Piling on: The Risk of me too claims

Piling on is a concept that most franchise investors do not understand.

Their ignorance is a very serious hazard because the risk of “copy cat” claims is a HUGE problem for their franchisors.

They can lose everything if franchisors lose control of the 1st serious challenge to their 100% absolute authority.

In American football piling on is an illegal play when defenders jump on the ball carrier after he has been tackled.

  • In franchising, any franchisor can settle the 1st very legitimate claim. But no franchisor can afford to settle, say, 100 similar claims (franchisees 1 to 100).

If one franchisee is successful in proving some wrongdoing, then the franchisor is exposed for ALL his franchise relationships.

Franchisees often wonder: What the hell…Why the thermonuclear war when I’m just asking a few simple question? I’m being reasonable; why isn’t he? (Think about it from the franchisor’s side: See his smile as he writes 100 cheques?)

Note also that the specific wrongdoing that you bring forward (ie. false earnings claims, supply gouging, ad fund use, etc.) doesn’t really matter. Experienced franchisors know that much more serious claims are there IF you know where to look.

This is why, when you continue to disagree with your franchisor, it should not be a surprise when these things happen:

  • delay, deny and then delay some more (Gosh, Les. You’re the first franchisee who has said anything about this issue.),
  • progressive discipline: start with verbal and then written threats; self and then lawyer; general (read: cheaper) and then franchise lawyer,
  • willing to spend $50,000 in legal fees to settle a $5,000 single bullshit issue,
  • refuse your expansion, renewal of franchise contract or withhold permission for any sale of your franchise,
  • tell all franchisees that it would be commercially “unwise” to associate with you,
  • re-write franchisee meeting minutes,
  • rig elections, threaten spouse, activate proprietary sabotaged software,
  • have your banker freeze your current account,
  • be short- or force-shipped, put on COD, given tampered goods, etc. by the authorized single supplier,
  • when you go to the industry association’s ombudsman program, all the information you tells them goes directly to the franchisor and his lawyer,
  • every cop and regulator says “no thanks” but says you can sue them,
  • talk to the media (a sure way to hasten your demise),
  • talk to a politician (if more than 4 years experience, he’ll act shocked but will privately know all about Big Franchising‘s power: older politicians and party officials have had “the money/influence talk” with him),
  • insist on life-long confidentiality agreements (self, spouse, descendants) to get 15% of your investment “back”, and
  • intimidate franchisees like hell to avoid having a skilled franchise lawyer meet regularly with many franchisees to discuss their legal options.

Every franchise investor must know this [going] in. If you don’t want the fraud sausage to blow:

  • never question the divine right of your betters,
  • keep writing the cheques and
  • relax, breathe and learn your new identity well; as a shill for your master.

Question any little thing and it’s Nagasaki time.

2 Responses to Piling on: The Risk of me too claims

  1. Carol Cross says:

    The intimidation is premeditated in all franchise agreements and becomes possible right after the contract is signed and the franchisor knows that the status quo of the law and the desire of all the special interests to protect franchising will, in the end, always protect the franchisor —and especially in the one-on-one confrontations in arbitrations that are envisioned by all franchise agreements. (Did the Federal Arbitration Act in the US really intend that very weak parties should be intimidated and mandated to arbitrate with very strong parties who could manipulate law and regulation in their favor?)

    Only when franchisees band together to seek fairness and justice and restitution do the franchisors take notice and even then, in the USA, where they have 30 years of favorable case law, they are sure that they can win in the courts and negate any real threat to their absolute power.

    UNSAFE AT ANY BRAND as Les Stewart says!


  2. Carol Cross says:

    Apparently, franchisors are aware of the benefits of counter lawsuits and the anti SLAPP laws can’t touch them when they immediately retailiate against dissenters because they are retailiating under the terms of the franchise contracts that give them immediate access to the courts to TERMINATE the offending franchisee, who will then be silenced in the failure and loss of his entire investment.

    Franchisees are kept divided insofar as possible and cannot usually address the courts on an individual basis and in mandated arbitration, they surrender their due process rights to arbitrators who are fully aware of the fact that franchising was regulated in the late 1970’s in the US to protect franchisors from fraudulent inducement to contract.

    It is only the franchisees who are unaware that this is federal regulatory policy, and even very sophisticated corporate-type investors in franchises have been taken in because of the appearance that there is some government oversight of the industry.

    Now and then a franchisee wins a few dollars in arbitration for negligent misrepresentation or breach of some term of the contract but franchisors and whatever percentage of franchisees who survive and stand up in the economy cannot be threatened by those who have failed to thrive and who were tricked by appearances into buying very high-risk franchises with little chance of profits. The franchisors understand that they have immunity under the law and they are emboldened to exploit franchisees in their own interests.

    The constructive legalized fraud of the “Package” of the government mandated disclosure document and the binding, adhesory, non-bargained contract does the job it is intended to do for the franchisors who are generally home free in both arbitration and the courts when they sell unviable franchise plans to the public.

    Apparently the Peaberry Coffee Lawsuit has been dismissed out of Court?
    And, there will be no new case law that determines whether or not franchisors have any “Duty of Competence” as long as they are compliant with the FTC Rule and the State FDD’s. Pretty disgusting stuff!


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