", you say, "we business owners will lose business!” I reply that Thom’s going to spread the word about this studio and the owner will lose more business in the future. . (The studio owner may have a black belt in Karate, but Thom has more than the equivalent in marketing.) Also, please explain to me how a "successful" business person can only maintain that success by requiring customers to do business with him even when the customer no longer wants to.
The owner may have the law on his side, but I believe he is engaging in unethical behavior. I am not suggesting that customers be allowed to break a contract and walk away. But I do think a buy out clause should be a part of the contract. Stiff enough to discourage people from walking away on a whim, reasonable enough so that the customer can opt out if his child loses interest in the martial art. I don´t know about Thom, but if it were me, and I couldn´t get out of the contract, I would make sure that my "viral marketing" campaign against the owner would cost him more than he would make off of me fulfilling the rest of my contract. And that can be done ethically and honestly, just by Thom truthfully recounting his experience to everyone he knows. (Note to studio owner: Thom specializes in networking; he´s written a book about it. You do the math.)
So let’s score this match. The studio owner has the law on his side so he gets the “legal” point. That´s one point for him.
I give Thom two points because the studio owner is in business to make a profit and the studio owner´s poor customer service is going to cost him business down the road. The owner´s business judgment is as weak as his legal case is strong.
I also give Thom one point for holding the ethical high ground. He was willing to buy out the contract, but the third party company refused to let him do that. My score for this match: 3-1, Thom´s favor.
If you’re a parent and you considering signing a contract so that your child can participate in a sport or other extracurricular program, read the contract. Then ask yourself, “How do I get out of this contract if (when) my child loses interest?”
If you´re a business owner, there´s more to making a profit than just enforcing a contract. Check the encyclopedia for the term, "pyrrhic victory."
A man who is less than just, is less than man.