Risks change: Pre-sale due diligence does not

October 24, 2010

Just like entropy (going from order to disorder), things in business normally turn to shit.

Business risks increase (19 out of 20 times…) as the franchise agreement runs but your sunk costs keep you hooked up to a babe that’s turned into a wolf. Every half-baked new cash-grab scheme, you’re “All-in”.

But that does not stop the thought machine, sometimes run by “world class” CDN franchise bankers.

– Thanks: Wolves of Wednesday on ThisIsntHappinesss.com


What is the Science of arresting intelligence long enough to get money from it?

August 19, 2009

SexyCopAdvertising.

Professor Leacock‘s full quote:

Advertising can best be described as the science of arresting the human intelligence long enough to get money from it.

Franchising is just like that.

The primary stage of arrested intelligence (entrepreneurial wishful thinking) is call pre-sale due diligence.

Due diligence, DD was created as a concept to serve the sellers, NOT the buyers of franchisors.  Perfect, “110%” awesome research can NOT provide reasonable protection against post-sale franchisor opportunism.

DD cannot stop a totally sweetheart franchisor from turning into the worst predator, unilaterally and selectively after the contract is signed.

DD never could and it never will.

DD was created to give a plausible excuse why 1,000s of hard-working, honest investors have lost their life savings. It is maintains the ” confidence” in the game, cools out the mark and confuses and distracts people. When the siht hits the fan…the victim is blamed and most importantly, their shame (stigma, spoiled identity, self-loathing) silences their potential dissent.

Dr. Donald L. Nathanson (The Name of the Game is Shame) provides a nice treatment of a very powerful affect: shame. His Compass of Shame, I find very interesting. He defines 4 patterns of reaction:

  1. withdrawal,
  2. avoidance,
  3. attack others or
  4. attack self.

Note how certain ones of these strategies are encouraged to be used over at Blue MauMau and Franchise-Chat.com. People are ridiculed our shouted-down, banned, shouted, censored or made to be felt stupid. Even to the point of lecturing rape victim advocacy groups on their ignorance of asinine legal processes.

Just like they know the distracting qualities of such a lovely image, above.

Confusion, distraction, sleight of hand…not very difficult to disable critical thinking, is it?


BusinessWeek franchising article

March 12, 2008

BW Logo

Please find the current Special Report on Franchising. I am quoted in the article Is It Time to Buy a buy Franchise?

“If any promise is made, you should have it in writing, and if you put it in writing and it isn’t included in a franchise agreement, you should assume you are dealing with a liar and a scoundrel,” says Stewart.

Further…

But he suggests that a majority of the new offerings being marketed are “non-sustainable,” and that the number is greater than in the past.

“These fly-by-night systems come in to the market because people allow them. They buy them and they think it’s just like McDonald’s.”

There is also a slideshow called Franchising Experts Weigh In. I’m the last guy [far right] with the red face on holiday.

“If you really have no experience in an industry, like collecting dog poop, then you should work there [first]. You need to understand what that potential franchisee is going through.”


Information Sharing Project, ISP

February 20, 2008

The ISP will revolutionize the franchise industry.

I started in 1998 by collecting franchise-related documents from around the world. They were drawn from public hearing transcripts, media articles and correspondence. I now have 1,500 of them from over 35 countries.

I began to notice patterns in behaviors.

What I didn’t have was a language to describe what I was seeing. I started to create keywords and keyword phrases to describe these behaviors. I now have over 1,000 of these industry descriptors.

Some examples are:

  • 95 per cent of legal fees are paid by franchisors,
  • Advertising fund use disagreements,
  • Churning (serial reselling),
  • Franchisee revolt,
  • Lender’s due diligence not done properly,
  • Never owe your lawyer money,
  • Regulatory capture breeds its own incompetence

The ISP does a whole lot more than translate franchise gobbledygook into plain English.

If you would like to learn more, Why not download a free copy of my 2003 Ontario government proposal? Just click here: Information Sharing Project.


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