Questions for a Franchisor (squirm, sweat and stutter;)

We are lead to believe that franchisors tell the truth and have the franchisees’ best interests in mind.  In hindsight, franchisors lead a completely disparate life from the franchisee.  Boiled down to the most common element, franchisors are using the capital of a franchisee to promote their brand.  Nothing more, nothing less.  Anyone who tells you different is probably selling you a franchise.  Franchisors sell franchises to trusting souls while leaving the trusting souls up to their own devices when it comes to any and every aspect of running a small business in the trenches.

If you were to ask a franchisor the following questions, then  “sleep on them” for a night, then validate them with a minimum of 10 franchisees who are in the system and 10 franchisees who have left the system, you would find that franchisors are less than truthful on nearly every issue.  If you’re a franchisee in the system, it’s too late, but hopefully you’re doing your due diligence and you’re reading this prior to purchasing a hairy ball of nothing for the all-too-hefty total of your entire life savings.

1. How many of your franchisees make it past three years in your system?
2. How many of your franchisees have sued you in court?
3. How many of your franchisees own multiple outlets?
4. How many of your franchisees have left the system, really?
5. What is the success rate of your franchisees? (please include churn, terminations, bankruptcies)
6. Who are your finance partners (please name them all past and present)?
7. How many SBA loans have defaulted within your franchise?
8. What is your definition of  “churn” and how many of your franchisees have you churned in your history?
9. Can I please have a copy of the name and number of every franchisee that has left the system in the history of the franchise?
10. How many franchisees have lost to you in arbitration?
11. How many have beaten you in arbitration?
12. Do you get kickbacks from your vendors, and if so, who are they?
13. What is the turnover rate of your corporate HQ employees?
14. How many corporate employees do you commit to the health and well being of your franchisees?
15. What is the average payroll for your franchise-related employees who serve franchisees?
16. How many franchisees have you willfully terminated in your history?
17. How many franchisees have you settled with requiring the signing of a gag order?
18. Do you publish the statistics on your marketing buys?  Can a franchisee have access to the amount of its money you’ve spent in their territory?
19. How many box seats in professional sports arenas do you own?
20. How many corporate jets do you own?
21. How many company stores do you own? What is the greatest number you have ever owned.  Is this on the rise or the decline?
22. How many foreign outlets do you own and how long have you been pursuing foreign markets?
23. Which outside law firm represents you?
24. How many stores are still in operation having dropped your name and franchise?
25. Have you or any of your management staff ever been convicted of a felony, claimed bankruptcy or lost a civil case in the courts?
26. How many legal cases does your franchise have currently pending and in which venues (arbitration, federal and state)?
27. Do you provide and require the purchase of marketing services from your franchisees?  If so, who is your CMO or VP of Marketing?
28. How many franchises have you owned, do you currently own (if any) and what are they?
29. Have you ever operated an individual franchise in this system and if so, for how long?  Were you profitable?  If so, please explain.
30. Finally, would you let a child or relative of yours own one of your franchises?

Bloody

Free Franchise – Come One Come All – Step Right Up! The Show Will Now Begin!

http://www.rrstar.com/news/x617071075/Printing-distributor-targets-Rockford

Please tell me you’re not that naive!

PFG Ventures is silently backed by the slimiest business dealer in the universe – Fred DeLuca.  (If you don’t know the connection, Mr. Deluca, the co-owner of Doctors Associates is the franchisor for Subway.  There are more lawsuits against Mr. DeLuca than McDonalds, Burger King and Dunkin Donuts combined.)  Muzzillo ran into trouble back in the ’90s and DeLuca bailed him out and took majority share in the company.  Then he taught Muzzillo how to write all of his contracts with arbitration clauses in them so no one could sue him.

Greg Muzzillo then divorced his wife and sued her in court, then appealed the judgment in her favor to make the misses share child support and take away her alimony when she had faithfully served him through the rough times.  She was unemployed at the time and he was making $30,000/month.  The judge sent him packing.

Thus, the reasonable needs of the children and the relative abilities of the parents to provide financial support are primary factors the trial court must use to determine the child support contributions of each parent. The trial court in the present case did precisely that. Plaintiff earns more than $38,000 per month and has ownership interests in various companies that are worth approximately $2,000,000. Defendant, by contrast, is not currently employed and does not have any monthly income, although we note that she is expected to “take steps in the near future to develop, and use, her earning capacity.” In this case, the trial court did not abuse its discretion in ordering plaintiff to pay one hundred percent of the child support. This arrangement correctly reflects that the children would have received one hundred percent of their financial support from the parent earning the income if the parents had been living together.         We affirm the order of the trial court.

http://www.aoc.state.nc.us/www/public/coa/opinions/2005/unpub/040039-1.htm
He then remarried an investment banker and now lives the life of Reilly!  He and his new wife don’t even go to the office.  They make the company blokes travel to Detroit to have meetings.   How does he do it?????

PFG has ruined many a people in its “free franchise” crock of watered down confidence schemes.  PFG is one of the few that gets everyone on the backside.  Most confidence schemes take the marks up front.  PFG has figured out how to get them for the long haul.  I’m sure it wasn’t planned, but it worked out that way.

This is why they give it away for free….They take kickbacks from their hundreds of printing, promotional and apparel vendors promising the franchisee that they get privileged pricing.  They often misrepresent themselves as a “corporation” whenever it suits them.  They hand franchises to people out the side door when a deal too-good-to-be-true shows up and they don’t want to share.  Their “Co-CEOs” live in Detroit and have absolutely nothing to do with the day-to-day.  Their president (Brian Smith) is one of the biggest “whipping boys” that ever walked the face of the earth.  He’ll talk logic and then sell the franchisees down the river when his boss lays down the gauntlet.  Good guy, bad guy to perfection.

How does it work?

1. They invite you to a “discovery” day – it’s the beginning of what they refer to as “due diligence”
2. They give you disclosures and an agreement that is all one-sided in their favor
3. They can change their mind at any time and you have no choice in the matter (just life most UFOCs or FDD as they now call it)
4. They sign you up to a minimum 10 year agreement = the naive are signing 20 year agreements
5. They give you a franchise that is of nearly no value – thats’ why it’s free
6. They control all of your money collections – if you take money, they dump you
7. Here’s the kicker – they take 10% of all of your GROSS – they don’t give a damn about your profits – you can lose money and they’ll take their cut anyway
8. They have their hands down every vendor’s pants.  All of their vendors are in a 2% kickback scheme.
9. If you have a large client, they’ll force you into doing business with their vendors (due to kickbacks) – you cannot push back or they’ll dump you and give your client to another franchise or they’ll simply take it and hand it off to one of their employees who suddenly “chooses to become a franchisee”.
10. This has happened with accounts as large as the United Way and many other Fortune 500 companies
11. The business is one of high overhead.  The average franchise makes about 28% net profit because in printing, promtional and apparel, the product is nearly 60% of the deal.  This only leaves 40% before overhead.  Proforma takes all the proceeds, requires that they pay themselves, then they pay the vendors and then last is the franchisee.  It’s indentured servitude and nothing more.
12. If you make them angry, they take your money and then they tell the vendors to come after you!  It’s another cute little “out” in the contract.
13. A non-compete also keeps you around and from keeping your accounts if you part ways.

Be careful – Nothing of value is FREE!