TRANSCRIPT 🔗
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Wesley Lyon:
Welcome back to another episode of drilling it
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Wesley Lyon:
down we are back after a hiatus of
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Wesley Lyon:
destroying all our equipment messing everything up we
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Wesley Lyon:
do apologize but we've got it all together we're recording now and it's working
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Wesley Lyon:
if you're listening to it so with that my co-host tyler ott is here with me
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Wesley Lyon:
to record an episode on ftc bans on non-compete for at least the 17th time Yeah.
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Tyler Ott:
We're experts now. You know, we could do this podcast in our sleep, I think.
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Wesley Lyon:
Absolutely. So for those of you that don't know, the first day we recorded this
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Wesley Lyon:
podcast would have been like April 27th.
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Wesley Lyon:
That was when, right after the FTC released a final ruling on the banning of non-competes.
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Wesley Lyon:
So there's a lot in there, a lot to unpack. It was about 520 or 570 something
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Wesley Lyon:
pages long, I think, maybe 600 something.
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Wesley Lyon:
It's been a while since I had to read every word of it.
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Wesley Lyon:
But we want to go through and we want to give you the big takeaways,
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Wesley Lyon:
talk about what you need to know and what you need to do, what you need to be aware of.
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Wesley Lyon:
So, Tyra, kick it off here. What are the big three items?
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Tyler Ott:
Yeah, big takeaways once that rule came out from the FTC was we had a lot of
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Tyler Ott:
clients worried about how this would impact practice sales. No worries there.
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Tyler Ott:
Non-competes are still going to be enforceable when related to a practice sale.
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Tyler Ott:
So, when you're selling, your practice value is still protected.
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Tyler Ott:
When you're buying, you don't have to worry about that practice owner setting
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Tyler Ott:
up shop down the street, taking away your value. So that's still protected.
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Tyler Ott:
Second takeaway was this is going to impact associates. So that's going to be
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Tyler Ott:
something to think about.
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Tyler Ott:
Third is hold your horses. Don't tear anything up.
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Tyler Ott:
This is going to go into the courts. There's already been lawsuits filed.
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Tyler Ott:
There's already court cases going on.
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Tyler Ott:
Judges are making rulings. It's going to end up probably going to the Supreme Court, honestly.
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Tyler Ott:
So just, you know, kind of wait and see. There's a lot of things happening right now.
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Wesley Lyon:
Yeah. So first one there, you mentioned practice sales.
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Wesley Lyon:
So this might've been the one people aren't thinking through as much.
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Wesley Lyon:
When you sell your business as a dentist, you sell used dental equipment,
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Wesley Lyon:
which is extremely valuable on the market there. So you're going to get that full million dollars.
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Wesley Lyon:
Probably not. More than likely, most of the value is called up in goodwill and
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the ability of someone to use that goodwill is really why they're buying it.
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So if you have the ability to go across the street and take all the patients
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Wesley Lyon:
the next day, you don't really have anything to sell. So that was an important one.
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Wesley Lyon:
Diving into the details of it, I thought it was going to be a little more problematic than it was.
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Wesley Lyon:
The original rule, I think you had to own 25% or more.
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Wesley Lyon:
I think the final rule, I can't remember off the top of my head if it ended
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up, if bona fide was the word, a bona fide business sale.
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But basically, if you were part of a business sale, and this really stemmed
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from the tech world, because the tech guys were submitting their feedback going,
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Wesley Lyon:
hey, you know, somebody could sell or we could sell, they could get $20 million and they only owned 1%.
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Wesley Lyon:
And, you know, that's just not right.
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We should be able to hold their feet to the fire on a non-compete for $20 million.
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Wesley Lyon:
And, you know, hey, I might do a non-compete for $20 million.
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Wesley Lyon:
You know, you can't blame them. So as long as you're part of a business sale,
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Wesley Lyon:
then you can be subject to it.
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Wesley Lyon:
So we don't really have a ton to go over there, But I bring that up because
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it might come back around on, you know, maybe as we peel back the curtain and
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try to look and say, hey, what could we do to get around this if it goes
Load full transcript
through?
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Wesley Lyon:
So, Tyler, I want you to talk about what's going on with the associate.
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Wesley Lyon:
But before I do that, I want to give everybody, you know, we'll call it,
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we're going to pick up the grass and see which way the wind is blowing.
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Wesley Lyon:
Now, for a lot of you, it might not matter. It's like us playing golf.
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Wesley Lyon:
We're still going to slice it in the woods, but hey, why not look cool and listen
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and pay attention and figure out which way the wind is blowing?
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Wesley Lyon:
But a lot of states are already going against the grain on non-competes.
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Wesley Lyon:
They don't like them. They want people to be able to move jobs.
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And they gave some absurd examples, of course, because it's the media and politics,
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but they were talking about like burger flippers, you know, having non-competes.
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Wesley Lyon:
I don't know that that's actually true, but there is some truth behind this
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Wesley Lyon:
for a lot of people have non-compete agreements that really can't do any damage to their companies.
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Wesley Lyon:
You know, they're at accounting firms, financial firms, things where really
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them going to another accounting firm is not going to matter.
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But they have these non-competes on them, and it's common in every industry.
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We're just accountants, so we talk about accounting.
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But it's common in every industry to see some of this for people that really
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Wesley Lyon:
shouldn't be subject to a non-compete.
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Wesley Lyon:
They aren't going to do any damage you know that there's just no way that this
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Wesley Lyon:
is going to have a negative impact other than you lost an employee but the employers
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Wesley Lyon:
like to put the non-competes on there to scare them and it costs a lot of money
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Wesley Lyon:
to fight this in court and you know they might,
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send one person or fight one person just to scare off all the others.
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Wesley Lyon:
And that's what they can be after sometimes. And that's what they're after getting
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rid of is, hey, we want people to have their free will.
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Wesley Lyon:
It didn't originally start with necessarily dentists, but here we are,
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Wesley Lyon:
and it's pretty cut and dry in there that this applies to dentists.
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Tyler Ott:
Exactly. Exactly. And I think that example applied to one of your buddies you
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Tyler Ott:
were mentioning that he had a non-compete and he was going to another company.
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Tyler Ott:
It wasn't an enforceable non-compete, But then, you know, the other company
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Tyler Ott:
that was hiring him heard wind of it.
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Tyler Ott:
They said, you know, we're not going to go through with this.
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Tyler Ott:
And then now he's out of a job.
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Wesley Lyon:
I forgot about that. He got a, this is a great example. He was leaving and he
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Wesley Lyon:
was going to a competitor, but he made sure he wasn't going to cover the same territory.
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Wesley Lyon:
So he was abiding by the non-compete, questionably enforceable non-compete to
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begin with, but he was abiding by the non-compete.
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And the former company sued him. The new company that said they were going to
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have his back did not. They let him go.
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Wesley Lyon:
So he's sitting in la-la land as a lawsuit is getting placed on him.
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And fortunately, his mom helped him fund the lawsuit because he was clearly going to win.
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Wesley Lyon:
He didn't violate the non-compete. And he won and got a settlement,
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Wesley Lyon:
but doesn't really cover up the fact that, you know, that's just a great example.
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Wesley Lyon:
If you don't have the money to fight the lawsuit, you're in trouble.
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Wesley Lyon:
You ain't going to leave. Yeah.
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Wesley Lyon:
So, yeah, but that's that's exactly what they're trying to put a ban to,
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Wesley Lyon:
which, Tower, I think I read it and it sounded like, you know,
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there was no highly compensated exception.
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Wesley Lyon:
So what's going on with the dentists and the associates and the non-competes?
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Tyler Ott:
Yeah, dentists and associates right now, you know, essentially based on the
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Tyler Ott:
rule that the FTC, the Federal Trade Commission, put out is that those non-competes
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Tyler Ott:
are unenforceable right now.
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Tyler Ott:
But I'm not saying if you're an associate, go tear up your non-compete right
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Tyler Ott:
now or, you know, freak out if you're an owner about your associates right now.
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Tyler Ott:
You know, again, as I mentioned, it's kind of have to wait and see.
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Tyler Ott:
And there are some ways, too, that if you did, you know, want to make sure that
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Tyler Ott:
your associates are hanging around, there are, you know, compensations and bonus
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Tyler Ott:
packages and benefits package that you can look into as a way to retain them.
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Wesley Lyon:
Now, we're going to come back to the legal side of it, whether or not this will stick or not.
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Wesley Lyon:
Let's just assume this rule stays in place as written.
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Wesley Lyon:
Somehow, some way, a judge says, hey, stamp of approval, we're good. Right.
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Wesley Lyon:
Associates are free to leave, right?
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Tyler Ott:
Yes.
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Wesley Lyon:
Yeah. So, this could be a big shakeup, but there's certainly ways around it.
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Wesley Lyon:
So, before we get into the legal, Tyler, what are some ways that,
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Wesley Lyon:
hey, if I've got a, well, I guess we should start by clarifying.
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Wesley Lyon:
If your associate's only been there six months, they're going to leave and take
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a ton of patients from you.
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Tyler Ott:
You got a problem.
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Wesley Lyon:
Maybe we got to look in the mirror.
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Tyler Ott:
You're probably not at the practice. Yes.
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Wesley Lyon:
We need to look in the mirror on that one. But a lot of dentists out there,
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Wesley Lyon:
they do have long-term associates that have relationships with patients that were brought in.
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Wesley Lyon:
And, you know, this could be a big factor. So if we're in one of these,
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Wesley Lyon:
you know, what can we do about it?
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Tyler Ott:
Yeah, I mean, it's kind of similar to the corporate world. You hear a lot about stock options,
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Tyler Ott:
and there's some things that you cannot provide stock options to your associates
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Tyler Ott:
that have a vesting period that they require to stay at the practice for a certain
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Tyler Ott:
amount of time before they're able to vest and be able to exercise their stock
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Tyler Ott:
option, become an owner of the practice.
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Practice, you may consider letting them buy in a small portion of the practice,
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Tyler Ott:
you know, a few percent here or there, you know, to tie them in,
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to make them have, you know, a reason to improve the practice,
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kind of have some skin in the game there.
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Tyler Ott:
Really just kind of giving them some compensation for a reason for that non-compete, really.
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Wesley Lyon:
Yeah, and then once they become owners, they're partners, so now the non-compete is enforceable.
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Tyler Ott:
Exactly.
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Wesley Lyon:
And that's the big part there is, hey, you know, if we look at how can we make
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Wesley Lyon:
this enforceable, well, that would be one really, really good workaround.
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Wesley Lyon:
Again, only for, you know, dentists that have been there for a while.
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Tyler Ott:
You're not getting this for one, a fresh associate that you're just hiring on
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Tyler Ott:
for, you know, your temp work while you're on vacation.
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Tyler Ott:
This is for a valued associate that, you know, is there for you,
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Tyler Ott:
has a great rapport with the patients, and really provides value.
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Wesley Lyon:
It's kind of like a get engaged and date before you get married.
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Wesley Lyon:
You know, you don't just go offer stock to somebody coming in the door.
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Wesley Lyon:
Oh, I'll get my non-compete enforceable.
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Wesley Lyon:
Let's wait to the point where we need to make this non-compete enforceable.
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Tyler Ott:
Now, that dating engaging example, that's a good one. That's a good analogy there.
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Wesley Lyon:
Yeah. You know, you've always got the friend that, you know,
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got enamored with every girl he ever saw or same with girls and you just know where it's going.
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Wesley Lyon:
It's like, hey, let's not do that. Let's take it a little bit slower.
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Tyler Ott:
Wait until you know, then that's when you make the jump.
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Wesley Lyon:
Yeah. Because, you know, nobody likes getting divorced in the practice or,
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you know, in their personal lives.
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But once they have a little bit of ownership, and if it's not much,
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Wesley Lyon:
hey, they're a partner now, divorce is going to get ugly. So that's one way around it.
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Wesley Lyon:
You know, another way we've seen people try to get around it is to offer additional
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Wesley Lyon:
compensation in exchange for the non-compete.
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Wesley Lyon:
So that's another potential option there. But you really are starting to see
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a surgence of doctors that just are 10% owners over practice,
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Wesley Lyon:
it's becoming more common.
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Wesley Lyon:
Hey, they don't really want to be an owner, but you want to make sure they don't leap.
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Tyler Ott:
Mm-hmm.
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Wesley Lyon:
Well, great. Maybe I'll give them 10% of the profits. They'll be happy.
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Wesley Lyon:
I'll be happy. I'll never have to deal with this turnover. So that can be a
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Wesley Lyon:
great thing for everyone.
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Wesley Lyon:
But definitely something new in the marketplace and something you don't necessarily need to do now.
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You just need to be aware of this. Although it could be a good wake-up call for some.
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If your associate is that valuable to you, whether or not this non-competes
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an issue, you may just want to get ahead of the curve.
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Tyler Ott:
Absolutely.
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Wesley Lyon:
But yeah, now let's jump into my favorite part of this where,
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Wesley Lyon:
you know, the FTC passed a rule.
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The FTC is not a lawmaking body.
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The FTC, Federal Trade Commission, is an agency of the government,
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and they've been given powers, you know, as it was granted.
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But what those powers are, we're about to find out in the court system.
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Wesley Lyon:
So, we actually found out about this rule getting passed from,
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Wesley Lyon:
what was it, the accounting firm that I think just had the ruling.
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Wesley Lyon:
So, you know, a couple key things just note here, and we'll get into kind of
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who sued and what rulings do we have, do we have any injunctions in there.
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But basically, we've got a couple different issues. One, maybe people aren't
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thinking of the eminent domain.
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You know, you think of it when, hey, the county wants to put a highway way through
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your yard and they just tell you they're going to pay you for it and take it,
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well, if the value of your business is based off some non-competes being enforceable
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and they're no longer enforceable, they've just taken property from you.
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So that's likely to get challenged.
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Another one, I think on the actual, they had, in order for a non-compete to
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be enforceable, you had to be an executive level or higher.
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And basically that wasn't defined by a title. It was defined by decision-making.
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Do you have decision-making ability over the future of the business?
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And one of these accounting firms sued and they said, hey, we've given all of
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these clients, all these partners in the accounting firm and their income partners,
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which we don't use the same terms in our world.
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Associates in our world are kids.
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And then income partners are or what y'all would refer to as associates.
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They get a cut of all of the revenue they produce. So, I mean,
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these income partners have the clients. They've been working on that team,
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and they've had the firm clients.
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I mean, they could take their team and just take the whole profit away,
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and that would be a very, very bad day.
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So that was one of the companies that sued. Another was just a pro-business
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group, and I know it's going to be wild where these lawsuits got filed,
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but it's almost you go look at the SEC listing for college football teams,
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and you just kind of throw a dart and see which one you think filed the lawsuit.
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This one was Texas though. So two lawsuits filed in Texas and one of them,
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I think they did not get this,
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The court didn't rule that it was on hold for everybody, but they ruled it was on hold for this firm.
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Tyler Ott:
Yes.
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Wesley Lyon:
So this is going to the courts. And that's why we say don't tear up the non-competes.
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I think really what they did was this is something they wanted done,
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and they don't know what's going to stick and what's not going to stick.
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So they said, hey, we're going to throw everything at it and see what sticks.
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Wesley Lyon:
So Tyler, you had mentioned it's maybe heading to the Supreme Court.
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Tyler Ott:
Yeah, it's probably heading to the Supreme Court. The question is,
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Tyler Ott:
can the FTC do this? Do they have the authority?
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Tyler Ott:
Is it in line with what their abilities are?
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Tyler Ott:
Are they acting in their capacity? Can they even do this? And that's what the
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Tyler Ott:
judicial system is going to have to decide. Yeah.
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Wesley Lyon:
And for those of you listening out there, we are not attorneys.
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Wesley Lyon:
We are just CPAs giving their opinion.
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So, don't take this. If you are looking at a non-compete, you definitely need
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Wesley Lyon:
to work with an attorney, do all that. But I say that to tell you this next part.
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Wesley Lyon:
Again, I'm no attorney here. But interestingly enough, since this rule was passed,
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and today, the Chevron doctrine was overturned.
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And basically what that did, from my understanding, and again,
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I'm no political, no law expert, but it seemed as if government agencies,
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if they made a rule that was not specifically laid out in the law on whether
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or not they could handle it, or whether or not that was the intent of it...
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For a long, long time, they would just, the courts would just defer to the agency.
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And they overturned that by, you know, saying, no, if the agency wasn't specifically
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given this power, then, you know, absolutely not.
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Wesley Lyon:
And I think, again, I didn't read a ton about this, but I think,
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Wesley Lyon:
you know, it was, maybe it was the EPA.
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Tyler Ott:
That's what I think so, yeah.
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Wesley Lyon:
It was something though, and it was a group of fishermen that they had to comply with this rule.
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Wesley Lyon:
And I don't know that it was the rule that was actually the issue more than
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Wesley Lyon:
the fact that they were making the fishermen pay $700 a day.
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Wesley Lyon:
It's like, yeah, you overstepped your bounds here. Absolutely not.
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Wesley Lyon:
They have to make a law to force these fishermen to pay. And again,
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Wesley Lyon:
I know I'm botching this.
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Wesley Lyon:
I'm just saying it's kind of ironic here. Here we are, we're going back and
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Wesley Lyon:
we've got something similar that's going to come on the docket.
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Wesley Lyon:
So where this goes, where it ends up, I don't have the slightest clue.
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Wesley Lyon:
All I know is it ain't even close to over yet.
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Tyler Ott:
Yeah. I think it was initially going to be, the rule was going to be fully in effect in September.
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Tyler Ott:
That's when the ruling has to go down for this injunction. And that's not going
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Tyler Ott:
to happen. It's going to be months.
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Tyler Ott:
Who knows when this is going to be finally resolved.
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Wesley Lyon:
Yeah. So don't tear up your non-competes in the meantime.
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Wesley Lyon:
Use it as a wake-up call though. Hey, If you do have someone extremely valuable
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to you, you know, maybe we want to do something about that.
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Wesley Lyon:
You know, you never want to have your most valued people just getting paid whatever
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Wesley Lyon:
because, you know, it's like Jonathan and I were talking about,
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Wesley Lyon:
well, I mean, yeah, if you just think of that one, would I ever want to pay
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Wesley Lyon:
a, you know, general practitioner or overpay them a percentage of collections?
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Wesley Lyon:
The answer is no, unless they brought a whole bunch of revenue with them.
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You know, if they have their own patient, their own loyal following,
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and I'm across the street and they say, hey, I want a new home.
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Wesley Lyon:
It's like, well, you know, I'll pay you 30% on the business that you do for
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Wesley Lyon:
my patients and I'll pay you 40% for all the patients you bring over.
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I
mean, hopefully dentists are a friendly bunch. So I don't really see them
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Wesley Lyon:
doing all that. But hey, one of these corporate buyers could.
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Tyler Ott:
Absolutely.
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Wesley Lyon:
Yeah, so don't tear them up. Oh, they're trying to ban them for associates,
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Wesley Lyon:
and business sales are in good standing, and the lawsuits are just heating up.
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Tyler Ott:
Yeah, it's going to be interesting to see how this all plays out.
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Wesley Lyon:
But for now, not a whole lot to do. For those of you younger doctors,
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Wesley Lyon:
you know, kind of looking at this or listening, you know, hey,
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Wesley Lyon:
use this wake-up call to be careful of what you sign.
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Wesley Lyon:
You're still going to be asked to sign a non-compete, but hey, is it reasonable?
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Wesley Lyon:
You know, some people, they like to just try to trap you in a corner.
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Wesley Lyon:
Same thing, talking with my buddy, they'll say, hey, this non-compete is enforceable for 70 miles.
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Wesley Lyon:
And it's like, well, what's the point of that? You're not practicing dentistry 70 miles from here.
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Tyler Ott:
Yeah. I mean, and a lot of these attorneys offer a contract review and we're not attorneys.
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Tyler Ott:
It would definitely be valuable that if you're expected to sign something,
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Tyler Ott:
having someone that's an expert on it to review it and to make sure that it
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Tyler Ott:
makes, you know, it's legal in a sense.
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Wesley Lyon:
Definitely, and Patrick Craig does those here. So we have somebody that can
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Wesley Lyon:
help you out with that, you know, make sure you're in good standing.
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Wesley Lyon:
But, you know, overall though, just like every big ruling that comes out,
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Wesley Lyon:
every big media piece, you know, keep calm.
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Wesley Lyon:
It ain't over yet. It's really just getting started. But my guess will be that
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Wesley Lyon:
we're not going to end as strict as this was written.
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Tyler Ott:
And either way, if something happens, we're here to give you the guidance on
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Tyler Ott:
it once it all, once all the dust settles and we get the final, you know, say.
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Wesley Lyon:
Yeah. And with that, we thank you all for tuning in. One last quick tidbit.
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Wesley Lyon:
We are going to St. Thomas on January 20th. We have the Ritz-Cartland, going to be awesome.
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Wesley Lyon:
I just talked to Sarah about putting an advertisement out and she informed me
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Wesley Lyon:
that we're already filling up.
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Wesley Lyon:
So if you are listening, it's a great one, going to be five days.
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Wesley Lyon:
You don't have to come to every day, but at 8.30 to 12.30 or maybe 8 to 12. We do education.
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Wesley Lyon:
Then after that, you're in St. Thomas. We're going to jump on the catamaran.
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Wesley Lyon:
Hopefully, we're going to get to see, you know, St.
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Wesley Lyon:
Thomas is sitting right there. Hopefully, we get to take it and see a nice little tour of Epstein Island.
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Wesley Lyon:
From the outside, though, not the inside. We just want to take a look at it.
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Wesley Lyon:
But that's right there. And then otherwise, it's a great place,
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Wesley Lyon:
great little restaurants there. And weather's beautiful.
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Wesley Lyon:
It's in January. January you're not going to want to miss out so make sure get
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Wesley Lyon:
in there sign up today otherwise we will see you next time.