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"An Important Lesson I Learned
In 1995 Could Help You Avoid A Lawsuit Today" by Ron Meyer We all make mistakes. Some of us make bigger ones than others, I know that over my life I’ve made quite a few doozys. But there is a saving grace with mistakes, and that is learning from them and taking what you’ve learned and putting it to positive use. During my carpet cleaning career I've experienced tremendous highs and also had my share of frustrating lows. What I'm about to share with you revolves around one of the 'lows' of my career and I hope my story will in some way help you to avoid some of the mistakes that were made in my company back then, and perhaps also help you learn a lesson that I learned, without going through the pain that came with it. In 1995 my company, Preferred Carpet Cleaning, was tapped on the shoulder by the Ventura County, CA District Attorney’s Consumer Consumer Fraud Division for alleged "Bait And Switch" tactics used when selling carpet cleaning services. A lot has been written and tons of accusations have been thrown my way over the past few years concerning this action by the DA. Some of it has come from a competitor who sells a cleaners marketing information product, and other accusations, half-truths and outright fabrications have come from people that don’t know what really happened, don’t understand the situation and don’t realize that anyone, anywhere, in any business could easily be tapped by regulating or law enforcement organizations if they feel that you are doing wrong… even if you really aren’t! Because I once and for all want to set the story straight I’ve decided to publish the complete unvarnished truth about what happened, how it happened, the remedies involved (legally and within my own company) and the lessons I learned… hard earned and expensive lessons that I’m sharing with you so that you can look at your own business and see if you are doing some of the same things and if so change them and protect yourself against potential accusations of fraud and the expensive aftermath that could follow. Before I begin, I should give you a bit of background on one of the promotions we ran back in 1995, one of our 'price based ads'. Have you ever run a priced based ad? You know, the ones that advertise steam cleaning for $6.95 per room or 2 rooms for $19.95? I’ll admit it, I have…in fact it was an ad selling a stripped down, basic carpet cleaning for $4.95 per room. Running a priced based ad is controversial to some, and is not for everybody (we no longer run this type of advertising and haven’t in quite a while). One of the reasons why this approach is controversial is that many companies that use it aren’t very careful with the way they guide their customers expectations. Many will withhold the details of the offer and deliberately mislead the customer. Then, once inside a customers home, they begin offering all sort of additional services the customer assumed they were originally going to get. Of course this serves to do nothing but frustrate and anger the customer. There are companies though that are honest and direct about their low price offers. They tell the customer on the phone that their offer is for a limited service. They inform them up front that there are additional charges that go along with the offer. They explain that the rep will give them a free exact estimate prior to starting the job and if everything sounds reasonable to them, that only then will they perform the job. These companies guarantee their work, they send the customer a thank you letter, and call them back the next day to make sure they’re happy. This is the category my company fell into. You can’t necessarily paint this type of approach with a wide tar brush as ‘bad’. It needs to be judged in the context of the entire customer experience from A to Z. People love to put labels on things as ‘black and white’ or ‘good and bad’. Unfortunately, many things in life and in business do not fall into such convenient categories. Some things are indeed ‘gray". My company always performed what was advertised. We sold additional services, yes, but this was told and explained to the customer UP FRONT when they made their appointment - the customer was always aware of what they got before we arrived at their home. Once at their home, we’d provide them with a free and complete estimate and if everything sounded reasonable and was approved by them, only then would we begin the work. In addition to this, every customer received a full guarantee, we’d called them back the next day to insure they were happy, and we sent a thank you letter in appreciation for their business and requested them to call us if they were unhappy in any way. When we ran this promotion, $4.95 was only part of the cleaning charge. We would charge 35 cents a square foot to take care of spots, traffic lanes and any other heavily soiled areas. This was mentioned verbally on the phone and our ad also stated "heavily soiled areas require preconditioning for best results". Elsewhere on the ad it once again stated "Also available: Preconditioning for heavily soiled areas" Here is what our rep would say, when the customer inquired about our ad... *********************************************************************** Telephone Script "As you can see on our flyer it's $4.95 to do our basic steam cleaning. Our basic steam cleaning will do a nice job on the lightly soiled areas of your carpet, which in most homes is the majority of the carpet, as it probably is in your home as well. For any moderately to heavily soiled areas we require our preconditioning process which runs an additional 35 cents per square foot, but only for the areas that need it, not the whole house. What I can do for you is have a technician come to your home on the day that you want the work done. He'll look at what you have, give you an exact written quotation, it's a free quotation, and if the price sounds reasonable to you and you like everything you see and hear, we'll proceed and do the work for you at the same time. What day would be convenient for you for us to give you a free quotation and do the work at the same time?" *********************************************************************** We would then go out and give the customer a complete estimate prior to starting. If the price was reasonable and the customer approved, we would perform the work. We found that a lot of customers preferred this sort of pricing structure because it allowed them to get a custom cleaning based on the needs of their carpet. The way we structured the pricing for our services was fair and cost effective for the customer. They could get full service - having their carpets fully cleaned throughout the home, lightly where it was lightly soiled, and a more extensive cleaning in the heavily soiled areas – and they could get it at an affordable price that didn't gouge them and left them satisfied (this is the key here, we made sure that the customer was ALWAYS satisfied. A job wasn’t done until we delivered to the customers expectations). Perhaps you're wondering... "$4.95… If It’s So Cheap, How Can You Possibly Make Any Money?" Here's an example which better illustrates this: If a customer has 2000 square feet and they hire a guy who charges 25 cents a square foot to deep clean throughout their house, they’re going to pay $500.00. Take that same 2000 square foot house; probably 400 feet or so is heavily soiled and the rest is lightly soiled. We would charge $4.95 a room to do our light cleaning for the whole house and add the 35 cents per square foot to deep clean only the 400 square feet of heavily soiled area. Again, this was after the customer was fully informed of the costs, of the services and what we would do, both on the ad, on the phone and in person. End result? Customer gets the job for $175.00. It gets them a clean carpet and saves them money. In the long run the customer is happy, the technician is happy and the company is happy. The main key to making this work correctly of course is to make sure that the customer was informed on the phone and was aware of all potentialities BEFORE we arrive at house, so they were able to make an informed decision. So, what if the customer had an overall clean carpet and didn’t need spots taken out? We performed the service as advertised and never upsold to something that wasn’t needed. Most customers generally have spots and traffic lanes that need to be taken care of and they were willing to pay for this service. But we never sold what wasn’t needed and never pushed unnecessary services. Some might say a cleaner who advertises such a low price for a basic carpet cleaning can't and won't perform the service at that rate. That simply is not true. As proof we performed our service as per this advertisement, click here. Tap… Tap… Tap… "Can We Speak With You?" In 1995 the Ventura County, CA District Attorneys Office accused my company of deceptive practices in the delivery of a service… or as it’s commonly known in the business "bait and switch." Now, you’d think that the accusation was because of the $4.95 per room ad right? Nope… it wasn’t that at all, in fact it had nothing at all to do with the ad. Here’s what the DA didn’t like, and what they called bait and switch... Have you ever done one of these?
What is this? What you see is a picture that dramatically illustrates the effect of what we call a cleaning demonstration, also known as a spot test. This picture isn’t an ‘exact’ representation because it doesn’t show how clean this minimal service leaves the carpet, but it gives you an idea just the same. Remember how I mentioned earlier that we informed the customer on the phone about the 35 cents per square foot charge for the spots and traffic lanes? Well, my contractor would arrive at the customers home and he’d give them an estimate based on the needs of the carpet. Most of my contractors would give a written estimate of the price and if the customer said yes and approved, only then would they proceed with the job. Other contractors were different. Some contractors liked to perform the demonstration prior to giving a quotation. Why? Because it shows the customer physically and dramatically what they’re getting and gives the technician an idea of how the carpet is going to respond to his cleaning. *********************************************************************** Hard Learned Lesson #1 If you have true ‘independent’ contractors completing cleaning jobs for you, like I did, the law states that you cannot ‘control’ the way they perform their job. An independent businessperson makes their own decisions, uses their own cleaning chemicals, tools and conducts the work according to the way they feel the work should be accomplished. On one hand, you want a great finished product for your customer to experience. On the other hand the law states you can’t control how your contractor provides this finished product. This interesting paradox put me in an extremely disadvantaged position – in a position of serious legal exposure. Independent contractor relationships must be clearly and succinctly defined in a legal document before the first job is ever completed by an independent contractor. I wasn’t smart and it cost me because my contractor agreement form had no guidelines that protected me and my company in the event of the contractor performing an illegal act. What’s the lesson learned? Don’t be dumb like me, have an attorney draft an independent contractor agreement form that is complete and covers every possible legal ramification. This will save you from any future legal actions and will protect you from the costs, headaches and frustrations that come from them. *********************************************************************** There’s nothing wrong with cleaning a patch of carpet for your customer. As long as the customer is ‘aware’ you’re going to do it. Of the contractors that performed the demonstration, 99% of the time the customers gave them permission to do it. But on 4 documented occasions the technicians didn’t inform the customer that they were going to clean a bright spot in their carpet causing these customers to get angry and file complaints. These clients didn’t contact me or my company about their concerns, they didn’t ask us to make good what they felt was wrong. Instead they filed their complaints directly with the DA. Had they contacted me I would have personally made sure that whatever they felt was wrong was corrected to their satisfaction. That’s why we employ a guarantee and recontact the customer – we want the job to be done right and our customer to be happy and satisfied. As a result of these complaints the Ventura County DA decided to file an action against my company, charging it with bait and switch. The DA in my county, especially their Consumer Fraud division, is one of the toughest in the country. They’re considered one of the best consumer protection agencies in the state of California. They’ve filed complaints and instituted lawsuits against hundreds of businesses both big and small (they are well know for going after major corporations and winning). They’ll often investigate a company after a single consumer complaint. Because of the action by the DA I had to hire an attorney to look after my best interests and provide a defense. It is something any business person would do. You don’t take an accusation by a powerful organization such as the DA lightly, if you don’t protect yourself and seek legal counsel you can wind up losing everything because in most cases that’s how the game is played. You Do A Spot Test Demonstrating A Different, More Thorough Cleaning You May Run The Chance Of Being Accused Of "Bait & Switch" ******************************************************************** Hard Learned Lesson Number #2 Sometimes what seems to be the most innocent of actions can be the source of a great deal of legal grief. Ever dump your waste water in the gutter? Ever accidentally spill some pre-spray on an expensive marble floor? Ever leave a bit of moisture on an entryway tile, where somebody could slip and fall? Ever run an ad WITHOUT your business address on it? (In California this is illegal) Bottom line, a small leak can sink a big ship. It pays to go over all your procedures, to make sure you’re dotting all your I’s and crossing all your T’s. Know exactly what is going on at all times. Make sure your contractors are doing the right thing and doing it properly, make sure that you are legally straight. I made a crucial mistake, I wasn’t aware this was happening at my company, and I wound up having to pay for that ignorance heavily. ******************************************************************** The DA’s position was that once the demonstration was performed on the carpet of a customer that was not aware it was going to be done, that the mere ‘act’ of this demonstration ‘forces’ the customer to buy the more expensive service or be faced with the prospect of having an unsightly 'clean' area on their carpet. The DA told us that if we were going to do demonstrations, we have to get written permission first. My attorney and I fully complied with this request and worked with the DA in wording a prominent advisory. Here is what my attorney and the DA came up with. It’s the exact language we inserted into the contract (feel free to use this in your contracts): ******************************************************************** In the event that your carpet has heavily soiled areas we may recommend a process called preconditioning, which is an additional charge of 35 cents per square foot, to remove those heavily soiled areas. To determine if our preconditioning process can clean your carpet to the best of it's ability, we may recommend to test an area of your carpet to be sure of its effectiveness and make sure that it meets your standards. This will be done in your presence in an area that you choose. The preconditioning process will thoroughly clean your carpet, however, the soiled areas surrounding the clean area may stand out in contrast to the thoroughly cleaned area if you choose not to precondition the carpet. Our basic steam process may not make the surrounding areas as clean as the preconditioned area, so if you decide against the preconditioning, we will do our best to blend the immediate area surrounding the clean area at no additional cost to you. I have read this paragraph and in the event the technician recommends preconditioning, I would like a free preconditioning demonstration to determine how my carpet will look in an area I choose. ________________Initials ******************************************************************** So, do you ever sell another 'level' of cleaning? Many cleaners don't, but a great many cleaners do. There are many different labels companies put on them...some guys sell shampooing in addition to steam cleaning for exceptionally soiled carpets, some guys sell RX20 cleaning as an additional service, and some guys even make up their own term for a higher level, like Servpro does with their 'showcase cleaning'. I've spoken with cleaners who perform dry cleaning on a regular basis, but will switch to steam cleaning for a real dirty carpet. Some advertise 'portable', then upgrade to 'truck mount'. The point is, it really doesn't matter what you're offering, or what the price point is on your lower level of service, if you advertise one level of service, and then demonstrate a higher, more expensive level of service to your customer on her carpet to show her the difference between the two, YOU CAN BE ACCUSED AND CHARGED WITH BAIT AND SWITCH. Did you know this? I didn't. Soon after the DA approved of the earlier mentioned advisory which we worked together on, a full scale investigation was launched against my company. It required me to hand over years of customer records, contracts, telephone numbers, etc. Full time investigators poured over all my records, contacted my customers - talked with them on the telephone, interviewed them in person. Some investigators quietly and secretly conducted ‘sting’ operations, with hidden cameras and hidden microphones, posing as customers to see if any non-consented demonstrations were being performed. As all this was unfolding, my attorney was required by the court to file a response to answer the allegations. What was my defense? It was simple:
My attorney filed a legal response with the court as required. A trial date was set for sometime near the end 1995. So, How’d It All Turn Out? Finally, after months of investigations and with a trial date drawing near, the DA’s office contacted my attorney and asked what we’d like to do to ‘make this thing go away’. My attorney asked, "What do you want?" The DA’s office placed an offer to settle the case. They wanted $30,000 and say there will be no mention of wrongdoing. Just a settlement, without going to trial, with no admission of guilt. My attorney and I politely declined. If I remember correctly this was followed by offers of $18,000… $15,000… then $12,500… all tenured by the DA to make the case "go away" (which appeared odd to me, if they had a "case" against me why were they so eager to make it go away? Even to the point of lowering the "settlement" they wanted to impose over and over again). While I was mulling this over, my attorney advised me to take the $12,500 offer and get everything over with. To not let pride get in the way, to put this past us, take the lessons we learned and apply it to the business, improve the way we do things and move on. Since the DA knew how costly it would be for us to actually go to court and prove our innocence, my attorney felt that their offer wouldn't get any lower and I should take it. Now, lets look at my attorneys wise advice. I could decline the offer, proceed to fight the charges in court, prove that I and my company wasn’t guilty and liable in any way and take the chance that the court would find us innocent. This would have cost me $30,000 or more in the long run (considering attorneys fees, depositions, witnesses, etc.). If I "settled" for $12,500 it would be all over, I could put all the unpleasantness and problems behind me and move forward with my business and life. It would save me $15,000 or more in attorneys fees and court costs (minus what my attorney had already cost me) and I would be considered innocent of the allegations. I made a tough decision, but I believe a decision that any smart businessman would have made, faced with the same set of circumstances. I accepted their offer and settled the case. It wasn’t easy, it wasn’t pleasant, but when faced with the lesser of two evils you need to take the option that makes the best sense, especially if you are running a business which provides your livelihood and sustenance. In the long run, although it was painful, I decided to use this experience as a lesson and move forward wiser because of it. *********************************************************************** Hard Learned Lesson #3 Do everything possible to avoid lawsuits. Nobody wins in a lawsuit. Nobody. Even if you win your case, you lose. Not only do you have to endure the mental agony and emotional turmoil of the lawsuit, more often than not it costs you thousands of dollars in attorneys fees. The only winners in lawsuits are the attorneys. If you find yourself in a potential lawsuit, think hard about doing whatever it takes to avoid it going to court. Of course, I was never aware I was going to be involved in a lawsuit, but what happened to me I believe has made me a better and more informed business owner. And this is probably one of the most important lessons I can share with you. Legal "attacks" can come from anywhere, whether it’s from a DA or another regulatory organization or even from a customer or a contractor. Always understand and be prepared for legal actions and do whatever you can to try to avoid being sued, investigated or accused. It’s not fun, it’s not easy to go through, and the stigma of it, even if you are not really guilty of anything, takes a long, long time to go away. *********************************************************************** As part of the settlement, as I mentioned earlier, I also had to agree to have my work orders revised to include the prominent advisory concerning the demonstration. After settling the accusations the DA sent out a press release. Here’s the key wording from the DA’s press release that explains the settlement.… *********************************************************************** Under the settlement, Meyer was required to advise consumers prior to performing any demonstrations, and to revise his work order slip to contain a prominent advisory to customers concerning the demonstration. In addition, Meyer agreed to pay $11,000.00 as civil penalties and $1,500.00 as cy pres restitution to the Ventura County Library Fund, for the purpose of supporting the operation of libraries in Ventura County. ********************************************************************* As I mentioned earlier the DA had no problem with the advertisement. They never once asked us to modify the ad or stop running it. What they did ask us to do is modify the act of the demonstration…that if we intend of providing a demonstration, we obtain WRITTEN permission first. We fully complied with them, and in fact worked together with them to put the wording together on paper, as I mentioned earlier. Now to answer a final question… Do we still run this promotion? The answer is no. Even though the DA never asked us to stop running the advertisement (or even modify it, for that matter) we made the decision that we no longer want to run any kind of promotion that involves any upselling on the cleaning itself. Now don’t get me wrong, my technicians still offer additional services in customers homes--like protection, upholstery cleaning, pet odor control, carpet repairs, etc. We just feel that this sort of low price promotion isn’t a politically correct thing to do. It’s too far in left field, it pushes the envelope to far to the extreme, and it’s too controversial. Besides, there are so many other methods of generating customers cost effectively…one doesn’t need to engage in controversy to enjoy extreme success, so why do it? We no longer run this promotion and have no intentions of running it again. So what did I learn from all this? Well, I learned a LOT. I learned how it feels to stare straight down the barrel of a potentially life wrecking lawsuit. I learned how it feels to be legally exposed, under fire from a powerful government agency. I learned how the legal system works first hand, I learned how these sorts of matters are conducted, and I learned how lawyers operate up close. In addition, when this information was released via press release, I learned how unfavorably our industry sees this form of low price/upsell advertising. I very rarely received complaints from my customers who had their carpets cleaned, but I heard a good deal of negativity from cleaners in the business. (And, upon considering their points of view, can't blame them.) I learned the importance of dotting your i's and crossing your t's. My subcontractor agreement form was seriously lacking...and I was legally exposed. My contractor agreement forms now offer much more protection in the event a contractor performs what is perceived as an illegal act by a regulatory agency. If a contractor working on my behalf were to pull some 'fool-stunt' in the future, my interests are now MUCH more protected. I learned the importance of what I used to call 'unimportant minutiae', ie: seemingly innocent actions performed can turn into something quite disastrous. This demonstration performed improperly resulted in an expensive lawsuit. It never occurred to me that guys were performing the demo without customers permission...yet, we wound up having to hire an attorney and defend ourselves because of it. I spoke with a cleaner who had a customer slip and fall in her home as a result of him accidentally spilling some water on her floor. He was staring at a multi million dollar lawsuit and he had no insurance. Carelessness or not paying attention to the little things have been the downfall of many a business owner. I learned that you can't be liked by everybody. On the ICS and Cleanfax internet bulletin boards, for example, there have been a few posters using fake names and fake email addresses, fraudulently posting lies about me, intent on damaging my marketing business. Others have paraded and waved around the press release from 1995 in an effort to mislead and persuade others I'm a bad guy. (As a matter of fact, one of my competitors actually mass mailed the DA's press release to cleaners across the country to help boost his sales and purposely damage mine) I guess there are those who'd rather I not help others. The bottom line...this period in my life was scary, it was stressful...but in the end it turned into a learning experience with a happy ending. Still, I wouldn't wish it on anyone. What type of service do I offer today? As I mentioned earlier, I no longer market to the low end of the marketplace with a 'budget' minded promotion. The clients I deal with today are mid-level to upscale clients and pay mid level to upscale prices. None of my promotions are less than 20 cents per square foot. All clients receive a top level cleaning wall to wall. To sum things up, I and my company have made mistakes in the past. Ones that we paid for monetarily, legally, physically and emotionally. They were mistakes that we have learned a great deal from, ones that allowed us to see what was wrong with how we did business and allowed us to amend those areas that were problematic. They were costly, much more than the $12,500+ that they cost us, but ones that taught us much about how to be better business people, that showed us how to work with our customers better and provided key lessons that I’m now sharing with you… to review your procedures, processes, contracts and agreements. Make what you do the best possible experience both for your customer and yourself. I hope the lessons I learned and have shared offers something instructive that can help prevent potential problems in your business. If not, at the very least you can use my example as what you should strive to avoid. If you have any questions about this you’d like to ask me personally, I can be reached directly at 805 796-6780. I will be happy to discuss them with you. Or you can email me at ron@cleaningsuccess.com. Thanks for reading and I hope you have a great year in the carpet cleaning business… Sincerely,
Ron Meyer (C) 1995-2007 CleaningSuccess.Com
CleaningSuccess.Com Copyright (c) 1995-2007 CleaningSuccess.Com. All rights reserved. Reproduction in whole or in part in any form or medium without the express written permission of CleaningSuccess.Com is prohibited. All rights strictly enforced. The products and services of other companies mentioned on this website does not constitute endorsement of these nor will CleaningSuccess.Com accept liability for them.
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