If we forget, We will continue to repeat our mistakes

WikidFranchise.orgWe created WikiFranchise.org to house the documents that I have collected and to start a dialogue.

A wiki‘s strength is in its volunteer editors.

Time will tell whether other people find this franchise industry-only indexed archive useful.

It has some merit for teaching and learning about the business risks that sometimes run counter to the overwhelming advertising message to say “yes” to every half-baked concept.

The latest, saddest example I added to WikidFranchise today is from the Washington Times’s Elise Anderson, entitled: Jobless seek future in franchising.

As Elizabeth Winterhalter and her husband, Monte, packed up their house in Glastonbury, Conn., for their move to McLean, they were eager and anxious about trading the pain of unemployment for the promise and peril of something they had never tried before — running a franchise.

Good grief.

I wish the Winterhalter, Dillen, and Prioleau families all the very best as a personal and financial outcome but I hope Ms. Anderson follows up with them in 6 or 12 months. As for the expert that Anderson solely relies on?: Alisa Harrison has been with the franchise industry for a total of 1 1/2 years.

Banks won’t do Franchise loans: It is true that there are no normal or even government-subsidized (SBA) loans to be had now.

The reason: an emerging crisis that implicates the 7(a) Loan program of the U.S. Small Business Administration which has a long and consistently scandalous history.

Predatory franchise loans are becoming visible to everyone: loan brokers, banks, re-packagers and politicians. The public bailout of the franchise industry’s greed is what is freezing everyone in their tracks: not a recession. Pending fraud indictments tend to chill even the shadiest franchising financing scam.

Estimates of a public bailout of $70 to 80-billion will seem quaint if an accurate, non-biased accounting were to ever take place.

Don’t expect to see any breaking news stories about this on Franchise-Chat.com or BlueMauMau.org either: these off-message stories are skimmed off before they hit any franchise RSS feed. Keep the kids busy talking about the evil empires (MBE, Quiznos) or arbitration reform or how franchisees are to blame.

What I do: I took the article, coded it and saved it in WikidFranchise. Here are the business risks I assigned to it:

  1. Cannon fodder,
  2. Desperation causes bad decision making,
  3. False hope,
  4. Financing with 401k money is totally reckless,
  5. International Franchise Association, IFA,
  6. Only one side presented,
  7. Loss Aversion: people dislike losing much more than winning (the same $),
  8. Professional journalistic standards,
  9. Retirement savings gone,
  10. Severance package financing dream,
  11. Sold during time of psychological vulnerability, especially unemployment,
  12. Sold only to people with no small business experience (very naïve),
  13. Success or failure is within the direct control of the individual franchisee,
  14. Unproven business model,
  15. Unskilled and unaware of risks, and
  16. Who pays for the research?

Many families are going through very desperate times and are searching for help.

  • This article is just plain cruel.

I collected the already-published documents to give a sense of history for new investors.

WikiFranchise.org is a revolutionary tool for those willing to use it.

Advertisements

2 Responses to If we forget, We will continue to repeat our mistakes

  1. Carol Cross says:

    I always feel sick when I read articles like the one in the Washington Times —but sicker when I realize that this is “public policy” that is backed by The Congress of the United States and implemented by the FTC and the State Governments, and protected in arbitration and the courts.

    You have tried so hard to spell out the dangers. Les, but the status quo is such that the dangers are hidden by the free press because of ignorance or malice or what? I can’t seem to get on the Washington Times to Register to comment but I really know it wouldn’t make that much difference anyway, no matter what I would write.

    The newspapers don’t want to see the disgrace and the BIG LIE of franchise regulation as anything that needs to be reported to the public. Apparently, ugly public policy is protected by the free press when it involves international trade. The reporters are looking for Product and the IFA sees that they get it, and all of the special interests feel off of the flesh of innocents who have no idea of what they are getting into and how great a risk they are taking.

    Public policy and the FTC Rule intends franchisees to be merely expendable resources for franchisors (Did you read the Honorable Richard W. Goldberg’s opinion (a Judge of the United States Court of International Trade) who sat by designation, Case No. 95-1903, Appeal from the United States District Court for the Eastern District of Arkansas, Before MAGILL and LOKEN, circuit Judges, and Goldberg, Judge, filed August 8, 1996, Jerry Morison and Helen Morrison, Appellants v. Back Yard Burgers, Inc., Appellee.

    Those Americans who are desperate for a means of earning income don’t want to hear negatives and are push overs for the franchisors who won’t tell them that they have a 50% chance of losing everything they have invested sometime in the first five years, and that there is only a small chance they will be one of the 29% to last as long as ten years.

    The MALICE of the implied earnings claims (the startup costs) and the ten year franchise contracts is shocking and the poor souls, the hopefull good faith franchisees, don’t realize that the contract is designed to be a malicious legal trap in both failure and success.

    Will the truth OUT!

    Like

  2. Les Stewart says:

    Carol,

    Do what you can when you can. It takes a little while for comments to appear on their site. Try. If you note, my comment made it but took about 3 hours.

    Also please note that 3 of the 6 comments did not “buy” the assumptions.

    Go as far as you can see; when you get there you’ll be able to see farther. Thomas Carlyle

    Les

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: