Real Deal

Real Deal: Readers Share Their Thoughts on Non-Compete Agreements

LORI’S MUSCLES ACHED as she thought about how exhausting her day had been. Deliveries came on Wednesdays, and this week had brought a huge amount of inventory. Lori handled much of the work in her tiny pet nutrition-focused boutique and salon by herself. For delivery days and Saturdays, though, she previously had received help from a college student named Cindy — but the affable young woman recently gave notice and left.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual pet businesses and people.

ABOUT THE AUTHOR

JODI ETIENNE is the founder and owner of Razzle Dazzle Doggie Bow-tique in Bradley, IL. After spending many years as an elementary school teacher, educating pet parents became Jodi’s new mission. Since 2005, Razzle Dazzle’s friendly, knowledgeable staff has helped guide community members in making healthy choices regarding pet health and nutrition. Jodi shares her life with her amazing husband, Steve (AKA the maintenance man), Shih Tzu rescues Poppy and Growlie, and Arabian horses Rez, Brach and Joey.

For the past two years, Cindy had been enrolled in business courses at the local college and was nearing completion of her associate’s degree. Although she had often expressed being unsure about what to do with her life after finishing school, Cindy had seemed eager to learn the ins and outs of running a pet business.

Dealing with customer questions in person and on the phone, scheduling grooming appointments, starting purchase orders, entering new inventory and stocking shelves were skills Cindy had acquired through Lori’s training manual. She had also learned about pet nutrition through educational resources Lori had created and shared with her. Needing more time to finish school projects was the reason Cindy gave for her departure. Lori was disappointed, but understood and wished her well. Training all the skills to a suitable replacement was not something she was looking forward to, so Lori had handled this delivery day alone.

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On her way home from work, she noticed the SOLD sign on a property down the street. That place would have made a really cool location for her pet boutique, even though it was on the outskirts of town, Lori mused. The road boasted a high daily traffic count, and the building offered a great deal of space, plenty of parking and curb appeal. Lori pondered the potential of the place … room to expand and grow her business, and maybe add more services. After 12 years of building her brand and getting the word out locally about pet health and nutrition, the small business was now bustling but a little bit cramped for space.

Well, no matter now, Lori thought … something else would be opening in that building soon. It was a done deal, so why wonder about what might have been.

Plus, she wasn’t in a place financially right now to entertain thoughts of moving.

Later that night, as Lori sat down to relax with a glass of wine and her pups on the couch, she received a text message from a friend. Had she heard the news about that building down the road from her store? Cindy’s parents had purchased it. She was going to open a feed store with a focus on healthy food for all animals … both farm and pet. It had never seemed necessary to have a non-compete agreement with an employee before. Now Lori was worried that she’d made a big mistake.

The Big Questions

  • Should Lori talk to Cindy? See if they can remain friendly? Or start planning her defense against the new competitor?
  • Should Lori require that all future employees sign a non-compete agreement?
  • How else could Lori protect her business processes and educational materials from former employees going forward?
Frank F.
FARMINGDALE, NJ

Lori should talk to Cindy and indicate her disappointment in addition to wishing her the best of luck, knowing how difficult it is starting a business from scratch. This being especially true when you have strong competitors (like Lori) already in the marketplace. I personally don’t believe in non-compete agreements. A piece of paper couldn’t, wouldn’t or shouldn’t insulate my company from competition. If I can’t effectively compete in the marketplace, then maybe my company doesn’t deserve to be in it. I firmly believe we are entitled to nothing other than the opportunity to try. This belief is also extended to former employees. There is no secret formula: Whoever services the customer best will dominate the market. You have to strive to serve the customer from the standpoint of their needs and wants. This includes product education, prices, product mix, experiences, relationships, services offered. If I were Lori, I would just get a replacement and move on!

Maisie F.
SHERWOOD AND WILSONVILLE, OR

We actively prevent this by purposefully limiting knowledge. Cashiers are not provided access to ordering software, distributor websites or merchandising information. They also must sign a non-compete agreement. Lori should absolutely begin planning her defense against the new competitor, without initiating friendly or unfriendly conversation. A non-compete agreement, at the very least, will help her waste less time in the future. Definitely consider it and prohibit/limit communication between cashiers and reps outside of training. Do not keep physical contact lists or comprehensive papers containing sensitive information, which could be easily photographed. Combine eagerness with caution. Also, talk to a lawyer!

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Samm A.
SAINT GEORGE, UT

Non-competes and exclusives are never a good idea for retail. Good vibes attract a good tribe; if you are the type of owner people want to learn from, it’s possible they’ll want to do what you’re doing on their own one day! I see that as a compliment as long as they do it respectfully and with transparency. What I do have issues with here is that Cindy did these things in secret. That does not display trust within. Lori should talk to Cindy, set clear boundaries for the professional relationship moving forward, and begin to plan how to make herself special to the customer. I choose to stay in my own lane and don’t focus on what other people are doing.

Jennifer Moore B.
NORTH RIDGEVILLE, OH

A non-compete agreement would have prevented this, and Lori should use one going forward. She spent a lot of time, money and energy training a future competitor, and Lori doesn’t want to have it happen again. I would be planning my defense. Given that Cindy didn’t talk to Lori about her plans, it would be difficult for Lori to trust that they can work together in the future. Years ago, I had to let an employee go. She immediately went to work baking for a competitor 2.3 miles up the road, using my recipes. The competitor is also unpleasant, so they deserved each other.

Cyndi S.
LONGVIEW, WA

Non-compete agreements have very little real “bite,” especially if that is the only competitive field an individual has worked in. If a non-compete is valid, it is limited-mileage radius, a year’s time (if that), “trade secrets” and client lists. Furthermore, the non-compete must be presented prior to or immediately after hiring. Lori knew she had outgrown her space and didn’t pursue other opportunities for growth. As long as Cindy didn’t abscond with client lists and private financial information, Lori doesn’t have much of a leg to stand on — with or without a non-compete agreement in place. Cindy’s parents are the ones who bought the building. More than likely, Cindy’s parents are the business owners. Lori needs to step up her customer service and spruce up what she has to work with and realize she will have to go head-to-head.

Laura A.
PORTLAND, OR

This happened to me. The only difference is I did know my employee was going to open her own store, but at my request and her word, it would not be near another of my stores — only to find out from a document left on a computer, this employee was opening nearby to compete with us. After consulting with my attorney, I began having new employees sign non-compete and non-solicitation agreements as part of their hiring paperwork. Although not impenetrable, I believe it sets a tone for professionalism. I let potential new hires know about this and explain why before hiring. I encourage them to show it to anyone they use for consulting with (family, partners, attorneys). I have not experienced any negativity or anyone wanting to change their mind about being employed because of it. In fact, I even had current employees want to sign the agreements to show their support.

Lisa B.
FAYETTEVILLE, AR

This exact scenario happened to us. We hired a person, and she was with us for two months, and much time and effort went into her training. She studied the ins and outs of our business (pet retail with a focus on nutrition and grooming) and bought a grooming shop a half mile away. She now posts on social media retail items like we carry. We have non-compete agreements (10-mile radius for six months) with our groomers, but it never entered our minds to have one for store personnel. I sent her a cease-and-desist notification after she came into our store to shop and was talking to our customers about her business. Client data is crucial, and the previous owner of our business of 47 years actually had grooming employees from one of his locations steal client data and open their own shop, sending out “we have moved” postcards to all of his clients, which flattened business at that location.

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Gary H.
NORFOLK, VA

We have always had employees sign confidentiality and non-compete documents. Depending on the state, the non-compete agreement may not hold up in court and would simply be a scare tactic. However, the confidentiality agreement is a different story. You deem company secrets confidential, and they should be protected as vigorously as you would protect a copyright or trademark. To aid in protection, I would also reach out to all of my vendors and distributors to protect our relationships. Do everything in your power to make the ex-employee start from scratch, just as you did. However, do not speak ill to the customer about the ex-employee. They may have established relationships that may teeter on your behavior. Believe in karma: What goes out will come back.

Diane B.
MORRIS, MN

I’m in a small town, population 5,100, and the only pet store for at least 50 miles, that far also from big-box retailers that sell pet products. A store opened at the east edge of town with a huge pet section. I checked it out and saw many of the same products I have! At first I was angry, but then I decided to think outside the box: I focus more on tropical fish and supplies. That is half of my sales. Plus gift items for pet owners, free delivery within town. I know many of my customers by name. Unless her former employee turns out to be a selfish sneak, there’s no reason to fear. As for the retailer in my town, many people are realizing that what I do is what brings them back.

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Jodi Etienne

JODI ETIENNE is the founder and owner of Razzle Dazzle Doggie Bow-tique in Bradley, IL. After spending many years as an elementary school teacher, educating pet parents became Jodi’s new mission. Since 2005, Razzle Dazzle’s friendly, knowledgeable staff has helped guide community members in making healthy choices regarding pet health and nutrition. Jodi shares her life with her amazing husband, Steve (AKA the maintenance man), Shih Tzu rescues Poppy and Growlie, and Arabian horses Rez, Brach and Joey.

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