I was thinking about buying a Farmers agency in Redlands, Ca. The agent was retiring, had about 1,274 Farmers policies in force, and was asking $205K for the agency. I became a reserve agent after I obtained my Property and Casualty license, and I spent around $300 to reach this point, training materials, cost of the license, etc. I then asked for all the agreements I was going to be required to sign to become what Farmers calls a “Career Agent.” By the way, I was working with these two “district managers:”
Yale Long
909-254-0318
ylong@farmersagent.com
Jim Heidrich
951-880-0427
jheidrich@farmersagent.com
Jim likes to pride himself being a retired Marine colonel.
I was shocked to find out that Farmers could buy me out for any reason or no reason for about $85K. For example, they could per E.4.F deem anything I am doing a conflict of interest and buy me out. They have sole discretion what a "conflict of interest" means. I am a CPA and I have consulting clients. This could be deemed a conflict of interest. See “E. Termination of this Agreement” and “H. Contract Value” of this document: [
drive.google.com]
This would mean I would lose about $120K and be on the hook to close the office. They also wanted me to quit my job immediately. In other words, they wanted full control. When I objected to these absurd terms, Jim Heidrich sent me this email:
“Frank,
I am disappointed you did not see fit to discuss this with me before making a decision to withdraw. Your interpretation of the contract, while correct in language, fails to see why the language is what it is; a worst case scenario to prevent damage. My staff and I have worked hard to provide you a full picture of expectations so I had hoped a conversation was in order before you simply turned away.
I do want to offer that your interpretation of the contract does not support the positive attitude you have displayed to date. The contract areas you have highlighted are purposeful but do not represent any risk to someone with your ethics.
To be straightforward, your concern for the contract language should only be an issue if you see yourself behaving in an unethical manner, and that was never the impression you offered.
I would be glad to set up a call with our legal team or someone above me if you felt it would be helpful; if not then I will wish you the best. I think you could have had a very good run as an Agent and created a business with an income of your choosing for many years to come.
Jim”
And Yale sent this nugget:
"Frank-
I'm sorry to hear about the concerns your having over the contractual language. If there is anything I can do to assist in clarifying the language or making you comfortable with the decision please let me know.
I would like to mention to you, in my twenty seven years with this great organization, I have never seen the 90 day clause used for any reason. The only time I have seen an agent terminated is immediately and for just cause, ie.. embezzlement. In-fact, Farmers is a company built on the back of promoting and fostering a platform of success rather than stripping an agency for anything other than warranted actions.
As far as the contract value goes, I can tell you Farmers is on a path of completely doing away with contract values which is why they now have paragraph G. "Sale of Agent's Service and Commission Rights". This is new language which allows agents to sell their books to an external candidate like yourself or to an existing agent. Steve England had to sign the same contract in order to have the option to sell rather than take Contract Value. Contract Value at most will be only one times the annual service commissions where a internal or external sale commands a much higher multiplier.
I hope my comments gave you a little better understanding. If you would like I am more than happy to chat and share my thoughts as I have been through many of these signings as well as many conversations with both buyers and attorneys.
Respectfully,
Yale Long L.U.T.C.F, CSD
Member of President's Council
District Manager
Farmers Insurance
1700 Iowa Ave Suite 230
Riverside CA, 92507
License Number: 0A95391
909-254-0318 (Office)
909-254-0327 (Fax)
ylong@farmersagent.com
[
www.farmersagent.com];
When I wanted them to change the boiler plate contract, this is what I was told:
"Frank,
You are correct that this is all business. And I concur that the terms are clear; however, I do not interpret them as a risk but as a safeguard to you and Farmers.
Farmers will not change the language in the contract, it has served us well for our history. When you refer to "contract price" I assume you refer to the stated contract value, which is not the contract price. The CV is established as a fail safe to our Agents; regardless of your situation you always have an out by being able to sell for CV. The only thing that would preclude this is illegal activity.
Your interpretation of the contract is that Farmers can randomly step in and take the book of business from you and settle at contract value, which is 50% after 12 months for a book under 1500 policies. While this scenario could happen (cannot find any previous examples) in a worst case situation, it simply does come into play for anyone who enters the business with even the most marginal drive and desire to excel.
My biggest challenge here is understanding your reaction to the contract language. Obviously someone is offering advice to beware, the risk is too great. Reality is this was presented as a great business opportunity that could provide you the level of income you desired and the ability to control your future. You appeared to concur in and fully support all information provided to date. To suddenly view this opportunity as high risk and a potential loss of half of your investment simply does not align. Can bad things ever happen, yes. However, someone with your desire and drive enters with an absolute minimum of risk and the greatest percentage of high success.
I know Yale also in communication with you and both of us just want to ensure you see the level playing field. There is no intent to convince you to take any action you do not fully support. We see this as a win-win and apparently you see it as a possible loss. Most unfortunate.
Glad to discuss if you like. If you are set against moving forward then please send me an email requesting you be terminated as a Reserve Agent and I will initiate.
Thanks,
Jim"
There you have it. If you want to be a Farmers agent you will be required to simply trust Farmers will not buy you out for far less than you paid for your agency or far less than it is worth. Anybody would be a total fool to buy a Farmers agency given these terms. I have still not been told why I was not told up front about these absurd terms. I have asked for my $300 back, but have been ignored.
Frank Adomitis
