Click to Cancel: Navigating the FTC’s New Rule & Staying Compliant

0:01 Hello. Hello my friends. We are live. Sorry that took us an extra minute just to get started. But thank you so much for joining us today. my name is Laura Munkholm and I am the president and one of the founders here at Walla. And today we are joined by Danielle Steed. Thank you so much for being here with us. Thanks for having me. Absolutely. So, we have a lot of people coming in for this today and I have everyone kind of introducing themselves, where they're coming in from in the chat. but for those of you who haven't joined us on one of our Wallow webinars before, this is a little bit different of a platform from Zoom. So, don't be alarmed if you don't see yourself on screen. It's designed that way. we do most of our communicating through the chat and it's possible I'll pop a poll in from time to time. So keep your eyes on the side panel and that's where you are absolutely welcome in this conversation to post your questions especially as we're going through some of the legal tales because that's why we brought in the expert today. so today we are going to be talking about the navigation of the FTC's new click to cancel rule. we know this is something that's top of mind for many of you. It was unexpected for many of us in boutique fitness. I know we have our partners in the gym space who have been rallying and kind of fighting and doing work behind the

1:32 scenes on Capitol Hill to at best mitigate the impacts on studios and gyms. but I think those of us in the boutique fitness world aren't necessarily in the day-to-day you know political drama behind the scenes. So when this was passed last year and a relatively short implementation timeline, I think we all wanted to make sure we got ahead of it. And our goal today is really dive into the actual law so everybody can understand how it impacts our studios. we will definitely go through how Walla is approaching and addressing this. Many of you who are on Wallet have already seen version one, kind of our first roll out of our click to cancel essentially compliance. and we'll be also talking about kind of our version two that will be live before April 1st. So Danielle, I'm going to turn it over to you. I'd love for you to introduce yourself, your background, and why we should be listening to you today.

2:40 Go ahead, please. Okay. Okay. Hey, I never get this chance. I have a toddler at home, so I'm always No, I'm always wrong. So, I'm really excited to be right today. Yes. Awesome. so, hi everyone. My name is Danielle. I'm a Los Angeles based attorney. you know, I know attorneys are people always kind of have this like, oh my gosh, she's an attorney, but I always say like, I'm not your dad's attorney. I'm a coal attorney. I do have a background working corporate big law. So, I did the suits hustle. Like, I worked in the highrises in Los Angeles for many years. I burned out, but I in the process got to work for some of the largest venture capital and Fortune 500s on the business side of businesses, which is really cool. So, like really getting to understand businesses strategically and legally. I left I did what you do when you're unemployed, you don't know what you're doing with your life, and I spent a lot of time at the gym. I went back to my athlete roots. I was a collegiate athlete. I played division one water polo at Santa Barbara. We were national champions.

3:35 Bragging about myself a little bit. We're fellow debunk athletes. We've we've got that hustle behind us. Exactly. It's why we It's why we get along. and I spent a lot of time in gyms when I was not working trying to figure out what I wanted to do and who I wanted to be. this is about 2015 16. I like to call that the golden age of boutique fitness. And I live in Los Angeles. And it's just it's a really cool town to see what boutique fitness is. It was the time that SoulCycle, Next Health, they were all getting huge injections of private equity. And they were scaling and building in ways that we had never seen the fitness industry do before. And I had this moment where I was like, I did this. I did this on the corporate side. I was the law firms that were putting together these deals. And I'm watching these small businesses pop up every single day. How can I help them? And so I actually got my very first job consulting and advising a small studio because I was like, hey, you know, your contracts aren't compliant. I can make them compliant, but you also have to hire me as an instructor. And that was honestly how I broke into fitness. And I've loved it.

4:38 And so I for a long time balanced being an attorney and a consultant for boutique fitness owners and also teaching and I've taught everything from strength to mega farmer to running and rowing and all that really fun stuff. And then when the pandemic hit, I went all in on just working with business owners strategically. I am an investor in a handful of gyms here in Los Angeles. So, I understand how that works on the back end. I have the legal side of it. I feel like it's a really strong skill set to bring in to serving fitness business owners. And so, now my firm, we work legally and strategically with fitness and wellness brands. So, what we're really trying to do is to give you the soul cycle. We're trying to give you the model that the private equities come in with a lot of money and the plan and then make them really successful. So that's what we like to do, but we like to do it on your scale. We like to meet you where you are. And we like to be the person that you can really talk to and trust because I feel like as a woman sometimes people are like, "Oh, honey, we got this." And I'm like, "Sir, I got this." And I think you need that ally in your corner in business. And so I love being able to do that. I'm so thrilled to that when Laura reached out, I was like, "Yes, let's hang out and talk and geek out over all things law." So that's why we're here.

5:51 Amazing. Well, I thought I would take a step back just before this because I had the immense pleasure of being a part of a conference last month in New York. about a hundred leaders from the fitness and wellness industry came together for NASDAQ Wellness Week and this was one of the topics that was discussed and it was interesting to hear those people who had been kind of behind the scenes on Capitol Hill discuss the why behind this. And Danielle, you and I chatted about this a little bit, but from a political standpoint, it's tremendously popular for politicians, people in leadership powers to fight for the consumer, right? Like any time they can say, "Look what we did for you to make to save you money, to make your life easier, to kind of push aside anything that looks like corporate greed." which is laughable for those of us in small to medium-sized businesses that this is corporate greed.

6:50 But you know consumer protection laws are becoming more and more popular whether it's around fees or in this case making it incredibly easy for consumers to cancel any kind of me recurring membership. And I want to frame this conversation and you know let you dive into FTC first, but this is not just an FTC thing, although we're going to be focusing on this. But I do want to highlight that we have all kinds of state laws that as a software company we have to watch. And when we're thinking about compliance, we're trying to make things as broadly compliant and acceptable as possible. So we were not looking at this through the lens of only FTC. We are also looking at some of the state laws that are becoming more and more common alongside FTC. And while they're not identical or they have kind of different intentions behind them, they have similar implications when it comes to consumers I guess consumers rights. So, I'd love for you to start by discussing FTC first and what the legality looks like and as business owners, are there things that we're not thinking about when we look just kind of first glance at the law?

8:18 Yeah. So, I want to preface this to everyone listening like I am not going to put you to sleep with like the boring law stuff. I'm going to give you really highlevel highlights and then I'm going to ask if you're here presently ask for the details. Ask the what about this? What about me? Because that's also the point of this live discussion. And so I'm going to try to keep it at high level and applicable to everybody. But I want you guys to make this for you. Okay. So everyone deal. Cool. Thank you for saying that. Ask away. Yeah. Yeah. So the way I look at this, it's really funny is I was I was thinking about how to frame this discussion and we call it the FTC click to cancel when really the cancellation is part two of a three-part structure that this larger law is. And so I want you to think of this as memberships as a whole because what this law has is three parts. The first part is the sales and contracting part of a membership. The second part is the click to cancel. Pretty straightforward. And then the third part is how you save them and keep that money and you keep those people in your community. So that's going to be our broad structure. So let's talk about sales. I know we all have sales processes. I know we have people maybe you have people whose KPIs and salaries are tied to this. So let's talk about how we can do it. The very first thing that this we're still going

9:34 to call it a click to cancel rule really talks about is they call it a negative option. I don't know why they picked that word but we're going to call it a free trial. That's what it is in our businesses. So, we have maybe if you're an online or on demand platform or maybe you have an intro offer that turns into a membership, you have something that captures people into your business at a discounted rate at an appealing way for them to get a little sample of what you do. And some of you have it set that if you buy, for example, some sort of intro offer or trial into your business, it automatically rolls into a subscription. So, that's really step one of what this law is saying. And what this law is saying is that we have to be explicit how people are contracting into a membership. So if they are coming to us and they're starting with a free trial, we have to say, "Hey, at the end of this trial or at the end of your 5day intro offer, you are going to get build on day six." And we have to be that explicit in our language. So super duper important how people actually start that auto bill, that recurring transaction that they're agreeing to. Second part of the sales and contracting that's really important, fam, is you need a contract and you need to have a membership agreement or a client agreement or terms of service, however you want to call it, that is explicit to what they are signing up for. Now, we can do it so

10:48 that it doesn't have to be personal to every single client that's signing up. We can have a general form for you to use, but it actually has to say, I'm agreeing to enter into an auto billing relationship with you. I understand I'm going to get build on X day every single month. I understand that these are my rights to cancel. these are my rights to terminate. This is my right to jump out of this. And you have to be explicit about it in both the contract. And then you also have to give your members ability to read the contract when they're signing. So I'm going to pause here because what Walla does really well for you guys and I'm just going to plug how much I love the software is that when your members are signing up and they're putting in their information, there is a line and there's a box we check that says, "I agree to these membership terms." This is what Wallet does really well. I agree to this liability waiver. You need them to positively check this box. You need them to have the ability to read that membership agreement. So maybe you link it if you click on it. You all know what I'm talking about. And that way people can actually say, "I had the opportunity to read it. I maybe or maybe didn't read it because I don't like to read, but I did agree to the terms." So, how you actually get somebody to that point where they hit subscribe, join, whatever it is, and they hand over that credit

11:58 card, that transaction is actually the most important part of this rule because it's capturing their information and that capture is being dictated by all of these rules. So, it's funny because we call it click to cancel. A large part of this text is actually bringing them into the membership. So, I'll stop there. See if anyone has any questions about just this or Laura has questions and then we'll keep going on to like the cancelling part. So, I think the two questions that have been asked so far, I'm going to wait on because I have a feeling you're going to answer them in some of the further communication when we start asking about click to cancel. But one thing I just want to be sure everybody understands is when you are building your plans in Walla, be sure that you have your language explicitly put into the anything recurring. Any of your memberships that you have built in Walla, please, please, please be sure you have your contracts attached. I have definitely seen people who just leave that blank. So, it's, you know, I know there's a lot when you migrate systems or there's a lot when you're starting a new company, this is probably one of the most important things you can do as a business to protect yourself.

13:10 And just to add one last point to that, Laura, is that if you don't have someone actually agree to that contract, they're not bound by it. So, sometimes some of you guys love to test my patients and just email your client list and say, "Hey guys, these are the rules. See you in the studio." That doesn't count. I love you all. Please stop giving me heart attacks. So, when you say and I say like, "Let me see your contract." And you're like, "I'm gonna forward you this email." It doesn't count. We need you to go into Wallet. We need you to bring it over and then your client needs to check the box. Pretty that's like the most straightforward thing that I'm also seeing is missing there. So, okay. So, let's talk question before we go to that. So, Katherine, you I'm not sure if you're asking if FTC is for autob bill plans or if for all of what we're talking about today is autob bill plans. Danielle is going to go into it.

14:00 FTC is specifically speaking to recurring plans as I understand it. So, you can you can chat to that, but there are other state laws that are that speak to all plans. So, there's going to be a difference there, but Okay. Go ahead, Danielle. Sorry. Oh, no. This I Katherine, thank you for asking that because I think I should have prefaced it with this. Who this applies to is the most important and which of your plans this applies to is the most important. So, for example, the FTC law applies to any sort of auto bill recurring transaction. So, I agree to anything. And so, even though we're talking about this in the fitness space, this applies to the Amazon subscriptions for my vitamins that I get every month. This applies to my Verizon wireless cell phone bill every month. This applies to anything product or service that gets automatically build every single month. Now, some of you have multiple options in your business where it is like a monthly unlimited. Great. Some of you have an eight pack that bills every single month. Great. Some of you just have an eight pack that then expires does not apply. So, I just want you to think that if your Stripe Square, whatever financial transaction software you use bills every single month on the 23rd, whatever that date is, that is specifically what we're talking to and talking about.

15:14 So, okay, one quick question here. somebody's asking, "How do we find our state laws and how they're different from FTC? Where do you go? Where's the best resource? Do you have any ideas or advice there?" Yeah. So, first of all, FTC is federal. Federal law trumps state. Pretty straightforward in the country the way our rules are set up. So, what's going to happen is you're going to have federal laws coming from FTC. Then you're going to have state specific compliance that is usually an extra layer. Now your state compliance is going to relate to and I'll go through it as we keep talking. But the biggest thing to do if you don't want to, for example, talk to an attorney like myself that is pretty familiar with like the 10 big states that have the specific laws, Google it. Google California fitness studio contract laws. Like it'll come up. And there is there's been a couple websites I've come across that have compiled the state laws. I have not personally found a resource that I'm like this is the place to go. Laura, maybe that's our flag and sign that we need to work on that and we can definitely talk about that offline. But what I would say is if you don't know your state specific laws respectfully, you need to. So whether you reach out to me and we figure that out for you or you Google that, we got to get that for you. So, I would say that's the number one

16:35 thing to know. However, everything we're talking about today is going to apply to everyone. And then your individual states are going to be, like I said, extra requirements to layer on. Yep. Okay. Yeah. And then Sheila, since we're talking about contracts, let's talk about your client asking for a contract. So, there's a couple ways to set this up operationally. I'm sure Laura, you have some ways to do it. So, why don't I let you chime in? I was going to say, let me share my screen really quickly. your clients always have access to their own contracts. Period. It's something that we do because we want to make sure you don't have to get logged down in those requests. So, let me just show you quickly. When a client is in their account on our widget, so up at the top when they're logged in, it'll say manage account. If they go to their credits and plans, this is obviously where they're going to be clicked to cancel. currently, we are adding it to the app very soon. but you can always view your contract right here. I don't have this is a demo site, so I don't have my a big contract in here right now, but this is where the contract language will be. that is always there also within the client profile.

17:48 So, if I go to my client profile and I go to the profile tab, down at the bottom, you will always have the contract that they've agreed to, when it was uploaded, time and date, and then you can view that contract, and you can always print a PDF from there. So, if they're standing in front of you, they don't want to have to deal with doing it themselves, you can do that here. Okay, I love that. The other thing I recommend if it is within any of your capacities is some of you guys are using and this is legal. Some of us we create what's called the terms of service. And so it really governs how people are members but also interacting with your online platform. Some of you have also an on demand. So we put everything in one contract. And it maybe lives in a footer or in a hidden page on your website. And so what I do like to recommend for my clients is that when somebody signs up, I know you guys send post-purchase emails. I know you guys have the ability to send marketing emails. Say, "Hey, Laura, thank you so much for joining our family today.

18:49 As an FYI, this is your membership agreement that you signed. Please let us know if you have any questions." And you link it. And that way there is no confusion of I didn't get a chance to sign it because you did and we're telling you did. And then also, there's no chance for you to say, "I didn't have an opportunity to read it or I can't because you are." And even that extra step, guys, I am I am all about like let's make the law work for you, but I'm also all about transparency and communication. And when you give your clients that extra sentence like, "Thank you so much and also here's a copy." Like, I feel so much I'm like, "Oh, they have their stuff together. Oh, okay. They're good." Right. And so, I think that's something to think about as well. and your post-purchase sequence that your marketing people can help you with. Y. Okay. Cool. Well, let's dive into the details of FTC then.

19:31 Okay. Awesome. And so, let's keep moving on to the cancellation part. So, the contracting, I'm sure we have more questions. And guys, there's also going to be an opportunity for us to work together if you have specific questions, but we're going to try to get to everybody. okay. So, now you have a member and for whatever reason they want to cancel. Here is the very, very black and white basics of it. You have to let people out of the contract in the same amount of effort and steps that they entered into it. What does that even mean? It means it needs to be as easy for them to hit cancel as it was for them to sign their life away like I did when I joined this club I go to. Right? So, you have to, for example, either let them do it in their account online or here's the caveat, they can call your business, but if you call and say, "Hi, Laura. I like to cancel my membership." It's canled. Laura can't sit here and hold me for 30 minutes and tell me she's going to call me back or anything. She has to say, "Thank you so much for letting us know." We will cancel it. I'm going to talk about saves in a second, guys. So, hang on here. But I just want to walk through the scenarios of cancelling first. Online cancellation, on the phone cancellation, inerson cancellation. However, you have to give people the option to cancel the same way they signed up. So, if for example, they have the ability to sign

20:43 up online, you have to have to have to have it built into their online accounts that they can cancel. If you give people the ability to cancel in person, you have to have a front desk or an authorized member of your team staffed at all times. If you give people the option to cancel by phone, somebody has to be manning the phone every day, and that phone call counts as their notice to you. You cannot say I didn't get it and then wait a few days and then build them. So here's the last part of this caveat about cancelling. You cannot anymore require 30 days notice. You cannot anymore require 15. You cannot require because they cancel. That is their notice. They're still going to be build and have access through the end of their membership. However, the date that they cancel is the date that they are done. And so long it is before their next billing period, they are out. That's a huge change for us. I know.

21:35 Okay. That is so the 30-day notice or whatever it is. So, if you require in your contract, if you say we require 30 days notice, are you saying that's not legal anymore? Correct. Correct. Okay. So, what's the most important is billing dates because technically the billing date is the financial transaction is what we care about the most. And so, let's just say I am on a first of the month transaction. If I call you today, Laura, and say, "Today's February 21st. I know my contract says 30 days, but FTC says now I can just call and cancel. I'd like to cancel before my March 1 billing." You have to accept that. You can, like I said, do save tactics. There's other things to do. But you can no longer say, "Oh, you needed to give us a 30-day notice." Because now, I can't do it online to instantly cancel. I have to call you. I've now made this harder than it was to pay for, and I have to wait 30 days, and I get hit for that extra billing cycle. So that is where they are saying can't do it.

22:32 Interesting. Yeah. And it does seem like the law is pretty clear on you cannot try to save them once they if they signed up clicked to cancel or I'm sorry they signed up online clicked a button bought they have to be able to cancel without you stepping in and saying hey wait we'd love to downell you into X Y or Z. So from our perspective, the research we've done is that now you're part of the reason essentially we have set it up in the first place to say all they have to do is click that cancel button online. They don't have to do anything else. It's now on the studio to enforce any kind of early termination policy. So if they if they signed a contract that was 12 months for example and said yes I am buying a monthly unlimited membership for 12 months they are bound to that 12 months. but you so you can say okay great your contract will be done after those 12 months. We will not bill you again after your contract is over. But you can't step in and say oh wait but what about our eight times a month after that 12 months is up. Would you like to try that one instead? Correct.

23:43 So yes and no. So what they flat out said in the final ruling was that you can save but you cannot make it unreasonable in how you're offering to save the membership. So there is this huge gray area right now about pauses and tier adjustments. And they promised us they would let us know and they haven't still. And so where I stand on this and I see the comments, guys, and I'm just I'm going to say this as like mama Danielle, so please just take this with all the love. If your clients are going to cancel, don't fight over what day they called or didn't call. If your clients are going to cancel, figure out in a very simple conversation, what was it about this that you can't make it work and can we make it work? And if in and in that two minutes, if that's not the answer, then that's okay. But what it really comes down to is everyone's technically supposed to make it easy and a click.

24:38 They're giving us the opportunity to do phone calls and in person. Let's not mess that up for everybody. Let's not take that extra that we've been given and say, "But my sales people, if they have the ability to click online, you cannot force them to go in. If you have the ability to go cancel online, you cannot force them to call you to try to save it. They have to say, go online and click this." If you would like to talk to us about adjusting your membership, we would be more than happy to. Yes. Call them the day after and say, "Laura, I saw you canceled your membership. We're really, really sorry to see you go. We'd love to talk to you about a pause, a freeze, a tear adjustment, anything to keep you within our family and community. What would that look like for you?" And if they don't reply, they don't reply. And if they don't call you back, they don't call you back. But what we don't want to do is start nitpicking people over this is when you canled versus not, or this is when I got your message, or nobody was at the front desk because you they were in the back. Like, we can't do that. Like that at that point. like we're all going straight to jail. So my biggest thing that to answer your question, Laura, is we are allowed to save in a reasonable way.

25:36 Reasonable is such a fun word because gosh, like interpretation. It's very broad. It's very gray. Right? So we're still waiting for some exact guidance. There is no like you have five minutes to talk to them guideline. You have two weeks before you can talk to them guideline. Right? So what we can do is in my opinion and my and I'm sure your expert opinions also is we can have a quick and reasonable how can we save this? Is there anything we can do? Think about it and get back to it. We can say that to people and I think that is really all we have right now. That said, I'm going to also like really add on to this. I know you have their email addresses. Don't spam them. Don't email them every day. Don't send them like sales emails non-stop. Don't put don't turn your like sales people on to them instantly. And I'm getting these questions not just from you guys. I'm getting them from like the big bigs. I'm getting them from individual consultants. Like how would you want to be treated in this moment is how you should be treating your clients, not how do I save this one membership for revenue purposes.

26:36 Got it. Yeah. I mean, I will say from a bigger picture, I think this, you know, it's asking us all to be better business owners and accountable for our products. There are always going to be people who don't love what we do and that's fine. You know, I it's definitely not ideal because a lot of people wax and wayne with their commitment to whatever wellness practice they are in. but I will say here because somebody's asking right now what happens if they cancel after hours. I would love to hear your thoughts on that and just get you know are there ways we can say sorry this was timestamped at x time we didn't receive until whenever or what is your guidance there? Yeah. So the one caveat here is that you cannot require that the cancellation must be done live and in person with no other opport opportunity to cancel online. So, if somebody calls late or somebody goes in and the club is closed, they have to still have the ability to go in online and cancel it. And that's a really important caveat here because I know everyone's going to say, "Well, everyone has to cancel in person still."

27:50 You cannot require that. We cannot require in person live representatives, chat bots, anything. You either have to have an online option and or just an online option. And so, we're again, we're given those opportunities to call, we're given those opportunities to come in person. but that doesn't Exactly. Exactly. but also Oh, go ahead. Oh, I was going to say, however, Joanne, to answer your question, if they forgot to cancel and then they got build, they forgot to cancel and they got build. You don't owe anybody a refund. You can be a nice person and you can prorrate it. You can have that discussion with them. But if my membership renewed yesterday and I forgot to cancel it, I'm in it for another month. and I can be grumpy about it or I can do something about it and we can all turn lemons to lemon. You are under no obligation to give them a refund. How you choose that is obviously a very larger karmic discussion. I feel you.

28:44 I get that all the time. Yeah. so I want to just take a step out and talk about the back end of Walla for a minute because I know I think everybody's like, "Oh gosh, what if this happens after hours currently?" And to your point, whoever brought that question up, nobody's there looking at Walla or getting that email at midnight if they're about to bill at 3:00 in the morning the next day, right? before compliance date, FTC compliance date is live and I'll let you speak to that. I It was April 1st. I think it's been pushed back to 14th. Yeah. So May 14th or is it April 14th? April 14th. Yeah. So before that date we are going to have two different options in the software for you. You can continue with the way it is right now where you are notified that someone has canled or essentially requested to cancel. In their mind they've canceled. They don't have to do anything else. it's on the studio now to either implement the early cancel fee that you have in your contract or if there is anything that you are you know they're bound to you can communicate and say yes you are you know you have a month left on your contract as soon as that you will not be build again after that. but you're going to be adding another option before April 14th that is a flatout cancel. You don't have to do anything on the studio side. it will give them the option to cancel immediately. And if there is an

30:12 early termination fee, there's an early termination fee that's charged. If not, then great, they cancel. It's done. You don't have to do anything. You just see them pop up in your cancellation report as canled. Now, the reason we are keeping both options is because of the state laws that some of you will deal off deal with that require different things than FTC does. And so that second option that just cancels may conflict with some of the or I'm sorry, yeah, it may conflict with some of the state laws. So we are letting you make that decision for your business and the first version that's out there right now is really it is absolutely compliant for the studio because you the client doesn't have to do anything else. It's on you. But for those strange incidents or whatever where somebody cancels at midnight, you're not going to see it till 3:00 a.m. You might feel more confident with the one that actually does cancel the plan. So, I'll pause there for a minute.

31:18 I want to I want to go into this because the I think this is something that's caused a lot of confusion. I know you said the 30-day notice is not going to be allowed, but what about a lot of studios have month-to-month billing, but a 12-month contract, a four-month contract, a huge discount to say, I'm signing my life away for two years with you. talk us through that. Yeah. So, really simply, contract law trumps here. So contract law says if I enter into a 12month contract that is going to bill me in 12 segments it's still a 12-month contract. So if I want to cancel at month three I actually have already agreed to all 12 months. Yeah. So very simply if you are on a monthtomonth they can cancel at the end of the month. If you're on an initial three-month term and they want to cancel they have to pay out that three-month initial term. I know that's very popular right now too. If you're on a annual, you are on an annual and you are stuck to those 12 months.

32:24 Okay. In practice, what do we do? We give people an out fee. In practice, I have seen and I have worked contracts where clients say, "Listen, you're going to get a great deal by signing up Black Friday deals. You're going to buy a 12-month contract right now. If you want out, you have to pay us back the difference of the month, the discount we gave you." And for some people, they're like, "Got it." And other people, they're like, "Nope." And they trudge it out. But if you sell a 12-month contract, April, they are in it to win it for 12 months. And then here's the other really fun part, guys, is that you all probably are part of various vendors, softwares, who this applies to as well. I use Canva in my business, as a lot of us do as small business owners. Canva bills annually. I did not even get an email from Canva telling me that they were going to be billing me annually. That is technically okay.

33:19 Business practice-wise, that didn't feel great when I was just like, "Huh, what?" And my ops person was like, "What is this charge?" But I'm on a 12month annual billing and on month 13, I got bills. So, for those of you who do have clients on that, I would strongly recommend that your sales or operations person keeps an eye on it because what we don't want, and this is where we want to be good business owners, is we don't want people to be surprised that their billing date is coming up again or their I should say their contract date, excuse me, is coming up again and now they're stuck in another 12-month contract. And so, FTC did us a huge solid by saying that we actually don't have to give them that heads up. But I think as people, we want to be better than that and we want to actually give our members that heads up. So, April, when that client is at month 11, just a friendly reminder, hey, you're going to end up at the end of this getting charged again for another annual. We'd love to have you here. And then, you know, put all your magic words in there from there.

34:18 Awesome. so a couple other questions came in. Stephanie to answer your question. So if they hit cancel it will automatically cancel the plan. Yes that is the second version of clicked cancel that we will have released you know before early April. So you will have both options in Walla and we'll be doing we'll be announcing giving you lots of content on what each one does, the details behind it and then you make your choice as a business owner which one you would prefer to use. and if you didn't see already, there are settings plan by plan to allow people to cancel online or not. So within Walla's plans, so we allow you to do it for all plans because of some of the state regulations like there are cool off periods which we can discuss in just a moment. But you can now enable this plan on a plan by plan basis in Walla. So when you go into edit any plan that is an option and that's where you'll be able to decide between the two when once we launch version 2.0.

35:33 All right. So, let's see if there are any other questions that I want to make sure we get to. anything you see that we haven't covered yet? Yes, wallet does notify clients on their upcoming billing. That's I mean, you can turn that on or turn it off. It's one of our automated transactional emails that we default to on. So, if you've never touched it, we are notifying people that their next billing cycle is happening. One of the topics we haven't hit on that's also really big in this law is called cooling off periods. So I thought it would be like a real quick hit just to go through what that even means. because they came up with all of these weird terms guys that I was like what is that? What are you even talking about? so a cooling off period and this is state specific which is also why as just as a plug as a transactional attorney it's really important to have a contract that's actually made for your business because most states actually have cooling off period requirements for contracts and they also have legal verbiage that you need to have in your membership contracts. Now people always kind of roll their eyes and they're just like that's great but like nobody cares who's going to check this. If you then have somebody from the local government that gets your contract, it is like a $10 to $15,000 fine per contract to not have it in. And FTC said that it is a

36:52 $51,000 violation to violate these click to cancel rules that are coming down. And like they like to do, they always like to make an example of people at the very beginning to be like, "We're serious. Follow this." And I would hate I would hate for somebody like we pay taxes and that sucks, guys. I don't want you to have to pay a fine over something so simple as let's make sure the language is correct in your contracts. So the cooling off period to bring this full circle. The cooling off period is going to be state specific language that refers to it's usually a 3 to 10 day period that the customers have the members have after enrolling in a membership that allows them an out. So, if they decided they, you know, they call it cooling off because it's like you go in the club, you get all excited, then you go home and you're just like, "Wait, I should not have done that." Or, "You're right.

37:39 We can't afford that." Or whatever that may be. So, if somebody does, and this is the bummer, and I hate to be the person to say this, somebody does sign up for a 12month contract and then they go home and they're like, "Well, shoot, that was not for me." If they do it within their state required 3 to 10 days and they give you proper notice, they are allowed out of that contract. Now, a lot of the more consumer friendly states are going to have three. A lot of the more consumer okay states are going to have 5 to 10. I'm going to tell you half of your states have this. I guarantee you guys look at your membership contracts. It's not there. The other thing that's not there, because I love you and I do this all day, is your state required fitness language. If you run a fitness studio, you guys are also required to let people out of their contracts, even if they are in a 12 month contract, if they move more than 25 miles away from your club.

38:30 So, like, let's say their spouse gets a new job and they have to relocate, they're injured, so much so that they aren't going to be able to be at your club for 3 to 6 months depending on the state. And obviously, if they were to pass away, you would let their estate out of the membership. I can't believe I'm saying that, but it's just it happens. so every state has different requirements about that and what the FTC is really hammering down on is that we have to call those out because this is a very consumerfriendly law and we have to give people the ability to exit if true circumstances exist that they should be able to exit. Yeah, I know we laugh about that, but there are like politicians love to call out those like horror stories of somebody's family being charged thousands of dollars after that person died by their gym. and so it's of course they love to find the outliers and make that the headline, but that's why things like this exist. And so if you haven't updated or looked at your contracts in a long time, it absolutely is helpful to spend some time either like she said, you know, digging into your state laws, doing some research on that on your own or hiring somebody to help you do that. so I actually sorry to double click on this, but I if you mentioned earlier contract law trumps this, you know, art trumps something. I'm not an attorney.

40:01 So, if you had in your contract that it's a month-to-month membership, but it requires 30 days notice, that still is not allowed anymore with CTC. No. So, unfortunately, I always tell people we can write anything into a contract, but we can't write anything that is like actually conflicting. So, here, like why I said contract law applies is because they're agreeing to a 12-month contract. they are not necessarily agreeing to the out terms of the contract. And what FTC says is you can enter into any contract you want, but in a this really controls how people get in and out of the contract, not the actual contract length. So that's where this nuance is that yes, we can write a lot of things into our membership agreements and we can ask our clients of a lot of requirements with freezes and early terminations and all of that good stuff, but we cannot then hold people into a recurring transaction just because the time frame. Okay, that makes a lot more sense. That clicks with, you know, why it's different. and honestly you guys that's why when you're building your plans any con any autorenewing plans in Walla we have that termination fee section where and we don't lock like when somebody actually cancels and you go to like execute the cancellation in Walla you can adjust that early termination fee. So, Katherine is actually asking you know, can you can you adjust that? Essentially, there's no

41:32 auto adjustment, Katherine, for the am length of time you have left, but you can adjust it when you get there. So, if nor if you say it's a $500 cancellation or early termination fee or whatever the number is, you can give that language in the contract that it's going to be equal to x months. And then you can look at how much they have left and enter that in. Daniel's asking, "Do you have to prorrate the day of termination or can you make it something like one whole month even if they cancel on day three of a new month?" I'm not sure. So, with your cooling off period, Daniel, so this is I believe that's what we're talking about is your cooling off period. If you have three days that people are allowed to exit out of that contract, they still pay for the three days that they're in the contract or five or however many they're entitled to under your state law. So you only have to refund them the other days. And if they cancel at noon, it's not a half a day, it's just a whole day. So just say there's 30 28 whatever how many days in the month that's the day it counts. So day one, day two, day three, they still come to you. You still charge them for those three days and then they get the refund for the rest of it.

42:49 Oh, that's a really good question. I think that's what you're asking. Yeah, that's a really good clarification. So, when you go to refund, if somebody purchased something, when you go to refund, just don't refund the entire thing. You can do the math and prorate like refund the prrated amount. Okay. if we have 30-day written notice in our current contract, are we now required to take that out and send new contracts to all of our members for their signature? So, this is fun. So what I've been working on with a lot of our clients and it's funny actually I'm going to finish a set of clients after this who's on Walla is what we're doing and Laura I would love your support in explaining this structurally and how like infrastructure- wise is we are updating her contracts in general because this was a really good opportunity for us to say she's in California, you're not California compliant. We're going to add in some nice freezes for members. we're gonna just up our studio terms. Like, we're making it just a better, more protective and personalized contract to her business. And then we're also changing the membership things. So, what we're doing is we are actually sending out an email because we are all about transparency. And we're saying sending out an email to our clients. We're saying, "Hey, we've updated our membership terms as part of our glow up of our business. Choose the words that

44:06 feel right to you guys." And these are three things that we really want you to be aware of. And because we're updating it and we're really like making sure everything's clear, we're gonna ask that everyone resigns this next time you're in your account. And so what she is do doing is that she's gonna send an email and we are going to have like three four main bullet points of what's new and then the click to cancel is going to be one of them. And we're going to say you now have the ability to cancel your membership in your account. And that's all we're saying. We're not giving people details. We're giving them like five words. You can now cancel in your account. Cool. That's all they really need to know. and what her members are and what she has set up in wall and Laura I'd love for you to talk about this is that next time they go to book a class or when they come into the studio they are just being asked to resign so could you talk more about that for us yeah so as part of this roll out we are giving a little bit more kind of broad way to do that I am going to follow up with this and give you guys kind of a step by step once I've got some visuals for you but currently, yeah, it's it's essentially selling them a new either selling them a new plan with an updated contract. or emailing it out to everybody as part of everybody who's on this membership.

45:21 We're updating our policies and C or I'm sorry, our contracts. happy to review this with you in the studio, but I'll give you guys a clear answer on that once I have some visuals of kind of the new process. Okay. Is there any law about changing plans? Like someone changed from unlimited to four class. Are we able to require a certain notice to change plans? Oh, that's an interesting question. Yeah, you're right. People do change plans all the time. Is changing the same thing as cancelling? So if I Stephanie am on an unlimited right now and then I decide I want to I'm not using it so I just want to drop down to like four times a month. I would say that the billing date of the unlimited is still what trumps the change. You can decide individually but you don't have to let them change their billing mid cycle. I think the real thing we want to think about is the billing cycle is kind of what's dictating and then we can make those exceptions for clients. But if let's just use big numbers here just to play around. Let's say I'm paying $500 a month unlimited and halfway through I decide I'm never coming. I just want to drop this down to a fourpack and it's only $100. You don't owe them a refund midmon. You don't owe them a prorate in anything. You can say, "We hear you.

46:41 We'll switch it over the next month." Now, you might want to do that for them so that like they feel good and they're happy and they come back. You are not legally obligated to. Okay, that's helpful to know. Okay, awesome. Natalie, I'm gonna like our product team is going to be releasing a ton of content on the kind of 2.0 version. So, you'll be receiving all of that. I'm not going to go into tons and tons of detail because I don't have visuals to show you guys right now on what the process is going to look like. But, please everybody keep an eye on the product portal in Walla because that's where we will be announcing all of that. If you are not already on our newsletters and release emails, I would highly encourage you just pop into the support bubble and say, "Hey, I want to make sure I'm on this list." You can do that. Or if you have somebody you want to add to our release list, you can you can request that as well. So, couple other questions, Danielle, from your experience. When a studio sends out new contracts to all current members, does the studio usually see a larger than usual uptick in cancellations? Great question.

47:54 No. Like this is like when you guys raise your rates and you're so scared that everyone's going to leave you cuz like I feel that way too. Trust me. No. Like if I'm being very honest with you and I shouldn't say this like most people don't care. Most people are like great or they're like oh I clicked to cancel whatever. Like I'm already thinking 17 other things about daycare and work and gym and like I'm like, "Oh, I need to sign a new contract." Boop. I trust you. And I think that's also I keep going back to like how do we want to show up for our clients as business owners. I think when we're transparent, we're like, "Hey guys, we invested in like protecting our studio. Hey, we're making sure all the policies are really clear for you." People love that. I love it when studios I go to are like, "This is our new late council policy." I'm like, "Thank you for telling me. Sign my life away." And I know that I'm an attorney and I'm weird and so maybe I'm not the norm, but what I will tell you, Kathleen, is that I have not had a single client come back to me with like a fist being like, I lost all of these clients. Quite the opposite. People are like, "Oh, we're really happy that you have clear rules now."

48:51 Mhm. You know, like I think most of us, especially with boutique fitness, like classes are full. We want to make sure we can get in. We want to make sure the people that want to be there want to be there. Like most members are just happy for you when you make those steps. Yeah. Yeah. Absolutely. I think you know big takeaways here for me and hopefully for all of you are you know this is this is an invitation to get a little bit more clear in our businesses about our you know protection and making sure that we're we're in a good place legally but also our clients want us to be in business and thriving. They love coming to our studio. They you know this is this is really a positive for everybody. couple I think unless anybody else has questions, I'm hoping to just kind of wrap the container around some of the big questions we answered today. first things first, FTC is different than some of the cool off periods and state laws that we have. So, please make sure that you understand and do your research or hire somebody to help you with research on your state laws. But the FTC rule is about recurring plans.

50:05 So, this is anything that is going to be entering you into a contract saying, "Yes, I agree to have my credit card build." the other thing is just be mindful, especially for those of you that have like an intro month or free month or a free week that rolls into whatever it is that rolls into a recurring plan because that is oftentimes, you know, people don't necessarily know or they go through that process quickly and they don't realize what they're doing. So, having that be crystal clear and either a follow-up email of some sort, Danielle's recommendation, having some sort of like, thank you for signing up for this. Here's what you are agreeing to. that's really easy to set up in Walla that you know based on a purchase, you can have a specific email sent out. audiences can be run. You can even have like if you want the personal touch on it, you can even have an audience that your front desk is, you know, sending a quick text message to their to your people who just started saying thank you and perhaps linking them to the terms and conditions like you mentioned Danielle that you have on a hidden page or wherever you want to keep that.

51:15 the other piece is that your contracts are enforceable. So, if it is a 12-month contract, if it's a three-month contract, somebody agreed to that, essentially you can charge a term early termination fee, but they are required to pay through that contract, but you can't require additional notice on top of that to cancel. So, if they are the 30-day notice period, the 90-day notice, whatever it is, that isn't enforceable with this new ruling. did I say that correctly? Yeah, I'm like taking notes here. I've been listening to you talk about this a lot. I'm feeling so also one of the other questions that was important you know if somebody does require or request to cancel or cancel after hours that is still there. You still have to be canceled in order to be compliant with this law. So with again version kind of two of Walla that'll happen automatically if you wanted to. If not that's just on you to have your processes set where you can have that canceled or you will immediately refund them if it the payment goes through before you have a chance to compliance or when does this takes take effect? So, it technically I think in the law it said January 1st, but you have until April 14th to have this ready.

52:44 Yes, that's that's the more clear and accurate question is that we technically should have had this already and you are going to start getting in trouble on April 14th. It's kind of like taxes like when are your taxes due as soon as you can get them done but when you really when are they due is isn't that tax day actually wait but it's the similar concept guys that like the sooner you can get this implemented the better and then after that I really strongly feel just based on what I've heard and what I know like they're going to start finding people just to make an example of it they did it with the non-competes a few years ago like they just like to be like we're serious and you're like great so don't don't be that person you know I don't want that for Yeah. one more clarifying question. If we don't allow people to sign up through email, do we need to allow them to cancel through email?

53:36 Well, you shouldn't Stephanie let people sign up through email. Do you mean like on Walla? I think she's saying like if we don't allow people to say like hey I want to buy a membership as an email then we don't need to allow them to cancel through email. I'm guessing that's your question. So what double negative right now so it sounds weird. So I guess what I'm reading Stephanie and like feel free to drop this in the chat to clarify it for us but some people email having issues signing up so we help them through the email. Okay. So, at that point, Stephanie, what I would also strongly encourage is you're not taking credit cards through email. So, you probably need them to call the studio at some point. And then it's technically if they're having problems signing up online, it's still considered like an online registration. and again, we can't just require people just come into the studio to cancel. We can't require, right, because we can't require a live representative. So, if that is your situation, like if they couldn't sign up online because they're having issues for some reason, they're still able to cancel online, but we can't require that they just email in to cancel or call in to cancel.

54:48 Yeah, I think I think that's a little bit of a nuance. If you're allowing people to book online or to I'm sorry, buy online, that's really what we're talking about here is that they can cancel online as well with clicking a button that says cancel. the last thing I just want to call out as like a absolutely you know important part of this rule is that you can't require that they talk to a person or go through some sort of an offboarding process in order to cancel. There's no requirement that they talk to somebody that in order to execute the cancellation. The cancellation has to be able to happen as easily as they purchased online. So you can, as Danielle said, after somebody cancels, just say, "Hey, you know, we'd love to hear your thoughts. You know, if there's anything we can do to keep you, that would be great." But if they don't respond, they don't respond. The cancellation still goes through. You can't require a response from them to actually execute a cancellation.

55:50 Katrina, we sign most people up right at the studio and our requirement is to email to cancel. if we remove the 30-day requirement, is that okay? But do you allow people to buy online right now? On top of that, I think that's the question. If it's possible to buy online, you have to allow everybody to cancel online, I think. Well, yeah. Yeah. Even if a lot of sales happen in person, I think that's very common in studios. like if it's possible to buy online, you have to make it possible to cancel online without human interference. Yeah. Anything else you want to add in before we wrap up this call? I feel like one of the big parts of this is it's a great opportunity, and I'm sorry to sound so happy, but it's a great opportunity to look at your sales process. It's a great opportunity to see how you're also dealing with loss cancellations. And it's just a chance to fine-tune things. And I know tons of studios who have always only allowed click to cancel and their numbers are amazing. And I have new studios who made this transition in October because they were like, "Well, let's ride." And they've been fine. And so I know it's scary when like change sucks. Like we all don't like it, right? Like and so it feels like oh my gosh, the ground is being pulled a little bit under us. But I really truly believe like take what we've shared with you guys today. we can work together to

57:27 update things and you're gonna see like, oh, this is actually like a really smooth process now and this is actually going to be really okay and you're also not going to lose people like you're just people love you already and so just adapt like we keep doing as small business owners, but like you guys are really this is like a great thing for all of us. Yeah. Awesome. fantastic. One last question we've got. We'll take one minute if this is a quick one. What if someone tries to cancel, but they didn't know they could freeze a membership instead of just cancelling? like they're on vacation or they're sick. are we allowed to say, "Did you know you can freeze before the cancellation is completed?" Yeah, Chelsea, great question. So, we maybe skimmed over this, but we did say you're allowed to offer to pause, freeze, or tier adjust. And it has to be like a one-s sentence offer. So, if someone comes to you and they're just like, "I'm just not coming unlimited number of times." You're like, "Hey, Danielle, how about you just come four times a month? We could do this for you." And that's really all you can say.

58:27 I'll say, "I'll think about it." Or, "Yes, no." And then just say, "Come back to us." Right? Then what you cannot do, Chelsea, is if they do decide to actually cancel, like let's say they cancel, you can try to recapture them in a few weeks or months and say, "Hey, I know like you're thinking about coming four times a month instead or you can sell them packages." You can do that type of thing. but you're absolutely allowed to. And a huge thing also, Chelsea, is make sure your client agreement talks about freezes and what that means. And when memberships like automatically freeze, and Laura also can address this, they'll automatically unfreeze and when clients can accept expect to be building and like all of those good things that we care about, but I know Walla allows you to do that on the back end as well. Correct. And I'm sorry, say that just that last piece one more time.

59:13 The freezing part. If I went into w my wallet as the business owner, I could freeze someone's account and it would automatically unfreeze. Yep. Yep. Yep. Yeah. You can set time frames or, you know, specific dates and it's it's super we actually give you like the copy to send to the client on when their next billing date will be and how many days it's frozen. So, it should be really helpful. Awesome. Okay. Well, we really appreciate everybody joining us today. Danielle, thank you for your wisdom. you know, I think this is going to be an evolving conversation and please everyone use Danielle as a resource. She is fantastic to lean on when it comes to the ever evolving world of legal fitness, you know, regulations. and we're here to facilitate that conversation. We're not lawyers. We have a great person here who is. and the other thing I was just going to mention while I've got you guys on, we actually have a fantastic webinar next week with Eric Tepper from selling wellness about churn and retention and essentially bringing this topic up how you can practically keep people rather than panicking about this law that we actually start at the beginning like Danielle said in our sales process and do the work proactively so that we're not here, you know, dealing with tons of cancellation because we weren't paying attention in the first place to those folks. So, we've got a very

1:00:47 exciting AI project we're launching in Walla around churn and Danielle got to hear a little bit about it, but we're we're very excited to give you guys a sneak peek. Okay, I hope you all have a great rest of your Friday. Thank you so much and we will see you next week. Bye everyone. Bye guys. Thanks for coming.