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Franchising Needs Better Government Regulation

Discussion of legislation and political advocacy regarding franchising.

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RichardSolomon's picture

IF YOU DON'T PROVE IT, IT JUST AINT SO

Accusations aint proof! You con't prove anything in here. You can only prove it in court/arbitration.  If you don't wanna arbitrate, don't agree to arbitrate. No one holds a gun to your head to make you sign agreements.

And I have no sympathy for people who claim they are defrauded and then go about remedying that in the same moronic manner that they used to get into the difficulty in the first place.

Calling me names doesn't prove your point - if you even have a point. When you go buy a pig in a poke, it's a pig. If you can't tell a pig from a business investment, you aint ready for the business world. If you're too cheap to get good help and you make a mess of everything, that's no one's fault/problem but yours.

Them are facts, and them facts won't ever change, no matter how many meals you miss.

Richard Solomon
www.FranchiseRemedies.com

Disingenuous Invitation, Dale, but Thanks!

If predatory capitalism had not been regulated by government to provide protection for individuals under our laws, we would still have "child labor" and "exploitation of workers" and "slavery" and many other evils. Collective bargaining as practiced by individuals as a whole with legal representation, unions or associations, are absolutely essential in Capitalistic Democratic Republics to prevent the Republics from becoming fascist Corporate structures.

Your Grandfather told you a lot of truth, Dale, and so did my Grandfather and my Daddy, who told me you can't depend on the goodness of the owner and the boss to give you a living wage if he doesn't have to, whether he's a Christian or a Jew, and that if one man's profits are another man's grief, that was the way of things. My Grandfather and my Dad believed in collective bargaining and in unions because, of course, they weren't born to money and had to earn a living the best way they could.

Government exists to protect the American people from enemies inside and outside of the country and not to protect Corporations inside and outside of the country at the expense of the individual rights and liberties of individual American citizens.

Ralph Nader showed the American people how some American Corporations would calculate the death of Americans with respect to their bottom lines in the failure to remove unsafe automobiles from the market. It has only been through the efforts of Ralph Nader and other Consumer Protection Groups that the American consumer has been protected from the instincts of predator corporations who will put profits before human life.

Franchising, as practiced today, without revealing the true risk of the product being sold, is really a disservice to the American Public.

Americans would still buy franchised business opportunities at a 20% risk, if this risk were disclosed under state regulations and the States and the Federal Government would have clean hands. Shouldn't the banks and the SBA and the American Tax Payers be interested in the true and actual failure rate of first-generation franchisees? Or, isn't this relevant?

It is hurtful to know that government condones the hiding of the risk and that they have provided themselves with deniability through the DEAL that was made with the Franchise Industry that permits the selling of unviable business opportunities to the public ---and now to our returning Veterans from Iraq with The Patriot Express Loan.

If the true failure rate of the first-generation franchisees is disclosed to these returning Veterans, and they want to take the risk involved, this would be wonderful and many would no doubt be successful. But many of these veterans will not do their due diligence with killer due diligence attorneys and will end up being destroyed when they invest in some of the vehicles for fraud on the SBA Registry.

yes the FTC punished me for speaking out!

They put superglue between my fingers while I waited for my beer & wings at Applebee's, set a paper bag of dog poop on fire outside my door, gave me a wedgy and a wet willy in a darkened bathroom at TGIF.

They even signed me up for magazine subscriptions that I did not want and registered me as an interested franchise buyer with every franchisor on FranchiseGator. Oh the horrors of what the FTC goons can do to whistleblowers.

Beware, be careful and be on guard!

Due Diligence may have saved you guest poster?

I don't know? Did you perform sufficient due diligence or did you buy on hype and your gut feel?

Nevertheless you cannot dispute that franchising is one of the greatest economic models of the 20th and 21st Centuries for both franchisees and franchisors. It just didn't work for you.

The Truth Shall Set You Free!

TIF

Or people could invest time and money in due diligence...

Government is not your mommy or your daddy. It is up to you to fully investigate your investments before you make them.

Before you spend hundreds of thousands of dollars you might consider spending $5K - $10K for proper due diligence and sufficient time.

The Truth Shall Set You Free!

TIF

I respect myself --I am not bitter--- I have seen the light!

When you can respect yourself, maybe you can try refuting some of my objective statements with your version of the truth.

You just want to sell franchises and hide the truth of the risk and the DEAL. If the eye of the needle were as large as the community swimming pool, you wouldn't make it, my friend!

Guest . . . Paul's historical perspective . . .

I'm confused. Is your comment in reply to "Franchise Regulation" by Guest, or to Les Stewart's "Why 'bad' Decisions . . ."?

Denise

Throw out the UFOC

Amen & Amen-why don't Zors just have a document that simply says "You lose everything you own if your business fails."
The UFOC I recieved was a worthless stack of papers that simply meant the above.

Actually

guest states:

'Anyone reading this story and most of all Franchise Attorneys, should be able to read this case and understand the need for Reform.' 

Didn't the franchise attorneys on this website say that they really didn't have a case and it was a loss before ever stepping into the room for arbitration, because they didn't 'tender' the franchise back?  Instead they continued to operate as a CB even though they felt that CB had committed fraud.

Paul you are not confused...

Les is irrational.

Les Stewart's picture

Up Chuck the Useless, Adopt a Market Solution

Paul,

You agree (somewhat) with my statements but then you disagree (somewhat).

Is it, like, 49:51, 40:60, 70:30? I'm confused.

One Fat Example

Let's take one example (only one of several hundred) unique franchise business risks: liquidated damages.

From your previous posts, you had stated that you know of zero franchisees that were aware of this. I think we would agree that it is a material investment risk (ie. Honey, don't forget to bury the extra $100k in the backyard...)

Since this is a fairly recent innovation, who bears the bulk of the duty to disclose exactly what these clauses could mean to your life savings?

Is it the duty of:

  • the candidate,
  • franchisor
  • franchisor associate or
  • candidate's counsel?

The probability of that franchisor claim being successfully forwarded is x% but for that percentage, the franchisee will bear 100% of the weight.

What's wrong with finding out what the x% is?

Of course, there are those that would argue that real purpose for the liquidated damages claim is keep the hapless hamster on the opportunistic franchisor's wheel.

Comparable Hazards
As a consumer, I am not expected to know the detailed toxicology (ie. LD50, etc.) of DDT, asbestos or PCBs. Medical science has provided us these facts.

Policy makers have decided when the benefits to our society are less than a product's costs. Without accurate information on the incidence of opportunism, all public policy devolves into he said :: she said polemics.

Without accurate information [rooted in the digital- rather than the 19th-century age], truth is defined subjectively (based on power) and not objectively (the scientific method).

Less experts, please. More franchise business risk facts.

Private Law
The AAFD has been doing exemplary work at establishing what quality means. This is what I mean by private law: the establishment of a standard, enforced by an industry.

Les Stewart, MBA
Industry Investment Analyst
FranchiseFool.com :: the Wise learn to say No

'Sleep Tight' you fail to understand...

Les Stewart and the Item 20 Ranter promote anti-franchising rhetoric and it is time for them to put their money where their mouths are and state their positions clearly.

If they cannot name franchises that are worthy of prospective buyer's consideration then it is obvious that they hold the opinion that there are no good franchises in the marketplace. This kind of absolute position is certainly their right, but it is foolish given the great succes many franchisees have had. Ultimately it is a question of their credibility.   

My position is clear, I think that there are numerous franchises that are worthy of consideration and plenty to avoid. I don't promote any particular franchise since I sell them (one concept).

'Sleep Tight' - Where do you stand on franchising and franchises? Is franchising a force for good and are there any worthwhile franchise concepts in the marketplace?

The Truth Shall Set You Free!

TIF

Barbara Jorgensen's picture

I do not believe Paul

or any of the lawyers on BMM are idiots.

Richard is right about there are liers everywhere. Even one of our presidential candidates straight out lied to us about her trip to Bosnia.

Michael is a wise person who says it as it is. They form their opinions as lawyers and look at thinks as their profession says to. They detach themselves so they can give their opinions objectively.

Plus if people went to them they will be saved from financial hell.

Carman has studied the UFOC like no one I have ever met. She is bright and I do not question her intelligence.

Until damaged zees do something about laws to protect the hard working people of our country nothing will be changed and our opinions just sound like rants.

We need to acknowlege where we went wrong and fight for what we believe is right. Until we can do something all we can do is warn other's of the bad zors that do not encourgage people and inform people about killer due diligence.and franchise lawyers.

 

 

HELL NO! DON'T GO! You were robbed! Coffee Beanery

I agree with you! I admire you!

But, I maintain that it is Federal Regulatory Policy that ZORS be subjected ONLY to Rescissions by the State that permit the ZOR's Network to continue to stand in the economy after the Rescission is negotated between the ZOR and the State. The Rule does not provide a private right of action for violation of the Rule.

Understand that it was not the intent of the FTC that ZORS would compensate ZEES for any misrepresentations that came about through violations of the Rule or the State UFOC's, that must be in compliance with the Federal Rule.

Under the present state of the law and regulatory policy, franchisees are a CALCULATED sacrifice to standing up ZOR networks. It is the ZOR networks who feed the economy and individual ZEES who fail because they bought an unviable concept have no recourse under the law ---BECAUSE of Federal regulatory policy that overrides state law under the Commerce clause.

The premise of "double jeopardy" is brought to State Rescissions for violations of the UFOC's and once a Rescission is negotiated by the State with the ZOR, that is the only bite out of the Apple for the Zees who are offered a Rescission. Obviously, a franchise rescission is different than a normal rescission under contract law for misrepresentation or fraud and franchisees are not made WHOLE because this could tear the ZOR network down.

Is the purpose of the State little UFOC's only to litigate actual violations and breeches of the contract itself and NOT to deal with misrepresentation or fraudulent inducement to contract?

You were betrayed but did Dale Cantone intend to betray you. Did you call him up and ask him? Does he not answer your letters? Should the Attorney General of the United States and the Department of Justice look into this matter? Would they or do they routinely protect regulatory policy that protects the regulated?

It may be that you will be sacrificed to immoral regulatory policy and technicalities of the law as a warning to other ZEES in Coffee Beanery and other unviable franchise concepts. All ZEES will soon know and understan that they have been offered a deal in Rescission that they can't afford to turn down, and that only a breach of the actual terms of the contract will be heard in any later arbitration after rescission.

The Rule of Law often protects injustice for those who haven't enough money to influence the law in their favor. You remember how you were attacked in your Congressional testimony. Remember how this Representative tried to blame your plight on your failure to do due due diligence, etc... Regulation is all about protecting the franchisor from charges of misrepresentation of their agreements and not about protecting ZEES.

Your case comes too close to revealing th3e real intent of the Rule! We are not attorneys; we can criticize the law and try to make it better in terms of justice in representative democracies. Attorneys are the only citizens who are not held responsible under law for ignorance of the law unless they are the subject of malpractice suits from their clients. Understand that attorneys like Harry Rifkin and Paul Bland are in the minority because they fight a status quo surrounding franchising that has been resistant to change since the Rule came into being in the late 1970's.

I am with you. Keep up your good fight but KNOW what you are fighting against.

michael webster's picture

Eptness

Guest writes: "likes of Solomon or Webster two equally inept miscreant merchants of the fallacy of due diligence."

Just what is this "eptness" I have heard so much about? 

Michael Webster PhD LLB
Franchise News

michael webster's picture

Anti-Waiver

I recall asking Carmen Caruso about the Illinios Franchise Regulation which deemed it a deceptive marketing practice to make an oral representation inconsistent with the UFOC and whether it trumped the integration clause.

He thought it might, but could not point to any case law on point. 

Michael Webster PhD LLB
Franchise News

Les Stewart's picture

Political Influence: Misspokenness alert

Paul,

You stated that the IFA does something and that franchisees virtually do nothing, which I agree with fully. But you seem to imply that if franchisees did something then, there would be more influence, isn't that right?

I hope you meant was that the difference between (IFA and non-IFA) influence was the determining factor in using tipping the political process. Wasn't it? Huh?

Political influence is a winner-take-all game just like in Court. To win, you must outspend your opponent. 

But what's the realistic chance of uniting 800,000 people (under heavy incoming) to oppose these the aligned and entrenched interests:

  • all product franchisors (oil, grocery & auto),
  • all professionals that serve the status quo,
  • all financial institutions, and
  • all media outlets.

It would seem to me the height of stupidity to advise facing these battalions in open warfare. 

But it does have some rhetorical utility in confusing, babysitting and blaming the McVictims.

Hypothetically speaking, of course. 

Les Stewart MBA
Understanding Franchising

Right Paul ---The David Frenches wipe the floor

You know why the franchisees have NO lobbying effort.

The nature of franchising and the nature of the franchise agreement keeps franchisees separated from each other. Franchisees are busy trying to get to breakeven in the beginning to protect their investment and by the time there is trouble, it is too late for the franchisee to fight back.

Franchisees always face the conflict of harming their own asset from which they are trying to make a living if they criticize their franchisor ---who has the discretion in the terms of the franchise agreement to punish him for defaults ----that are interpreted by the franchisor loosely under the franchise agreement ----that permits the franchisor to steal your business if you are "defaulted" out of business and dead in the water.

The blurring of the identity of the brand franchisor with the chump franchisee always helps the position of the franchisor. Those who know what is going on in the Congress play dumb because they are afraid if they regulate franchising, it will negatively affect the economy.

Franchisors, until lately, haven't had to recognize independent franchise organizations and have nominated their own franchisee representatives with whom they will deal on the terms of the contract that always favor the franchisor and his profits.

The deck is stacked but a lot of franchisees don't realize this. They are too overwhelmed trying to survive. The ABA and the AAFD and the AFA don't educate franchisees to the constructive fraud created by government regulation. Obviously, they have given up and are willing to compromise by pushing "relationship" issues and legislation and fairer contracts.

Does this mean that these groups believe that franchising as a business model cannot survive if there is true disclosure of performance statistics on a unit basis to new buyers of the franchise? Does this mean that these groups and you, Paul Steinberg, don't believe that franchisors of the same or similar concept within a sector should have to compete with each other through honest disclosure to capture the cheap labor and capital of the franchisee?

If franchise associations would approach the government for better regulation of franchising, could they be successful? Would franchise associations do better approaching the government, or contributing to organizations like the AAFD, to lobby the government for fairer disclosure and fairer relationship contracts in franchising, than by approaching their franchisors? I think so! I think franchise associations would do much better with a Paul Steinberg or a Richard Solomon lobbying the Congress for them.

Why don't franchisees do this? Again, it is probably money. You could join the Brown Board Association for $30.00 but the BSA needed $300 a month to take the matter of The UPS Store unviability to court. Franchisees really do not want to go to court and do not want to fight with their franchisors, they just want their businesses to succeed and they want to realize profits on their investments in the Brand Name. If they tear down the brand name, they are damaging their own asset!

It is not just the franchisors who lobby the Congress; it is the banks and the lenders, the developers, the construction industry, the landlords, etc... Franchisees would have to gather a heap of money to fight this lobby in The Congress of the United States.

Reality and Catch 22!

But wait what about the Item 20 Ranter/Carman conspiracy?

If I click my heels three times can I have the conspiracy be true? 

The Truth Shall Set You Free!

TIF

Carman/Item 20 Ranter I believe you are an idiot!

Plain and simple you are the biggest fool posting on BMM. You have no facts just unsubstantiated and malicious opinions. 

The SBA Registery is simply a process and procedure for expediting loans and if you are stupid enough to think that being on the SBA list is an endorsement then you are more of a rube than I could have imagined you to be.

In conclusion please stop wasting everyone's time with your idiotic conspiracy theories 

The Truth Shall Set You Free!

TIF

Item 20 Ranter why don't we get the IRS to help with Item 20?

Maybe they can take the tax returns of all franchisees and calculate the performance across franchising , by segment, then by individual brand and publish the results online at www.IRSfranchisingperformance.com/statistics/2007?

The Truth Shall Set You Free!

TIF

Carman you are sad ant-franchising zealot

no facts just ridiculous opinions.

eBay, Trust, PayPal

How do millions of money and products change hands every day without collapsing from free riding or fraud? These aren't really spot transactions: The majority of trades are multiple small business-to-consumer.

Same way: structured reputation systems.

How did they overcome the theft problem when importing tea? Trade guilds.

The franchise industry obstacles are a loss of power to some and a gain in power to other groups.

Technically, a no-brainer.

Les Stewart

FRANCHISING IS IN THE SERVICE OF CAPITALISM...

Both franchisees and franchisors provide products and services that the public wants and buys at prices determined in open and free markets.

Barbara Jorgensen's picture

You don't know what you don't know!!

If you are not told by the zor what true due diligence is how do you know? If your lawyer doesn't explain what due diliegence is in franchishing how do you know what to do. Most of the zee's I talked to claim no one explained to them what due diligence is. How bad is that???

Michael, I agree that

Michael,

I agree that post-sale franchisor opportunism is the proverbial "skeleton in the (franchise) closet".

In franchising, the due diligence is similar to what the Dr. says to the widow:

"The operation was a complete success but your husband died. But on the plus side, he's a fine looking corpse."

"The Other"
Everybody works hard. Everybody does their best. Stuff happens. Slaughterhouses can look like day cares. Somebody's gotta work the mop.

THIS is the Solution?
"I will study and sign my lotto ticket much more thoroughly and take much longer to choose my numbers. And when I need help, I promise to choose 1 of the 3 of the hundreds of thousands of..."

And if anything goes wrong...well,...(hmmm) you know, Item 19 was empty all along: It said so right on Blue MauMau/LaFalce/UFOC/FTC/cigarette package/et al.

You saw that allusion on the internet on one site on one day, didn't you?

Oh...there you go! Mystery solved.

Step right up...

Les Stewart

Barbara Jorgensen's picture

You don't know what you don't know!!

If you are not told by the zor what true due diligence is how do you know? If your lawyer doesn't explain what due diliegence is in franchishing how do you know what to do. Most of the zee's I talked to claim no one explained to them what due diligence is. How bad is that???

Man what a fool you are Item 20 Guy...

You mean you actually believed that someone would buy into your crap? You are more stupid than I thought.

Ariel

P.S. Maybe I'll buy a churned UPS Store?

Dwyer Group ----View from the Top

It is nice to know and PR will get you everywhere ---especially in Texas.

But, what about the franchises that they sell?

Are the franchises that they sell good franchises that provide a high success rate for the first investors in the franchises?

Is the view from the bottom of the pyramid the same as the view from the top?

Since they are concentrating on the military community, it would be patriotic for Dwyer to get their unit performance statistics on first owners out here for all veterans to see.

Barbara Jorgensen's picture

Give it up! The Zor only has to disclose:

what is on the UFOC from the beginning of the year. In my opinion this gives permission to lie to the potential zee. Like I said before the laws are in favor of the zor. The government only looks at the zee's decision as a bad business choice. In my opinion non-disclosure is a lie. The zor has no responsibility to be honest. The UFOC is one-sided. And yes my lawyer failed to tell us anything. Unless you have majored in college in business you will have the full scoop of things you need to know to start your own business. After all the truth is the zee doesn't own his own business. Even though the zor we were involved with said so. Any zor that will not put his words in writing- and again I say in writing is a bad zor. Run do not walk away from him. The real rich seek ways of using other people's money to invest. You've heard of the perfect crime. This is the perfect crime. The bad zors rob from the good zee's. And I mean good because they have to have something going for them if they can buy a franchise. The zor has the government's permission to use other's to build his business. (And it is his business not your's.) The Zor only abides by the UFOC. I call it a perfect crime because the bad zors do lie and take advantage of the the good zee's. The most important thing we can do is inform the public about what due diliegence means in the franchise world. Hopefully by understanding what due diligence means the zee will do it and be saved. Capitialism only works in an ideal world of people who follow the golden rule. Unfortunately the zor only has his eyes on money. To most business people they have eliminated the word ethics. The zee wants to make money too. In my personel case I do not want to make money at some esle's expense. Business use to include the word ethics. Not anymore. I believe the bad zors have the killer instinct. And boy do they kill people's dreams by ruining them financially.

A rule of the Game

You can bring your own balls to the game but Mr. Blue Mau Mau is the umpire and makes the rules and calls the "outs."

Anyone who wants to continue the discussion can go to the Political Activism and Government Regulation Forum.

What are we talking about now ---Spudster and Potatoes or Coffee Beanery? ---or whether an Attorney is a better due diligence choice than an Advisor???

I once told Mr. Blue Mau Mau that all threads eventually return to the cause of so much of the discussion on Blue Mau Mau ----due diligence and success or failure of franchising, etc.. because the topics concerning success or failure in franchising cannot be separated from the effects of the regulation or, rather, the lack of effective regulation of franchising.

20yearZEE and TIF and others brought up the subject of changing the terms of the contracts and the fact that the contracts are negotiable -----and the progression to government regulation and the UFOC was natural and not out of place in the thread, in my opinion.

But, like Romney, I'm suspending my campaign, but only until tomorrow. I'm still waiting for Paul Steinberg's excellent study "Beguiling Heresy" A Study of the Franchise Relationship, to be posted on the Internet so that I can refer all cheated and failed franchisees to it and all new franchisees to this book. Also, I highly recommend Richard Solomons copywrited essays on franchising for brutal truth about how the game is played and won mostly by the franchisors. Michael Webster's site and writings are also a source of honesty on franchising. I miss Les Stewart's "Franchise Fool" that revealed the nature of franchising to exploit asnd cheat.

All these people above have been my teachers and because they deal in facts and truth most of the time, they have led me to my unhappy conclusions about the deal the FTC has made with the FTC. In reality, they should bear some of the responsibility for my rantings.

Felony Conviction for Grand Larceny by Kevin Shaw

Please detail Felony Conviction for Grand Larceny by Kevin Shaw. I am in the process of seeking legal counsel in hopes of re-couping monies from a
similar business transaction with said moron.

Franchise Agreements are Similarly Deceptive

But think on this, 20 year ZEE! Most potential franchise buyers are looking for a solution to the problem of providing income to support themselves and their families. There are only as few rich people who do it for a lark.

When job growth is slowing and good jobs are hard to find, franchising picks up. FranData and other PR people even indicate that franchising picks up in slow economies. These same people say that franchising has brought the American economy out of many recessions since 1976 when franchising was regulated to protect the franchisors.

Certainly, there is material on the Internet and in Book Stores but when people are looking for a job and thinking that as franchise is the solution, they are not looking at negatives. This makes them particularly vulnerable and they do not do any due diligence looking for negatives. Most of the information on the Internet is positive and pushes franchises and franchisors who can use Press Releases and their UFOC(FDD) to imply viability and government endorsement.

You will admit, won't you, that some franchisees are stuck at breakeven the entire term of the contract, sometimes with low pay and never any profits, if they can't pan their franchise off on some other person who doesn't due killer due diligence. I would bet that there are more indentured franchisees than there are successful franchisees who realize a profit.

You were one of the lucky ones but in the end, they got you because of the contract that you signed and because they no longer needed to use you.

And, you know that they sell franchises as the American Dream --- a business of your own ---and suggest that there will be only success and only mention lack of success in the binding franchise agreement. You provided capital and cheap labor (your employees) for all the years of your association with your ZOR but in the end you were no more than an expendable resourse ---isn't this true? They could make more money elsewhere.

Noise

Is right. TIF you will not advance the franchisee. I don't think you would hurt us , we can only help our selves.

As long as the zee continues thinking that we are victims and that change is hard if not impossible, we will continue to be victims.

Not me. I will fight to the very end for what is right and to right the wrong that has been done to me. My fight is a statement of not declaring defeat because the other side has more toys.

The one with the most toys in the end wins. No matter what each side had at the start.

It is also important that in the end I can look at myself in the mirror and say "I did everthing I could."

I won't post and cry about what has been done to me. I will stand up and fight, and they will know I was there when its over.

UFOC is a license to steal and not much more --Bull Scat

You protect the current regulatory rules on franchising because obviously you make your living in or around franchising and just write off the thousands who are sacrificed because they don't do their due diligence with experts.

Go out on the Internet on Google and read Robert Purvin's comments to the FTC about the Rule and understand that this insider in franchising and the former Chairman of the AAFD complained about Item 20 to the FTC ten years ago and noted that the UFOC and the Rule was really a mechanism which together with the adhesory franchise agreements protects the franchisors from charges of fraudulent inducement. I think you know that the naive trust their government and don't understand that the UFOC together with the Franchise agreement were designed to protect the franchisors and not the franchisees. They don't understand that the actual franchise agreement is in any way negotiable and the government UFOC's and the FTC Rule doesn't clarify this misunderstanding, apparently, in a further effort to help the franchisors who use the carrot of profits, etc... together with the UFOC's to trap franchisees into long-term contracts from which there is no escape even if there are never any real profits.

There are no statistics and no research on first-generation franchisee success and on the completion of the long-term contracts and no statistics on ROI for franchisees, etc.. The cooperation of the IFA and the FTC and the business community to obscure the risks and to ignore past performance statistics that are known to the franchisors is a violation of the trust of franchisees. The cooperation of the SBA who will guarantee loans for franchises with very high failure rates who hide these high failure rates in the transfer columns of Item 20 of the UFOC must be bad fiscal policy.

I think you know that inexperienced prospective franchisees often mistake the visibility of the franchise in the communities of our country as viability of the franchise that is offered for sale and don't understand that the transfer columns are obscuring complete failures of ex-franchisees.

I think you know and understand that the government UFOC presents the contract as NON-Negotiable and that most prospective franchisees do not know or understand that the contracts are in any way negotiable and in established networks, they aren't.

This cooperation of the FTC with the IFA to set up naive and inexperienced franchisee prospects who don't spend scarce resources to perform due diligence and who are provided only a weak and ineffective and inefficient Item 20 on which to do their due diligence ia an American disgrace and a betrayal of those middle class Americans who buy franchises to replace their jobs and their incomes.

Sorry, but I find no substance in your weak defense of the indefensible but I understand that all the parties involved in franchising; the franchisors, the advisors, the brokers, the attorneys, the sellers of franchise, whomever, and the government is served by the status quo of franchising that feeds the economy and the profits of all but those franchisees who are sold unviable franchises with high failure rates that are obscured in the UFOC's.

You all agree that "the end justifies the means" and that those who are sold franchises with high failure rates of first generation franchisees are sacrifices to the status quo and the ineffective UFOC's. The FTC uses weak language in the disclosures, such as "if possible" show your ..........knowing that scarce resources will prevent thousands and thousands of prospects from showing their contract and papers, etc.. to an Accountant or Attorney, etc... They indicate that "franchising is complicated" instead of indicating that is is risky and they require no concrete information be disclosed concerning the performance of the franchise itself. The UFOC is a red herring that deters the attention of the prospective buyer from the most important material factor concerning the risk. This material factor is the franchisor-known statistic of the success or failure rate of first generation franchisees who provide the cheap labor and the cheap venture capital to build the physcial units that wear the brand names.

Franchising needs to be regulated as well as securities are regulated by the SEC. If franchising can't stand on its own merits and can't withstand true disclosure of the success or failure rate of the first owners, the first-generation franchisees who, in failure, lose everything, then those franchisors with high failure rates of first-generation franchisees should be subject to market forces and fail.

Hey!

Everything is about Item 19, 20 and the FTC! Why do you think gas is so high? Item 19. How to make peace between the Israelis and Palestinians? More government regulation in franchising. The problems in Darfur? Duh - the FTC! The protests in Tibet? Okay, so the Dalai Lama may or may not be involved, but you can bet your knickers the SBA is involved!

Am I, and Carman, the only ones that see this?

Dale Cantone and Administrative Action ----Why did he Cave?

There has to be some explanation of why DLA Piper was able to negotiate a rescission on behalf of the Coffee Beanery that required the franchisees, D&R, to GIVE UP THEIR PRIVATE RIGHT OF ACTION if they accepted the Rescission. The terms of the rescission would not have saved D&R from bankruptcy and, therefore, they wouldn't accept the terms that required them to give up their private right of action. We see, from researching other Maryland Rescissions, that franchisees were NOT required to give up their private right of action under Maryland Law if they accepted the rescission. Only the Coffee Beanery Rescission was diferent, why?

What right does a state regulator have to negotiate a rescission and consent decree, in which the franchisee who has been harmed isn't present or represented, that requires the Maryland franchiss to give up their right to a private right of action under Maryland law if they accept the Rescission. How can this be lawful? If D&R had been permitted to accept the Rescission and RETAIN their right to a private right of action under Maryland Law, they could have accepted the rescission and then have gone directly to court. Instead, D&R indicate that Dale Cantone encouraged them to submit their arbitration deposit and to arbitrate as a means of recovery?

As we see, this was a trap for D&R who not only lost in arbitration but were found to be responsible for the costs of the arbitration. Was this a message from the federal government?

Dale Cantone is head of of NASAA, a private organization of volunteers, who work with government to protect the public from fraud and who work with government to formulate public policy. The DEAL of Item 20 was made in the late 70's and all of the people involved today in the FTC and and state government and NASAA inherited a system and a status quo in which the actual material risk of the investment in a franchise, as demonstrated by the failure or success of first-generation franchisees, could be obscured under State UFOC's.

Rescission is an administrative action. I don't know how the Maryland State Franchise Relationship Statute treats ommissions in the UFOC that are violations of the the UFOC and the Rule. Is it necessary to prove in court that the ommissions were fraud and is it necessary to prove that the fraud was proximate to the damages suffered by the franchisees? Is the concept of a flawed business plan with a high failure rate every arbitrated? Is the concept of hiding the risk through ommissions in Item 20 of the UFOC ever arbitrated.

In my mind, it appears that CB did not fully disclose in Item 20 and made misrepresentations that obscured the risk of the investment. That is! If D&R had known that most of the Cafe Concepts were failures, would they have invested in the franchise? I think not. Item 20 obscured the risk of the Cafe Concept that was mixed in with the other CB concept.

And yet, a federal arbiter completely ignored the Rescission and treated the ommissions in Item 20 and the other misrepresentations in the contract as technical oversights that did not contribute to the damages that D&R suffered because of their investment in a flawed and unproven franchised concept. Was the arbiter aware that most of the Cafe concepts had failed? Is fraud ever arbitrated or are misrepresentations not considered fraud in arbitration?

Do you understand that the States issue UFOC's to franchisors who have very high failure rates of first-generation franchisess that cas be legally obscured in the UFOC in Item 20? Do you understand that the SBA guarantees loan for franchises that have very high failure rates? The FTC and the State AG's appear to be only interested in whether or not the franchisors have complied with the disclosure rules, and if they have complied, they appear not to care hnow high the failure rate is, or how low the success rate may be.

Somehow, The CB matter, if not defeated, may have opened a can of worms the State and Federal Government does not want to open. My opinion!

We wait for the next chapter.

Barbara Jorgensen's picture

Yes avoid franchising until the laws are changed!

To be honest as a former zee we had hoped to have our own business and make passive income for our retirement. It turned into a financial nightmare. The zor is out to take your money and does not want you to make money. (Good zors would want their zees to succeed.) Like a very wise lawyer said to me most are bad. Our only hope is to fight together so the people in our government would change the laws to protect the people who have saved all their lives to open a business of their own. (Which a franchise isn't your business- another lie.) Things will not change until zees from all the companys band together and try to get a committee together and tell the government what happened to them. Getting our government's attention should be our first goal. There is strength in numbers. Until we stop talking about it and actually do something,  we will not be heard. In the mean time people should never invest in a franchise. We need to get united. If you have connections with the press get a hold of them and tell them your story. I have personally warned family, friends and aquintances of the evil doing of the franchise world. Tell everyone. Seek counsel. In the mean time all the zees from our franchise are trying to get well. (Get out of financial hell.) We cannot help others util we make ourselves whole again. I am still grieving and many times I get angry. (Which is part of grieving.) A wise man said to me this week end that the best revenge is to live well. Allow yourself to grieve but still take care of business. We need to get ourselves out of financial hell and fight. Until abused zee's get together we do not have a chance. Never give up. Remember there is a reason in movies and in many stories the bad guy always looses in the end. I don't believe our stories will be any different. When people are confronted with the truth many times the only answer is it is your fault. That is what zors do. They know what they've been doing to gain a buck. By misrepresentation, price gouging, puffing, non-disclosure they are looking to rob you and take whatever you have. Yes the government allows this awful thing to take place by allowing them to have UFOC's that protects them. The average person doesn't understand this. Even in our case we had our lawyer review the UFOC. If no one guides you with proper councel how would you know what to do. In the last 4 months I have been doing what they call killer due diligence. In the last three days I haven't spent as much time with this. But by studying here on BMM I believe I understand what happened to us. What I came up with yes we should of gone to a franchise lawyer instead of the dead weight of a lawyer that said everything was fine. Instead of guiding us to a franchise lawyer and our CPA, he said nothing. So get referrals about lawyers. Do killer due diligence on the counsel you seek. I believe people do not understand the depth of killer due diligence before you buy into a franchise. I spent 12 hours a day studying what I know now. Time to take action and make myself well and continue to encourage the people who have been thrown into financial hell and give them hope. Things happen for a reason. Am I more cautious? Yes. Would I trust business people so easily? No. Do I have a plan of action? Yes. I agree with Item 20 ranter the risk factor should be disclosed. Not just that it is a risk. But the percentage of the risk. The truth to do do proper due diligence before you buy a zee takes a long time. Never buy it because you like the product. Never sign because the area directors are charming. Protect yourself until the laws change and never buy a zee.

Again you are the Idiot Item 20 Ranter

There must be more than 800,000 franchise contracts here in the US.

The government is not your mommy or your daddy and no one has to buy a franchise.

As an alternative to franchising people can start their own businesses and in fact they can become a franchisor.

So Idiot Item 20 Ranter don't go way mad, just go away you bore me.

The Truth Shall Set You Free!

TIF

Barbara Jorgensen's picture

Greater good should be changed to the very wealthy!!!

What made our country great is the middle class. The middle class is dissapating and our country is going to be the have or have nots. Peasants and the rich. It is the very thing that made our country great that are targets of these vulgers. It is about power because the very rich have the money to protect their best interest. Please stop saying greater good. Change to the very wealthy. In my opinion the middle class is the greater good. We may not have billions. But I know I personally would never hurt another fellow human being so I can personally gain financially. I am out to prove that I can live a good life and do and have the things I want by never hurting anyone. In other words I can be successful by living by the golden rule. "Do unto others as you would want them to do unto you."

Quizno's Nothwithstanding

Let's bust the myth that there was a by gone era when all a person would do is shake another's hand and that would negate the need to incorporate the agreement to a written contract.

If a man's word is his bond then the man won't mind reducing his words to writing and sign his name next to them in a contract.

The Truth Shall Set You Free!

TIF

JD is Disingenuous ---SEC Rules

You know, JD, that the success of the franchisor is not affected by the failure of the individual franchisee as long as the individual franchisee's assets continue to serve the franchisor and his profits. Please! don't con me.

This blurring of identities is useful in financial reporting and this is why we had the article on The UPS Store that worked to hype the The UPS Store and UPS Stock. Hopefully, this will be investigated by somebody!

actually...

actually that question was posed first to you by fuwa and you chose to ignore it and instead turned it around as a question posed to the 'ranter'.

RE: SEC & Saks

Saks turned itself in when they restated earnings based on their own internal investigation.  The SEC didn't find the error, Saks did.  Oh, and it was settled without admitting or denying any wrongdoings. 

The Fisher King

"The story of the Fisher King is the chronicle of that part of us wounded in the great development in other spheres that occurred in the twelfth century. Science, individuality, a new sense of freedom, romanticism - all of these were taking on new power and definition at this time....

It was a wonderful explosion of new human faculties, but cost a heavy price. The story of the Fisher King is the story of that wound that fell principally on the the feeling function."

- The Fisher King & the Handless Maiden, Robert A. Johnson

Les Stewart

Yes! I wonder about Saks Inc.

I always wondered about Saks Inc. who were instrumental in setting up Winona Ryder for the City government and the retailers to protect the Civil Recovery Programs for Shoplfting. I hope the FTC socks it to them but I would be surprised.

When the FTC and city and state governments permited the licensing by the City Police Authorities of privately -paid -retail- loss prevention personnel with limited police powers, the stage was set for the legalized extortion of civil recovery for shoplifting to be paid to the corporate retailers.

While it is against the law to extract money by threatening a criminal prosecution, it is perfectly legal when the government does it for the retail corporations through the use of our city police and the courts.

Barbara Jorgensen's picture

We didn't rush to their bedside!

They sweet talked us lied right in our face. Told us what we wanted to hear. An old trick that men do to seduce a women. Lie after lie after lie. After the act they throw you away and have nothing to do with you. (The act is signing the franchise agreement!) They just wait until they ruin you financially. They better be careful maybe someone will have lots of money they don't know about. And then justice will be prevailed. It just takes the right person with money that will provide zee's the way. We have the will but lack the resourses to go after the crooks. In the mean time we need to warn the public.

Bob Frankman's picture

Regulation Forum

"Maybe we need a new thread to discuss the role of the regulator " - V

Good suggest, V. This discussion isn't quite appropriate for "defunct franchise concepts".

There's a robust forum thread about franchise regulation, which is right here. And since you are anonymous, let me know if that is not enough. I can create a new forum. (Members can create forums.) If so, give me a title and description.

Frankman

P.S. As a favor, might I ask to tone down the whole virgin / whore thing in the titles? You never know who might be looking over my shoulders and thinking that their boss is an Internet perv. And if that weren't bad enough, my wife at home has been wondering what I've been doing late at night while cackling at the computer. Don't want to give the wrong impression.

Could not agree more BUT

One answer to your question is that all of these franchisors make sure that they have top-notch high-pressure sales teams in place to sign people up using all kinds of shady tactics. Yes, shame on me for signing the UFOC but shame on the company for mis-representing themselves. I know a lot of people, including myself, who bought into these concepts before they exploded in the past few years and oversaturated the market in many states while increasing the initial investment to unaffordable proportions and we all spoke to current owners and they were for the most part very happy at the time. Cold Stone for example has had major issues since 2002 but has continued to sell a model that they know does not work. Now we are just starting to see the fallout from that mistake. Sadly, it is the franchisee that ultimately suffers. Hopefully there will be some changes in the law to protect the public.

Many franchisees may not share your point of view

Dear TIF:

I suspect there are many failing Quiznos, UPS Store or Baskin Robbins franchisees (by way of example) who do not share your point of view. Would any of the downtrodden franchisees of the world care to chime in?

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