Before you use online coupons to increase business, be aware. There are legal, marketing, and financial issues that can jump up and bite you. There are also implications for communities where they are used as well as for those in the same industry who don't use coupons.

1. Dangers & Delights of Daily Deals Presenters:Jan Triplett, Ph.D. Business Success Center Jeanine Lehman, Law Offices of Jeanine Lehman P.C. ©Business Success Center and Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 1

2. ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 2 Disclosure The information in these slides and the presentation is general in nature and does not constitute legal advice. Recipients are advised to engage an attorney for legal advice and consultation applicable to their own situation.

3. ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 3 It added up in 2010: 332 billion coupons (largest ever) 87% of coupons were inserts; 5.2% handed out in stores; 37% increase in online coupons; Shoppers saved $3.7 billion.

4. How it Works Delights Potential Dangers Auto access to their large database Shared branding — reputation of coupon company enhances your reputation They create the coupon & the message They take the money & handle everything Merchant assigned to a category – no choice Merchant signs their contract They create the coupon & the message They take the money & decide when the coupon push ends & when you get what monies ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 4

5. ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 5 It failed in Austin

6. To the Merchant Exposure to more people who may become clients Some money; maybe some profit To the Online Coupon Provider ½ to 2/3 of the money paid by the Buyer Exposure to more clients & buyers To the Buyer Low risk to try something new Feeling smart about the “deal” they got Giving employees, friends, family a cheap gift ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 6 Delights

7. To the Merchant Lose money Lose control of the brand & message Make current clients mad; lose clients; attract wrong clients Expose staff to coupon bullies Increase in tax & financial exposure; ability to sell business Lawsuits Bad press, bad positioning, loss of brand, close business To the Online Coupon Provider Lawsuits Bad press To the Buyer Not able to get what they bought Not getting good value for what they paid Being embarrassed ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 7 Dangers

8. Lowers value for all businesses in that industry Businesses not offering the coupon can be bullied into giving discount Can have “ghost competitors” Daily Deal has PPC for that offer although no online coupon (San Francisco Comprehensive Tours, LLC vs. Groupon case) Loss of sales ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 8 Industry Risks

9. Reduction in tax base Most of money goes outside the community to places like Chicago (Groupon) or DC/London (LivingSocial) Loss of profitable independent businesses & job creation Loss of profitable marketing & media businesses ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 9 Community Risks

10. Can you deliver what you promise? Salon 505 & others couldn’t From the Coupon Company Lockup — prevented from offering similar discount elsewhere Transfer of Rights to continue to distribute deals as samples or promotions Texas Laws Deceptive Advertising Law Misrepresenting the cost or character of the product or service Texas Deceptive Trade Practices — Consumer Protection Act (DTPA) False, misleading, or deceptive acts or practices ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 10 Legal Dangers

11. Legal Remedies VS. the Merchant Lawsuits If you lose, here are just the DTPA remedies: Civil Penalties Economic Damages Mental Anguish Damages Revocation of license/certificate to do business in Texas Restitution Attorneys fees & court costs ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 11 If you can’t deliver…

12. Can you finance the deal? Coupons are “gift certificates” Paying sales tax for used coupons May have to give the money you get back Financial strength/weakness of coupon company Laws: 2009 Credit Card Accountability, Responsibility & Disclosure Act & Electronic Funds Transfer — Federal 2005 Stored Value Card Act & Unclaimed Property Laws – Texas 12 Financial Dangers Can you keep afloat? ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved.

13. How should you handle… Refunds Partial redemptions Combining multiple vouchers Transferability Taxes due: income & sales Liability for unredeemed coupons (disclosure item when selling a business) 13 More Financial Risks ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved.

14. It’s foolish not to be aware of other laws that might affect you. Anti-kickback laws, fee-splitting HIPAA, Barratry Industry codes of conduct Insurance Rules Merchant is responsible for compliance with all laws —not just the coupon company. More Dangers ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 14

15. Operations Finance Sales Legal Marketing Personnel Capacity to meet demand Financial strength Desired outcome Ability to be in compliance Taking responsibility for the message Long term effect ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 15 If you do coupons, consider

16. ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 16 Only 15% of customers are loyal; but account for 55-70% of all sales. Loyalty is the goal. Coupons are short-term.

17. Loyalty Program CRM program Suggestive selling/ package deals Go Local Card Special recognition of your Platinum customers Getting more from each sale ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 17 Alternatives to the Daily Deal

18. Here’s to your success! Jan Tripletttriplett@runitright.biz Jan Triplett Blog: http://www.ownersview.com (512) 933-1983 Jeanine LehmanLaw Offices of Jeanine Lehman P.C. jeanine@jeanine.com http://www.jeanine.com (512) 918-3435 ©Business Success Center & Law Offices of Jeanine Lehman P.C., Austin, TX 2011. All rights reserved. 18