Franchising is the latest Big Con

I believe modern mom-and-pop franchising has largely morphed into a Big Con.

Illusion of Legitimacy: The methods of the confidence game have evolved into a much more difficult fraud to deal with because there is very little difference in the look of a blatant scam and a legitimate business format franchise.

Anyone who says you can tell the difference on a pre-sale basis is a liar and scoundrel. 95% of all problems happen after you sign; when you are caught in an almost impossible situation.

And perfectly good little systems can be turned bad by a change of management or ownership, in the blink of an eye.

As John Kenneth Galbraith said:

The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced.

The manners of capitalism improve. The morals may not.

The prospects for legal protection are not promising.

David Maurer concludes his 1940 book, The Big Con, with the following:

Confidence men trade upon certain weaknesses in human nature. Hence until human nature changes perceptibly there is little possibility that there will be a shortage of marks for con games. So long as there are marks with money, the law will find great difficulty in suppressing confidence games, eveen assuming that local enforcement officers are sincerely interested. Increased legal obstacles have, in the past, had little effect upon confidence men, except perhaps to make them more wary and force them to develop their technique to a very high level of perfection… [my emphasis]

The Wire, Rag and Payoff games are essentially dead.

  • They have been replaced by sales agents (ropers), franchisors (insidemen) and those that profit from keeping the marks cool so they don’t wise the next fool.
  • The fix is wearing thin.

One Response to Franchising is the latest Big Con

  1. Carol Cross says:

    You tell it like it is, Les Stewart.

    When the United States FTC regulated franchising to take franchisors out from under the state statutes governing common law fraud (because of their desire to encourage franchising in the economy) did they realize that they would be creating new generations of “con” artists who would use law and process to “con” middle class Americans out of their life savings? Look at the comments on Franchise Pick by the retired police officer with 23 years of service who bought a L&W franchise and see “the art of the con” in action.

    You are right. Government has given credibility and legitimacy to both the good guys and the bad guys and hasn’t bothered to provide regulation that permits the prospective buyers of franchises to recognize the difference. And, when the good guys decide that they want to use their immunity uner the law to maximize their profits on the backs of their franchisees, the good guys often become bad guys and use “churning” and “pumping and dumping” as a management tool, because they CAN.

    I agree with you, Les Stewart, “The fix is wearing thin.”


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