Earnings Claims in CDN franchising: $75,000 for 12 days work?

sipnsnackThis is an advertisement in today’s Toronto Star.

It is a listing under the “Franchising” section. At least 50% of the ad space in this section is hyping the Canadian Franchise Association’s upcoming The Franchise Show.

The Canadian Franchise Association bills themselves as “the national voice for Canadian franchising“.

Let’s see exactly what this alleged franchisor has to say for itself:

1. Earn $75,000 per year for 1 day of work per month. I guess that corresponds to $781.25 per hour (8 hours per day). Or if you wanted to work 2,000 hours per year, you’d be making $1,562,500 peddling branded drinks. This is what passes for investor protection in Ontario, more than 8 years after the passage of the Arthur Wishart Act (Franchise Disclosure).

2. Note how the extremely unknown franchise system trades on transnational brand titans such as Pepsi, Doritos, Lays, Red Bull, etc. This is a classic persuasion technique the confers legitimacy by associating with authority (this time, marketing or brand strength that “Attracts Customers like a Powerful Money Magnet!“)

3. It promises a system: it bundles locations with package. Why the heck at these revenue per hour figures doesn’t the franchisor just hire some flunky to stock the machines? This goes to the usual “turn key” proposition of a “proven system” that usually turns out to be nothing of the kind.

4. The flash “Now Launching in the GTA!” serves two masters: (a) it explains why no one has ever heard of Sip-N-Snack and (b) it lures those that want something new, special or up-and-coming. The phrase “This here poo-collecting franchise is the next McDonald’s…” is a related rhetorical come-on for the overly-trusting.

5. Placing the advertisement in the franchise section is intended to confer legitimacy or utilize social proof: other better-known franchise brands in the ads around this ad. This is important because this might well be the cheesiest fly by-night equipment business opportunity scam imaginable.

6. The total price point is important. At $16,995, if this were a total scam, very few investors would sue to recover their loses. The cops usually won’t investigate anything under $250,000 and the retainer for a lawyer is +$1,000. Like 99% of the defrauded, they won’t even report it to the local police and the Competition Bureau is a bloody lapdog.

7. Note the recognizable logo: Pespsi-Cola. And 5 exclamation points. This must be a hot deal!!!!! (Just because it is corny does not mean it isn’t really effective on a certain percentage of the population.) Fraud cuts across many socio-economic levels.

8. If this is a scam, the money is quickly sent away; well beyond the reach of any litigation or police investigation. Con games are well-thought out beforehand and the three-card monte table is quickly folded up.

9. But still if 10 people bite, that’s an okay return on investment for the franchisor and it keeps the revenue wheels turning at The Toronto Star, too.

10. Canada is a well-known white-collar crime incubator as recently portrayed by the CBC Marketplace in Buying into the pitch to become rich. In all confidence games, more than 50% of the marks are good for a second fleecing.

Any comments, particularly from those knowledgable about business opportunity frauds are welcomed.

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7 Responses to Earnings Claims in CDN franchising: $75,000 for 12 days work?

  1. B.O.B. says:

    Well said.

    A “lapdog” that is cute and cuddly and has no teeth, as a matter of fact, won’t even bark while ordinary citizens of this country are robbed by those with connections. Keeping victims apart from scams and frauds is a good way to keep them (scams) going.

    Where does the due diligence of the Star’s advertising Department come into play here?

    Have you ever been victimized by a Scam in an “income opportunity” market? Fell into the trap of a misleading or fraudulent “business opportunity”? How about falling into one of the many “franchise” traps? If you have or know someone who has please contact me.

    Scott

    Business Opportunity Busters at rogers dot com (remove all spaces)

    Like

  2. Les Stewart says:

    Scott,

    Thanks for the comment. The only thing that allows scammers to continue is the silence of those that have been burned before.

    The Toronto Star has had an enviable reputation in publishing franchisee stories: before the last 2 years or so, anyway. I agree: this is a real whopper of an ad.

    Les

    Like

  3. Carol Cross says:

    Yes! The silence of those who have been burned before enables the status quo of franchising and scams to continue unabated. The newspapers are only interested in the ad revenue from franchising. What would all the media do without franchise advertising revenue? The few franchisee horror stories that appear in the newspapers do little to counter the overwhelming appearance that franchising is the key to a good job and profits.

    Big Franchising always goes to the Super Bowl and the power of advertising in newspapers and on the Internet and TV and Radio feeds franchising because franchising feeds their revenues.

    It is no wonder that P&G in the US is going into the franchise business and will use the cheap labor and cheap venture capital of franchisees to try to prove their concept of a “car wash” in a saturated market place. I may have to stop using Tide.

    The silence of the lambs is unfortunate but understandable. Those who survive the “burn” of bad franchise investments have scars — and those with scars try to hide them from the view of the public.

    Like

  4. Barb Rodger says:

    It truely baffles me how we can continue to elect and support politicians that continue to allow such injustices to be enacted upon the average person that is trying to make a living. I am currently going through a situation where an individual reduced margins (legally) initially to drive out franchisees as well as to make the corperation more attractive to potential buyers. He has since walked away with a handsome cheque, left many franchisees large debts and a corperation that has no money left to improve.
    There needs to be a significant overhaul of the franchise laws in this country. I think as a minimum franchisors should be obligated to fund a budget that allows franchisees to have a lawyer and accountant on retainer to review contracts and changes in the system. The reality is the franchise system is very effective in applying the divide and conquer technique which pits individual franchisees against very well funded corperations and we all now how that story ends.
    I wonder if the CFIB (Canadian Federation of Independent Business) would be interested in carrying this torch.

    Like

  5. Les Stewart says:

    Barb,

    The last time I checked, almost 20% of all CFIB members were franchisees. That being said, the CFIB has a reputation for asking simple questions and accepting simple answers. They seem unwilling to really get behind franchisee rights except in a very mild way.

    I had tried to liase with them at one time but they had no interest. Oh well…

    Les

    Like

  6. B.O.B. says:

    A movement has started to get some changes made.

    http://www.bestrongfoundation.org/ has been set up in the wake of the Earl Jones Ponzi scheme in Montreal which has been getting some media press.

    Join in and sign the petition.

    Scott

    Like

  7. Les Stewart says:

    BOB,

    It’s a long journey and many obstacles but I commend them for taking some excellent first steps.

    Les

    Like

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