They must have just been unlucky in choosing their franchisees, then?
However, running a New Zealand SureSlim franchise seems to be a one-way ticket to losing your life savings and your home
A great article from New Zealand’s Sunday Star Times and Garry Sheeran called Big losers in SureSlim row head to court:
Failed SureSlim franchise owners are lining up to take legal action against the franchisor in New Zealand after 17 of the 21 SureSlim diet clinics here closed their doors last year.
SureSlim NZ says those businesses failed because people had cut discretionary spending on attempts to slim as the recession began to bite.
But franchisee business owners, themselves under fire from clients who paid money for diet regimes and now feel left in the lurch, say the SureSlim franchise model is the cause of their woes.
Here are some classic death rattles (sounds made just before death) of a failing franchise system:
- lost homes for franchisees but profits to lenders (lending due diligence?),
- churning: rapid re-sale of franchises (Fee1 gift to franchisor, sells to F2, etc.)
- can’t afford legal action to get money back or prove fraud,
- the business model is broken; sales free-fall (ie. 80% sales drop in 2008),
- 29% royalty and ad fund cost (unusual in that it is out-in-the-open; most charges are buried in mandatory products from the franchisor and their suppliers) ,
- franchisor slashes co-op advertising to during recession,
- independent accounting points toward “hugely questionable” franchisor actions,
- new president spewing excuses du jour RE: blaming the franchisees (bad lot with +80% tanking in one year: fire the s.o.b.s that accepted their applications!), and
- tip-of-the-iceberg litigation history in an older market (at least Oz has a toothless franchise law to plead).
The only bright spot is the honesty of a Sydney, Australia lawyer named Mark McDonald. He hits the nail-on-the-head for thousands of franchisees caught in franchising’s Trap for the Trusting:
“Most poor bastards caught in the SureSlim net can’t anyway because they have totally done their arse. And we discourage people from throwing good money after bad.”
Throwing good money after bad. An apt description of taking legal action against any franchisor in many countries.
- I wonder how SureSlim is doing in other countries?