The True Evil of Gag Orders

Hitler’s words on his mouth is Redeverbot or Ban on Speaking


The caption reads:

  • “He alone of two billion people on earth may not speak in Germany.”

This poster reflects the fact that for a period in the 1920’s, Hitler was forbidden to address public meetings in much of Germany.

The artist is Philipp Rupprecht who is best known for his cartoons Julius Streicher and Der Stürmer (“The Attacker”).

Tricking franchisees into signing gag orders when they evaluate a franchise, when they renew, when they re-finance and then when they sell is next to useless.

Gag orders are powerful but not for the way most people think.

1. The conventional wisdom is that confidentiality agreements act to stop the flow of information (negative stories) coming back to the market. Usually, information flows reward good operators or franchisors and punish opportunistic franchisors (people are unwilling to invest in their systems.

This is part of their function but they are much more useful than just that.

2. Gag orders are a sophisticated form of mind control that taps into exiting franchisees’ guilt and internal conflicts. The gag order is only the symbol of a franchisee’s betray of another person, another family.

Franchising sets up a Bargain with the Devil that is disguised within an economic model.

  1. The deal seems to say: ” You get 15% of the value of your investment you must sign a gag order”.
  2. But what it comes to mean [in the franchisee’s mind] is: “I will betray someone else in order to get my 30 pieces of silver.”

As an exiting franchisee from a deadbeat investment, you know anyone that buys the store from you will lose their life savings. You also know (at least on some level) that by agreeing to the “deal” you are becoming complicit with the franchisor: the very party who has basically ruined your family and future.

You are maneuvered into believing that the “best of the worst” alternatives is to screw another unknown future franchisee to the wall.

  • I believe franchises get really sick because of this internal conflict, of knowingly betraying a stranger in order to survive.
  • Franchisees that I have known that died, often attribute their cancer, heart attack, etc. to franchising (via stress).

Allegorically throwing anyone in front of an approaching train in order to save yourself, has some deep psychological and spiritual consequences. When you conspire into luring someone else into slavery and a life of pain, you not only join in the franchisor’s culpability…but

  • in a very real sense, you become more of a slave than the new guy because you were aware of what would happen.

This internal guilt or cognitive dissonance (two contradictory ideas at once: “I hate my franchisor for lying to me” but “I lied to escape”) is what keeps former franchisees sick, inactive and silent. You have created an internal conflict that is next-to-impossible to reconcile. It’s called being eaten alive and creating yourself as your own worst enemy. I know this very well as someone who has never signed a gag order.

Scribbling your name on a document means next to nothing.

  • Intentionally conspiring with and becoming buddies with evil, means the world.

One Response to The True Evil of Gag Orders

  1. Carol Cross says:

    Gag Orders in Franchising are SOP because, of course, they further the ability of franchisors to churn –either through acquisition of the hard assets and sales of the failure through direct acquisition by the franchisor —-Or. through the franchisor’s management policy of encouraging and helping third parties to acquire the business from the failing and departing franchisees for pennies on the dollar.

    The failures and the fire sales are kept secret to the best of the ability of the franchisors and the ABA is busy trying to instruct franchisors on how to use SLAPP lawsuits against franchisees who post of their experiences on the Internet.

    I’m sure SLAPP will work if the FTC Regulatory Policy concerning franchising continues to protect the franchisors from fraudulent inducement and fraudulent concealment in arbitration and the courts. I’m sure that BIG FRANCHISING will figure out how to silence the voices of those who post on Franchise Internet Chat Sites.

    Franchisors can now assure the cooperation of the failing and terminating franchisee through threats of using the liquidated damages clauses in the boilerplate contracts UNLESS the failing franchisee cooperates with the third party prospective buyer in a takeover or in the sale of the assets or in a “management” agreement in which the failed franchisee still remains responsible for the long-term lease if the new manager/owner? doesn’t make it in the next year or so. The gag orders are upheld by the courts as they are legal and binding contracts signed by both parties.

    In some instances, failed franchisees do WARN new franchisees about the unviability of the business and turn over their P&L and business tax reports to the new owner-manager-buyer who perhaps thinks he/she/they can bring the unit to break even because he/she doesn’t have a big investment debt in the startup and buildup to service every month. Or, maybe these buyers who buy failed stores are just “straws” that help the franchisor to present the appearance of viability in the marketplace.

    Obviously, the GAG ORDERS work TOGETHER with the government disclosure document and the boilerplate franchise agreements to obscure the failure rate and lack of profitability of many franchised business opportunities from the new buyers of franchises.


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