More garbage info in = better decisions?

A good article from the Mr Video situation that illustrates many of the basic problems in franchising, worldwide.

Australia and New Zealand investors and media have really picked up on the industry’s propaganda in the last 12 months or so. As I have increased my knowledge about franchising, the more I want to wash my hands.

Slindile Khanyile reports from South Africa in the Business Report article: Information is franchisees’ best friend in agreement with franchisors.

More is always better?: Partially true in theory but is absolutely misleading in franchise practice. It’s called baffling them with bullshit so the contract is seldom even looked at.

In FranchiseLand, things are often much more complex and counter-intuitive than a “rookie” small business investor would believe. Sheep are useful for both a fine woolen sweater or the barbecue

I would suggest that South Africa’s franchisor-only trade association has some explaining to do. BTW: whenever you see the words “franchising consultant” together, translate that into a commissioned salesperson. You’ll be right 95% of the time.

I took this article into the Information Sharing Project and these are the keywords I extracted:

  • 100 per cent of settlements have gag orders,
  • Access to justice is not available,
  • Apologists,
  • Cannon fodder,
  • Can’t afford to sue,
  • Churning (serial reselling),
  • Complaint letter to franchisors trade association,
  • Designed to fail as franchise investment,
  • Disclosure laws: 10 per cent solution,
  • Disclosure laws: false sense of security,
  • Financial failure of first franchisee a material fact to the second,
  • Franchise laws protect franchisors, not franchisees,
  • Franchise agreements are so complex, they are breached the moment they’re signed
  • Franchise agreements create a License to Lie, Cheat & Steal,
  • Franchise agreements: Masterpieces of deceptive wording and artful omission,
  • Franchisee repudiates loan,
  • Franchisee-on-franchisee opportunism,
  • Franchisor association not trusted by franchisees,
  • Franchisor association not trusted by professional journalists,
  • Franchisors want the minimum regulation they can get away with,
  • Gillian K. Hadfield
  • I own the assets but the franchisor controls them,
  • Incompetent or predatory: for the small business investor, the outcome is the same,
  • Loan repudiation,
  • McLaw: toothless legislation designed to protect the dominant parties,
  • Mediation: information gathering that aids the destruction of valid legal claims,
  • More one-sided information leads to greater deceit,
  • Must sell business (eventually) through franchisor,
  • No franchisor support,
  • Only 3 ways out: resell (next loser), independence (be sued) or abandon (bankruptcy),
  • Opportunism: contract creates powers which are used to strip investor value during relationship,
  • Opportunism: self-interest with deceit,
  • Opportunism Test: If asset ownership were reversed, would decision likely change?,
  • Stores shuttered,
  • System designed to fail for franchisees,
  • Sunk costs: franchisee’s trapped capital keeps them chained to treadmill,
  • Short-term profits to franchisor much higher with cannon fodder investors,
  • Shocked, I tell you: just shocked,
  • Unproven business model,
  • Unsophisticated buyers,

Want to gamble? You better know when you sit down with businesspeople who the chump or the fool is. If you don’t have superior relevant information and power, look for the victim in the mirror.

You may believe you are getting into a sort of a partnership with a franchisor. It is much, much more. You may not care but, believe me, if you ever have to disagree with your franchisor, these parties will create every barrier imaginable to your pathetic attempts at justice.

Usual Suspects

  1. your specific franchisor (good, evil, whenever…),
  2. a national trade association that defends the rights of the best franchisors to behave [if they see fit] as the most predatory [see FASA],
  3. an international network of these apologists & spin doctors (see next logo),
  4. the biggest law firms in the country who are paid 95% by the franchisors to destroy little guys like you [franchise bar],
  5. banks and lenders who love loan pushing, Predatory franchise lending,
  6. franchise consultants/sales agents [only paid when someone says yes],
  7. politicians whose jobs depend on giving the powerful what they want and
  8. monopoly suppliers.

If you don’t understand these issues, you are incompetent to evaluate a franchise offering in any country.

  • You are, however, fully qualified to sign a contract that gives others the right to Lie, Cheat and Steal from you.
  • And you should not be surprised when they, in fact, do so.

Harold Brown, Esq. didn’t call franchising a Trap for the Trusting for nothing.

2 Responses to More garbage info in = better decisions?

  1. Carol Cross says:

    When I read Les Stewart, I understand where he is coming from and where he has been, and where he wants to go, I think! He wants to warn and he wants to raise the consciousness of the Bar or the Banks, or the Government? He wants to WARN that franchising is UNSAFE with any Brand for franchisees. I agree!

    Franchising for franchisees is a world problem! Horror stories are surfacing in the UK, NZ, AU, and the USA. The very nature of the scheme of franchising wherein the stronger party holds out the carrot for the weaker party who is out there LOOKING for the carrot depends on the the IGNORANCE of the weaker party as to the “nature” of franchising and the dangers to the franchisee inherent in the deal and the terms of the binding and adhesory long-term franchise contract. The ignorance and the good faith of prospective franchisees is never in short supply

    He tells the truth. There is really a very slight chance of any recourse in the courts for failed and failing franchisees because all franchise contracts require the buyers to acknowledge that there is a 100% risk of failing and that they have been promised no success or profits by the franchisor. There is a conspiracy of silience about the true risk of franchising to franchisees that is supported by the status quo in support of government and private industry and the BAR. So often, legal recourse, as Les Stewart points out, is the second victimization of the failing or failed franchisee who again is taken in by “hope” and the human “thirst” for some kind of justice.

    Franchising would not continue to work and be durable if franchisors could be held responsible in arbitration and in the courts for misrepresenting the profits and success of their franchises to that portion of the public who buy franchises and who fail completely or fail to earn profits.

    Government, the franchisors, the Landlords, the Banks, and the Lenders and the legal establishment all join together to protect franchising and the franchisor because it is the franchisor who serves their interests. Franchisors need the resources of the franchisees to stand up their systems in the economies of the world and their Paper Empires built on the franchise agreements, the binding contracts, must be upheld in the courts. .

    Franchisees sign these contracts because they understand, of course, that there will be some small amount of failures in any system but they don’t understand that the franchisor himself hasn’t shared any of the UNIT performance statistics of the system that it in the possession of the franchisor. They believe that the “disclaimer” is just a necessary technicality of the contract and that the risk is very low and that there will certainly be a job and profits as promised and indicated outside of the franchise agreement. Franchisees don’t understand that the “risk” as demonstrated by the historical financial performance of other first owners of the franchise is deliberately obscured and not disclosed to new buyers. Prospective buyers don’t understand that only the success of the franchisor is tracked by the “powers that be” and that franchisees are a premeditated sacrifice, when necessary, to the “greater good.” Franchisors must be allowed to sell their franchises at any rate of failure or unprofitability for franchisees, with immunity and impunity under the law.

    LET THE BUYER BEWARE of the franchisor, of the government, the banks and the lenders, and all of the special interests who exploit the franchisee in their own interests. LET THE BUYER demand proof from the franchisor himself as to the viability of the units standing in the system and if there is no proof, let the buyer keep his checkbook in his pocket. And, always get the proof in writing!


  2. franchisefool says:

    Carol’s’ comments are very welcomed here at FranchiseFool. Her writing is not as long-winded as mine (thankfully) but her words ring with an authentic sound that former franchisees recognize. I have often found that the truest approach to a subject is often also the most generous of spirit.

    I don’t believe in creating an electronic gated community by banning specific contributors.

    Everyone is welcomed here.


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