“Get into business for Next to nothing”, said the Kid

U620564ACMEFranchising offers a short-cut to prosperity.

Inexperienced people fall for a well-dressed up “get rich quick” scheme.

Over at Blue MauMau they’re saying that 70% of advertised franchise “opportunities” are bogus (ie. not investment worthy).

You should be wary of people promising “quick riches”: even if you seem to have to “work” for them,

This desire to get something for nothing has been very costly to many people who have dealt with me and with other con men. But I have found that this is the way it works. The average person, in my estimation, is ninety-nine per cent animal and one per cent human. The ninety-nine per cent that is animal causes very little trouble. But he one per cent that is human causes all our woes. When people learnas I doubt they willthat they can’t get something for nothing, crime will diminish and we shall all live in greater harmony.

– Chapter: Early Adventures in Chicanery, The Con Game and “Yellow Kid” Weil, W.T. Brannon, 1948

Something for nothing (or some “bargain”) has proven very costly to many franchise investors.

But very profitable for those skilled in confidence games techniques.

5 Responses to “Get into business for Next to nothing”, said the Kid

  1. Les;

    Are you now suggesting that those of us championing realistic due diligence might be on to something?

    Like

  2. Les Stewart says:

    Michael,

    I have always been in favour of realistic due diligence.

    I have simply pointed out repeatedly that pre-term, due diligence is just one element of managing business risk that arises from the sunk cost nature of putting money into rented franchise.

    The far, far greatest risk is in-term franchisor opportunism which is largely immune to pre-sale due diligence analysis.

    It is not that the opportunism risks are “low”, “medium” or “high”: it is that because of new management, owners, market conditions, supervisory practices, etc. the opportunism cannot be determined at all.

    Excellent due diligence can, indeed, filter out the most blatant scams for attorneys that are willing to provide both legal and business risk assessment. However, these are very, very rare individuals.

    An excellent first step in managing total franchise business risk would be a risk assessment “pre-filter” that would cost about what a potential home inspection report.

    Les

    Like

  3. Carol Cross says:

    Perspective is everything in franchising. Not surprising that attorneys suggest that “due diligence” can solve the problem of “fraud” in the sale of franchises to the public and the problem of opportunism once the unilateral, self-serving contract has been signed.

    Of course “due diligence” perhaps would solve the problem when done with an insightful attorney such as Michael Webster who does understand the human element involved in franchising much better than the average attorney. But such attorneys are rare, as pointed out by Les Stewart.

    But, here in the US, the constructive fraud of franchise contracts wrapped up in incomplete, ineffective, and deceptive government disclosure deocuments remains unabated.

    How could attorneys and MBA’s provide a “pre-filter” risk assessment for “founding” franchisees without disclosure by the franchisor of the unit financial performance statistics of the units within the system.

    Surely, neither of you are suggesting that consultation with ex-franchisees and current franchisees can result in efficient and effective due diligence. People lie and numbers don’t —– and only the franchisors have the full picture of the risk of the investment, and as the sellers, who will profit, they should have the obligation to disclose to the new buyers of franchises.

    Like

  4. Les Stewart says:

    Carol,

    You are correct.

    A material fact for potential buyers is the financial performance of current and older franchisees. Without providing the financial figures that they require under contract to all current franchisees, I believe franchisors are misrepresenting (directly or indirectly) all of their offerings.

    Attorneys and/or pundits do not matter: Franchising is imploding; at first slowly, then, exponentially as the publics’ perception of being a “dodgy go” is established in a bottom-up process.

    The http://www.recession is a but a blip in the collapse of he mom/pop franchise fraud bubble. It’s permanent because of a little thing called the internet.

    Les

    Like

  5. Carol Cross says:

    Les! I sure hope you are right. But! I do get discouraged when I see more and more misrepresentations about franchising on the Internet, and how the franchisors are using the Internet to freely advertise and hype their franchises.

    I understand how vulnerable those who are out of work and who have resources are to the idea of “self employment” and a “business of their own.”

    The head of TARP oversight here in the US has talked about the “tricks and traps” of business activities and how they have been legalized and are common place.

    I can’t even use that “First, let’s kill all of the lawyers” thing because I read where they wanted to kill the lawyers to destroy their ability to defend the law of the land……etc… I guess it must be the lawyers who drive the get-a-way cars for those special interests involved in franchising.

    Can you read my comments at http://thegreatfranchisingrobbery.blogspot.com/ or my newest Ezine Article in a Google Search –“Franchise Regulation Realities — Deception or Patriotism.”

    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 )

Google photo

You are commenting using your Google 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 )

Connecting to %s

%d bloggers like this: