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How To Protect Your Driving School From An Instructor Who Leaves To Compete With You

You’ve got a great driving school going. You have many happy drivers who learned from you. Financially, you’re doing well. You have a great team set up.

Then your star instructor leaves and starts their own driving school--in your market!

You could be in trouble. Your former instructor has access to your methods, your student lists, your contacts--everything you’ve built through the years.

What do you do?

The Employee Who Left

I’ve learned a lot about the driving school business since I started DSM three years ago. Driving schools come in all sizes--one owner/instructor with a small home office to schools with 20 or more locations and lots of instructors.

Many schools rely on single main instructor or a core group of instructors to build their business--especially when training a lot of teen drivers. You have a limited amount of time--after school until dark for 10 months of the year.

Those instructors help your business. Your vehicles to stay on the road for instruction, rather than remaining in the parking lot. These instructors know your students and their parents, and will see how you do business.

The risk, therefore, is that one will leave, start a business, and take your contact lists and other business systems. You’d think that this would give them an advantage.

 

Not so much, as we’ll discuss a bit later.

But you can avoid your employee becoming your competitor.

Thinking About Your Driving School Structure

Prevention is better than reaction. If you run a good ship, and treat your instructors well, you’ll avoid many problems down the road, including the instructor who jumps ship to start their own school in your area. The former instructor who sets up shop 50 miles away isn’t really an issue.

I think the first steps should occur before you open your doors--with your business plan and business structure.

You should always have a business plan. There are plenty of models out there--even if it’s a collection of notes and ideas for what you’re going to do. In your plan, think through your employee policies, and how to handle this situation (and others)

Your business structure also matters. One of the big horror stories I’ve heard involved a driving instructor who was also a partner in the business.

Partnerships are tricky businesses--every member should have full information, even with specific responsibilities.

The instructor left after a strong disagreement over money, and took a lot of the client information with him--clients, the inner workings, the market, the contacts at local schools, the relationships with the other instructors.

You could end up competing on price and brand.

Even an instructor who’s an employee can lead to problems. Whether the employee leaves, or is fired--your brand can be attacked in the community.

Should My Driving School Be a Sole Proprietorship, Corporation, or LLC?

Other structures can avoid the problem. If you run the school as a sole proprietor, everything’s on you--including hiring the right people. A corporation or LLC will probably have the advantage of limiting your personal liability--people most likely can’t come after your home for business reasons--but involve more time and overhead.

Obviously you should consult with your attorney and accountant about the various business structures. With both corporate and LLC structures you can reward long-time instructors with a share of the business.

You’ll have lots to think about as you set yourself up.

Being a Good Boss

Your driving school is you--your personality will reflect how you run things. If you’re looking to expand, you’ll want to set up systems--for everything.

And be open to suggestions from the people who work for you. While you shouldn’t make a change every time someone suggests a great idea--you should build those great ideas in when you can. Employees who feel part of the team will stay loyal to you, especially when you show your loyalty to them.

Nondisclosure and Non-Compete Agreements

You should also have a process or system for hiring people. Part of that process of course means knowing what questions you can’t ask in interviews--in fact, you might want to create a job interview script for each interview, especially once you know you’ll have a big enough business to hire fairly often.

Instructors are key employees for any driving school. You want to value them, trust them, celebrate them. But you don’t want them to turn on you.

Part of that is on you, of course,

Part of it also can be the use of non-disclosure and non-compete agreements. Experts of course disagree on the effectiveness of these agreements, but I think they can be effective in the right circumstances.

A non-compete agreement simply means that your employee will not use the information they get from working for you--client or proprietary--and then become a competitor in your market.

Non-compete agreements seem to be upheld if they meet the four tests:

  • Is it limited in time?
  • Is it limited in geography?
  • Is it limited to running a driving school of your type?
  • Does it protect a business interest which needs protection?

You’ll need to consult a lawyer to get the wording right--courts generally seem to want narrow interpretations of the four tests.

Make sure the time isn’t unreasonable in the driving school business.  1 year probably would be more reasonable than 5 years.

Driving schools are local businesses. Very few students will come from more than 20 miles away in most parts of the country. Using the whole state as the geographic base is probably way too broad. But if you’re looking at a 10-15 mile radius, or even mention specific towns or counties.

Think through what business you’re trying to protect. If you’ve been running a school teaching people to get Commercial Driver’s Licenses only, and an Instructor wants to provide regular driver’s education only, your non-compete probably wouldn’t be upheld. Think through what restrictions you’re putting on the instructor.

It seems like you should make sure you’re trying to protect true business interests, not just trying to prevent someone else from entering the market. Thus, you can probably protect your student contact information, and your business systems--but maybe not your curriculum, especially if your state spells it out in detail.

(I should note--I’m not a lawyer, so you’ll need to discuss all these issues with an attorney to find the best fit for you. I’ve talked with a lot of driving school owners about these issues though, and they do come up).

We sell a template a non-compete agreement with your instructors and other key employees. It was written by an attorney, and should be adaptable for every state.

Non-Disclosure Agreement

The non-disclosure agreement is another possibility. My understanding is that NDAs can be used for any confidential information--including your client lists and any specialized systems you have.

You’ll have to consult with your attorney to get the language right--you don’t want to make your NDA so broad that it won’t stand up. Your attorney will make sure your NDA addresses what seems to be the set of key issues:

  • The confidential information covered
  • Exclusions from that confidential information
  • Obligations of both parties
  • Time periods covered by the NDA

We also offer for sale a attorney-written template for a non-disclosure agreement.

Non-solicitation Agreements

A final agreement which should be part of your employment process is the non-solicitation agreement.

The non-solicitation agreement is simply an agreement that your employee will not solicit business from your customers after they leave your employ--regardless of reason. They can’t take your customer lists or your contact lists. They will have to start at the beginning if they leave to start a new school.

In most places, these agreements seem to be upheld as long as they don’t make it unreasonably difficult for your employee to make a living. You should keep it focused and narrow.

We also have an attorney-prepared non-solicitation agreement template available for purchase.

Systems and Information Management

We’re going to return to systems now--probably the best place you have for preventing your instructors from becoming direct competitors.

If you’re teaching a lot of students, great!  That’s the best way to be. You’ll be happy, and so will your instructors. If you’re in a strong place in your market, they’re less likely to jump ship.

But consider the following:

  • Who has access to your customer list?
  • Who is able to contact customers?
  • Who works with your systems accessing all your information?

Much of your information is mandated by the state--the records you’re required to keep by the State regulations. You’re expected to keep close track of them. Some states require fireproof storage, especially for certificates.

You have every reason to make sure that you’re the only one to know everything for your business. That’s one factor in your favor.

You’ll have to consider whether instructors should be able to contact students or their parents. Most of the time, they might not need to make contact. But traffic congestion sometimes will make an instructor be late--who calls the student? Should that be the instructor or the office?

I’m not saying don’t have the instructor call. I’m simply recommending that you keep communication as tightly controlled as you can.

Wrapping It Up

So a lot of what’s involved in protecting your business from the instructor who jumps ship is simply good business practice.

You have a lot of options for what you want to--and I know if you want to grow, you’ll have to bring new instructors on board. Have a solid hiring process for them.

Regardless, however, making sure your business is set to lessen the likelihood of harm, the more likely it is you won’t have the problem.  Focus on running a solid business, and you’ll be on the growth track for success.

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Josh Meah

Josh Meah

Josh is the CEO of DrivingSchool.Marketing. His goal is to be the marketing and business development partner of driving schools around the world, helping them become thriving businesses while also expanding general awareness for the importance of traffic safety standards and education.

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