Rachel Brenke: So, I am a business consultant and lawyer for entrepreneurs, but I’m also an entrepreneur myself. I had multiple legal niche blogs to help entrepreneurs in various industries know what they don’t know and keep theirselves protected and on the right legal path so they can actually stay focused on being an entrepreneur and not dealing with lawyers like me.
Jessica Freeman: But you are a nice lawyer, so-
Rachel Brenke: Thank you. Thank you. Yeah, you notice I didn’t lead off with lawyer.
Jessica Freeman: Right.
Jessica Freeman: Like, I don’t wanna hear from lawyers. But I wanted to bring you on the podcast because contracts are super important, but I know that a lot of health and wellness entrepreneurs don’t utilize them or they don’t utilize them well or something, so I just kinda wanted to have a conversation about it.
So, who needs a contract?
Rachel Brenke: Everybody.
Rachel Brenke: It’s funny you say that health and wellness industry, they’re not using contracts. It’s funny ’cause being in an industry, I have a legal niche blog called Fit Legally for it. But yes, they are very “behind” some other industries that I work in, but I think it’s just the life cycles of industries. The health and wellness industry is on an upswing right now whereas other industries that I’m in, like photography and creatives, they were on an upswing 5, 10 years ago. Not to say they’re dead or anything, but there was a mass influx of people, and I feel like that’s what we’re seeing now with the health and fitness, which is fantastic ’cause it’s a great industry, it’s a great idea of being healthy physically, emotionally, and mentally, and just having a well-rounded lifestyle. But that being said, because of the amount of people we’re seeing coming in in the fitness industry, I think we’re starting to see a lot more problems and there’s a lot more of a need for making sure you have the right legal protections in place, which makes me really excited that I am in this industry now ’cause I kind of help pushed that along with the photography industry about a decade ago, and now I’m excited for this “new one” to be able to do.
But to answer your question, I say that to say … Fitness people listening, don’t think, “Oh, my gosh. It’s just us.” No, other industries all go through these life cycles when a lot of people come in, they don’t know what they don’t know, and that’s actually how I ended up doing what I’m doing now. And so if you’re new, or maybe if you’ve even been in business for a long time and you’ve never had a problem, I still encourage you to listen to us talk through this contract stuff because you never have issues until you have an issue.
Jessica Freeman: Yep.
Rachel Brenke: It’s funny ’cause I travel and I speak places, and I’ll finish and people clap, they come up to ask questions, and inevitably, every single year, multiple times a year, I’ll have entrepreneurs come up to me and say, “I’ve never had a problem. I’m not worried about it,” and within six months to a year, they’re in my inbox going, “Dang it. I had a problem,” and I’m like, “Yes.” It is the nature of where we’re at these days. Society is litigious, and no matter how well-intended you are, no matter how good you are at what you do, we’re also human and we make mistakes, whether you intentionally do it or not, and so having contracts is actually just one piece of the layer’s protection that fitness, all entrepreneurs, but definitely fitness entrepreneurs need to have in order to insulate yourself and keep yourself protected.
And again, like I said, it’s not from the standpoint that you don’t know what you’re doing or that you intend to do ill. It just happens. Issues just happen and you can’t put the cat back in the bag once it’s out, and I think that’s one of the big things is that … Guys, I get it. I came into entrepreneurship … I actually started … This is so funny. I started selling apparel. I had a fashion apparel shop, which is so funny ’cause I’m not at all fashionable whatsoever, and that was like 13, 14 years ago and I’m still not fashionable, but I started there and I wasn’t a lawyer, I wasn’t a business consultant, I didn’t even know what an LLC was at the time. All I know is I was so focused on, “Oh, my gosh. I gotta get branding. I gotta get myself out there. I gotta get customers. I gotta have inventory. I’ve gotta figure all this out,” and I was so scared that I wasn’t actually taking the chance to stop and go, “How can I protect myself, A, from failing or from issues?”
And I share that story to say, “You’re not alone.” If you’re just thinking, “Oh, my gosh. I have so many hats to wear. Please don’t add another one,” too damn bad. You guys need to be using [inaudible 00:05:04] and contracts, especially, even more so imperative, any other word that I can use. In the fitness field, you’re teaching people, whether you’re a trainer or you’re a coach, nutritionist, whatever it is that you do within this industry, you’re teaching people what to do with their bodies. Everybody’s body is different. That is enhanced liability than, let’s say, a logo designer who’s creating a logo on their own computer and then emailing it. You’re physically telling somebody what to do, how to do whatever it is your services or your products are. That is enhanced liability. You guys don’t want to get stuck without having legal protections in place ’cause, like I said, you can’t put the cat back in the bag. Once someone’s hurt or something happens, that’s it.
Jessica Freeman: Mm-hmm (affirmative). Just to clarify, just because someone is … Like, if they’re listening and they’re like, “But I’m an LLC. Doesn’t that mean I’m protected?” No, you still need a contract. You need a contract for your clients, for, like, if you do sponsorships or promotions with different brands. I think even if you’re just a blogger and doing [crosstalk 00:06:16]. Yeah.
Rachel Brenke: Yeah, for sure. So, I’m glad you actually said that because when I look at layers of protection, I think of the movie Independence Day with Will Smith. You know the scene when they’re shooting the alien ship and the blue force fields come up and deflect it, right? That’s how I imagine three major layers of protection that you guys need to have. There’s more, but these are kind of boiled down to a quick three that you can jot down.
The first is business formation. It’s like what you’re talking about, the LLC, which is a limited liability company or a corporation.
I don’t recommend pretty much any entrepreneurs to be a sole proprietor, especially fitness coaches.
You guys have to choose because you want to insulate yourself personally. You want that alien force field around yourself and around your business.
The next one is liability insurance. That is a huge one, especially for the reasons we just outlined. You’re telling people what to do, how to do, and put in or on or to their body. You need to be protected with that.
And then the third, and these are all layers, these are multiple force fields, and the goal is … But the third one is contracts. Nothing is foolproof. You want the potential liability to have to jump all of these hurdles, not just one hurdle, not just another. So, don’t sit there and think, “Oh, I’m an LLC. I’m good to go,” because from a liability standpoint,
LLCs aren’t foolproof, contracts are not ironclad.
I hate that saying ’cause there’s no such thing. Then, also, having your insurance. Insurance policies don’t cover 100%. And they all have their own operations.
Now as far as specifically for contracts here, contracts are even more than just a protection tool. They do set up the legal relationship, and you kind of outlined a couple already that you guys need to have, and I’ll get to that in a second, but contracts, and I just use the term contract, you can call them legal forms, whatever you wanna call it, agreements, they not only set up the legal relationship and manage that relationship, but they do a couple other things. They set expectations. It’s putting everything that your client expects of you and you expect of your client or your customer, whatever it is you wanna call it. I’m just gonna use the term client for this. It sets the expectations for the entire relationship and it helps to eliminate potential issues, primarily miscommunication.
The majority of legal issues that I see come in the door for things that were not glaring omissions or intentionally done is from misexpectations arising out of miscommunication, and contracts help to reduce the potential for that immensely ’cause it’s everything in one place, you both agreed to it. It’s right there. You present it before you even get into business relationship with each other that way you guys can ask questions, they can talk about it with you, you can explain it, but setting expectations, super, super important.
But the other thing, too, and I definitely think this is the case for multiple industries, not just for fitness professionals, but we’re scared. As entrepreneurs, no matter how passionate, how amazing, how successful you are, we have fear, and one of those fears is telling our clients no ’cause we want to serve our clients. We’re afraid they’re gonna reject us. We’re afraid they’re gonna go elsewhere or not pay us or not wanna refer us, so what happens in relationships, and this could be whether you’re selling a product or you’re offering a service, clients could intentionally or unintentionally just push and push and push for you to bend on your policies, and what contracts allow it to do is for you, the entrepreneur, you, the business owner, to be able to stay the business owner in a good relationship and let the contract be the bad guy.
I think of the movie Liar, Liar with Jim Carrey. When he tries to say, “No,” but he goes, “Yes.” We’re so scared of how our clients feel that we can’t say, “No.” We end up saying, “Yes. Yes, yes, yes,” giving, giving, giving, giving, and the next thing you know, we’re burnt out or they’re getting more, we feel used, we feel walked on, and of course there’s other exercises you can learn to tell your clients, “No,” but contracts can come into play to be the “No” man for you. For you to be able to say, “Per the contract, we agreed to X, Y, and Z, and that’s what we’re gonna fulfill,” and it allows you as the entrepreneur to still … It’s a psychological thing. It’s different than me saying, “Nope, I won’t do that for you.” It’s going back to saying, “The document that we agreed to together says X, Y, and Z.”
And of course I don’t say all this to say, “Hit your clients over the head with the contract,” not at all, 100% no. You need to have it there in order to protect yourself, have a backbone, set the expectations, set the legal relationship, but you, at the end of the day, also get to make the decision on customer service. If you want to bend something in the contract in benefit of your client, you can do that.
Jessica Freeman: Mm-hmm (affirmative). Yeah. Two things. First, the making the contract the bad guy, I’ve totally been there. Most of the time with my contracts and my clients, it’s really small things of just, “Oh, can we extend the deadline a week?” and I’m like, “Well, our contract timeline is X to Z,” but I do have a policy that for every week after this date, you pay this fee, and they’re like, “Okay,” or, “Hey, I can’t do that.” This web design only includes X, Y, Z. We didn’t talk about adding e-commerce, so [crosstalk 00:11:57]-
Rachel Brenke: No, it’s [crosstalk 00:11:57], too. That’s what may be the good phrase that I should’ve started with. It’s set boundaries for both of you. In the example you just gave, it’s telling the client, “We only agreed to X, Y, and Z,” but it’s also the fact that … Like, the late fee thing you’re talking about. You can’t arbitrarily add late fees to a missed payment if you guys didn’t agree to it. Even more so, not just from a customer service standpoint, but from a legal standpoint, late fees, in my states, are considered a debt. Don’t start googling debt and thinking it falls under late debt collection practices. It’s not that. But states heavily regulate things like late fees, and they have caps because they’re trying to really protect the consumers. There are consumer protection laws. Most states, even the most business-friendly states, still have more consumer protection laws than business, and I get it. That’s fine.
But because of that … Let’s say you and I got into a relationship, I had you do my website, we either had a contract that didn’t have late fees or we didn’t have a contract at all, and I’m a scumbag and I just decide I’m not gonna pay you or I miss my payments habitually and you wanna try to charge me, you can’t do it. Or you could try, but it’s gonna be really hard for you to enforce, and especially if it’s, at the end of the day you need to end up taking me to court, having everything in a document, one place that you go to, makes everything cleaner and easier and it’s gonna make you prevailing on whatever your claim is way, way easier, higher potential of success. Now some entrepreneurs listening are probably going, “Oh, I’m never gonna take a client to court. That’s too much. That’s too scary.” Don’t tell me that because I hear that all the time. When someone comes in my inbox, they’re ready to enforce against one of their own customers and they go, “I never thought I’d get here.” You never know where you’re gonna end up in business, and you need to have that.
And then to partner with that, not having a legally written contract, there’s a lot of things that you don’t … You can’t what is either not in the contract or is ascribed by law. One of the very specific things is, let’s say, attorneys’ fees for nonpayment. Say you wanted to enforce your contract for nonpayment. If your contract doesn’t have anything in there addressing attorneys’ fees or you don’t have a contract at all, you’re gonna be 100% on the hook for paying out to an attorney with no chance of recovery for those attorney fees even if you win, and I think there’s this misconception by watching on T.V. They’re like, “Oh, the loser has to pay the attorneys’ fees.” That only happens in these types of situations if it’s in a contract that was agreed to. There’s nothing … For what we’re talking about here, nonpayment stuff, there’s nothing under the law that gives you any attorneys’ fees, so you end up with what? Nothing. You’ll get to a point that you want … You’re gonna have issues and you’re gonna need to enforce your contract, and it’s better knowing that if you win, the other party’s gonna pay your fees for you.
Jessica Freeman: Yeah, that’s awesome. Something you said a little bit earlier is that the contract protects both you and your client. I was talking to a woman a few weeks ago and she’s been waiting for her website to be built for a year, and so she was inquiring with me about me doing her website, and I was like, “Well, how much of it is done,” and she was telling me, “Oh, literally it’s been over a year,” and I was like, “Did you sign a contract?” and she was like, “No,” and I was like … I haven’t had this happen probably since my very, very first-
Rachel Brenke: Don’t say that. Don’t say that ’cause it will happen.
Jessica Freeman: But what I was gonna say is in my very first year of business, like when I sent a contract and someone was like, “Why do we have to have a contract?” feeling like I was being mean or … I don’t even remember. It was kind of weird of, like, “No, this is just to protect both of us.”
Rachel Brenke: Right.
Jessica Freeman: Luckily, I … Because I work with entrepreneurs and we all want the contract, I have not ever had someone else bring that up.
Rachel Brenke: Well, and that’s what’s interesting is that people have these aversions to contracts, but they don’t realize they sign them all the time. iTunes, that app you downloaded an hour ago, signed a contract. You’re doing it every time you go to a new website, you sign up for this or that, and people don’t understand that’s what they’re doing, and I think the fear of putting contracts into business is because, A, the business owner doesn’t understand it themselves, they’re overwhelmed, and we can fix that, or you’re afraid of what your clients or customers are gonna say. It’s all about how you approach and educate them.
And like you said, contracts protect both you and your client.
You don’t have to have this big formal, “Here’s the contract. Here’s my scroll, and sign it with lamb’s blood.” Here’s a contract. This protects both of us, it outlines what I’m gonna do for you, what you’re gonna do for me. Read it, let me know if you have any questions. It can be as easy as talking like that. It doesn’t have to be this, “All right, paragraph one says this.” These are people, too, and how you approach it, they’re gonna feed off how you’re acting about them, and so I always encourage, and I do this with my clients some … Now that we talked about this, I wanna do this even more. But I talk to my clients so that they can understand when I drop a contract for them how to explain it.
But I encourage you guys to sit down and test it. Practice it with your significant other or a studio assistant or a friend, a colleague, or even your lawyer, and have you explain it back to them and see what their questions are. I actually think it’s almost better you start to do it once with your lawyer and then go do it with people who don’t know your policies are anything because then they’re gonna be able to ask questions as thought they’re getting ready to book you, hire you, purchase from you, and now that’s where you’re gonna be able to identify multiple things.
One, what do I need to explain better or two, what do I need to include in my contract, and three, that’s an entire list of social media and blog content that you can utilize, so when you’re going to create contracts, people, I think, have this scary mindset of, “Oh, my gosh. I don’t know what to include.” Stop and think about your business policies, what you want to do. Stop and think about your top customers, clients, questions or objections, and just make a bullet point list and then hand it to a lawyer to do. It really is as simple as that.
What do you think is one or two things that a lot of fitness professionals are leaving out or mistakes they’re making in their contracts?
I’m looking for attorneys’ fees, what kind of law governs, what the resolution method would be, are they agreeing to mediation, arbitration, or does it have to be in a certain court, and a couple other specifics. That right there, actually, will tell me, for the most part, will tell me if you’ve had it lawyer-drafted or reviewed because those are things that … We were talking about earlier, you can’t put the cat back in the bag. Once you have an issue, like when [inaudible 00:20:03] for nonpayment … We talked about late fees, but let’s say we need to go to sue for nonpayment, go to our local small claims even, we still need all those other sections, the attorneys’ fees, where to do it, how to do it. We need these things to govern the relationship, and this is especially true if you’re working across state lines, across the United States. You don’t want to end up being subjected to, if you live in Virginia, to a case out in California, and so those are some of the specifics that I would look for.
As far as more tangible things that I think you guys could check off, ’cause that section really is gonna need to be lawyer-handled for you ’cause those are very state-specific. Some of the big things that are just missing in contracts in general are payment schedules, if you’re getting paid a certain amount of times, like payment plan, and this can include recurring subscriptions, late fees, and what is the punishment, or the consequence rather, if they don’t pay, completion schedule, when are you, the fitness professional, gonna deliver whatever it is that you’re supposed to deliver, how it’s gonna be deliver, depending on … This kinda depends on what you guys are offering. If you’re doing gym classes versus an online course, if it’s a broad variety of [crosstalk 00:21:21] the capacities for that. I really think, though, the biggest … I think it’s easy to get the inclusions in a contract. People relatively know what they wanna have included.
More of the mistakes that I see are often not having one, which we’ve already [crosstalk 00:21:41],-
Jessica Freeman: Right.
Rachel Brenke: … or they had written on by themselves that is so disproportionately unfair it can be rendered invalid, which isn’t helpful. Or let’s say you’re an LLC, we’ll circle back around to that, and you end up signing a contract in your name personally and not for the LLC, well, then you’re personally liable at that point.
You want to sign everything in the name of the LLC as a representative of the LLC.
So oftentimes, fitness professionals set up their LLC, they’ll get their insurance, look at their contracts, then they start entering in … Let’s say they’re running a gym and they’re getting all their clients entered in these subscription contracts, but the contract is tied to you personally, you’ve signed it in your name, not the gym’s name, not the LLC’s name, you could be personally liable if somebody gets hurt or if they’re suing for some sort of performance, and that’s one of the biggest mistakes, just how it’s used, not so much what’s included.
Jessica Freeman: Interesting. I never knew that, that you should sign it in your LLC. I just learned something.
Rachel Brenke: Yep, yep. It’s really as simple as … Like, for me, Rachel Brenke for the Brenke Group LLC.
Jessica Freeman: Yeah.
Rachel Brenke: Identify who I am as a representative and it’s for the LLC, and not me personally ’cause if something does happen, one of things this means [inaudible 00:23:05] lawyer on the other side of the table is I’m gonna look for things like that ’cause what if your LLC … Maybe your business isn’t thriving, maybe it doesn’t have a lot of assets, but you do as a person, I’m gonna look as a way to try to touch you. I have to find a way to get through the LLC to you personally. That’s one of the things that I would look for.
As a lawyer and a business owner, what are your thoughts on hiring a lawyer to draft up a contract versus buying a template from a lawyer versus the free ones that are out there?
I’m especially wondering about the templates, like the paid templates versus the free templates.
Rachel Brenke: Right. So, the problem with the free templates, they may be good, they may be bad, you just don’t know where they’re coming from. So, whether you do free, whether you do paid, you’re gonna still need to take it to a lawyer just to make sure ’cause state law varies. Let’s go back to the example of the late fee amount. They vary by state of the amount that you could charge, and so you don’t want to download something that was for Missouri and you’re living in California … And I just pulled states. I don’t know if there’s [crosstalk 00:24:24]. But that’s a good example. You don’t know if there’s gonna be variations, even down to the legal miscellaneous section I was talking about earlier.
Some of those contents vastly vary between states, and if something’s included that is aggressively not supposed to be included for your state by the courts, they could render the whole thing invalid for you and then you’re kind of SOL. But you know what? There’s danger in that also with a paid template, and I say that as somebody who sells templates. I think no matter whether you sit down and write a bullet point list or you get a free template or you get a paid template from somebody, you should always have it reviewed, you should always make sure you fill it out with the things that you want to have included, then have a lawyer look at it for you.
For me, that’s the first step that, even when I have clients who come to me that have nothing, I go back and I say, “Bullet point for me your business policies.” We could talk about it on the phone, but you’re gonna be paying me for the hour for me to ask these questions. You write it out and then we’ll talk later and ask questions. The thing with buying … Buying paid templates and/or coming in the door with an existing outline can save you a lot of money for the reason I just explained. Some lawyers will say, “Well, let’s sit on the phone for three hours and we can talk through everything.” Well, if you’re an entrepreneur, I feel like there’s some responsibility and you guys are smart enough to be able to save an hour and a half of that, write out your own bullet points or you can bring a template that has that, and that can save you money.
Having a template also helps in the context of … My industry’s a little weird. I’m excited for the future because it’s moving out of the stone age I feel like just ’cause there’s younger ones of us now owning law firms who are really embracing online age, we understand how these industries work, influences, sponsorships, and that sort of stuff, so it’s important to find a lawyer that understands the nuances of the industry you’re in, but there’s not a lot out there necessarily. So, buying a template could help you in that it will fill the holes that that lawyer may not have necessarily thought of because they’ve never worked in that industry or worked with the industry before, so if you have a local business lawyer that you absolutely love, but they don’t know the difference between a barbell and a squat or whatever, which are two completely different things, I understand that, you may want to take them a template that you’ve gotten from someone who is within the industry, and it’s gonna save you a lot of time and frustration and money.
Jessica Freeman: Yeah. And to clarify, we do need to … If we take this contract into a lawyer, it’s best to find someone locally. Instead of going to you, because you may not know … Like, for me, you may not know Georgia law, right?
Rachel Brenke: Yeah. So, it’s kind of interesting. We’re small business plus intellectual property, so on the contract side of things, we can only work within the states that we have licensures for, and so our firm has three states right now. One’s not Georgia, but we’re working on it. So, you have to go to people who are licensed in your state because it’s very state-specific. Now on the intellectual property side of things, which is, like, trademarks and copyrights, that’s a federal, so we can do that, all that work, especially since intellectual property law’s in this very niched area of law. There’s not a lot of us. So, we can do that anywhere and then we just partner with somebody in the state. Basically, they sign off … Someone who’s licensed in that state may sign off for us on that type of work. But yeah, definitely if you can find a small business lawyer who does contracts, business formation, and intellectual property stuff, and actually does the IP, doesn’t just say they do, that is really gonna be your one-stop shop to really help you to be protected.
I’ve kinda dropped a couple of the hints when we were talking about the contracts. Earlier I said you may even need a contract with your logo designer. Well, a regular contracts attorney may just be thinking only service [inaudible 00:28:49] to include, which is great, but that’s only a piece of it. The other half of that is the intellectual property part where you as the entrepreneur … I know that you, Jess, you wanna own your logo. You want to own your brand, and so that, the only way that that can be transferred when you go to hire a friend or someone on Fiverr or Upwork or that you’ve met in a group, the only way that that ownership can be transferred to you is by contract unless they’re your W-2’d employee, but that’s typically not the case.
But sometimes, small business lawyers miss that second part of it. You could go down the path of never having that in writing, the transferring of ownership for a logo, and there’s such great dangers in it. They could stop you from using the logo because it’s technically their property, you could never trademark it ’cause you don’t own it. Let’s say someone else rips it off and is using it. You would then be dependent upon that logo designer, if they didn’t transfer the rights over, you’re dependent upon them to pursue the infringer, and it’s those type of things. And you could sub-logo for images, video, audio, text, anything that’s created for you and your business. That’s where the IP, intellectual property, side of it comes in. So, the best lawyer you can find is small business plus intellectual property. If not, you could … We do IP all over the United States.
Jessica Freeman: Yeah. That’s amazing. You have been amazing today, Rachel Brenke. I’ve learned so much. So, where can we find you online for all your templates and podcasts and to keep up with your races as well?
Rachel Brenke: Yeah. Everything is under Rachel Brenke. Rachelbrenke.com. I’m the only one in the world, so you can’t miss me. You can find me there. That’s the handle on all the platforms, Facebook, Twitter, Instagram. I do all my own social media interactions, so if you send me a message or comment there, I’m the one that responds back. Yeah, you can find all the brands. Everything from that website will split you off into either the legal niche blogs, my books, and also my foundation for pet advocacy.