Franchise investment safety: more valid data, less talking heads please

Franchisees’ life savings seem to be less as important than a head of lettuce.

Barfblog reports that Dole Food Company is using software to track produce from “farm to folk”.

No government collects franchise investor data in a manner that helps capital be allocated efficiently. This failure in basic census-type activity enables industry talking heads to float such “whoppers” as a “22% growth in since 2008“.

Mom-and-pop life savings is a serious business.

Less value than a head of lettuce.

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11 Responses to Franchise investment safety: more valid data, less talking heads please

  1. Carol Cross says:

    Ah yes! But! if there is more valid data on the survivability of “founding” franchisees within franchise systems, churning and turning and pumping and dumping of units will become transparent and Mom and Pop may not like the odds and won’t invest their life savings in the purchase of a franchised business. Importantly, also, investors in the paper of the franchise systems may not like the odds.
    Additionally, those (the regulators and the courts included) who NOW can claim that they don’t KNOW about churning and turning and who can deny that they are complicit in stealing the life savings of innocents (who have no idea of the actual risk involved) will not be able to hide behind ineffective and dishonest regulation of the sale of franchises to the public.
    Obviously, if franchisees don’t understand that they have “less value than a head of lettuce” in the scheme of things, the tort and fraud against innocent Mom and Pop investors will continue and “no valid data” will continue to enable the exploitation and capture of the life savings of innocent “good faith” investors in franchised businesses.
    In truth, no Mom and Pop should borrow against their home equity and/or their retirement savings to “gamble” on ANY small franchised startup without fully understanding the odds against them, as demonstrated by the disclosure of the UNIT performance of the units that comprise the franchise systems.

    http://thegreatfranchisingrobbery.blogspot.com

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  2. Ray Borradale says:

    Two state inquiries and a federal inquiry in Australia called for the collection of meaningful data on the performance of the franchising sector. The Minister came out and stated it would be collected through the Australian Bureau of Statistics. And there it ended. There has been no further mention but that was to be expected and afterall; what the government and franchisor lobbyists would consider ‘meaningful data’ would never meet the needs of prospective franchisees. The ‘loss’ factor and the ‘turnover’ numbers will never be exposed for the reasons previously stated by Carol.

    I listened to a lengthy debate on US arbitration clauses and class wavers and my gut told me something was missing. In the end both sides of the debate were promoting litigation from different angles.

    Now that is a good thing for lawyers but not so good for those who have suffered substantial or total loss and cannot afford a lawyer. Or at least cannot afford a lawyer for the length of time a franchisor is prepared to out-spend them.

    It seems to me that society lives with a legal profession maintaining growth in conflict. There was no talk of deterrents even when it was demostrated by example that a large company can swindle $30 from 100,000 consumers and consider possibly 100 successful litigants as justifiable and profitable business with 99,900 suckers that don’t bite.

    Franchising investors who are scammed mostly justify franchising by walking away with nary a whimper. That could suggest that the legal profession is under-performing in franchising or it could suggest that franchising is incredibly efficient when it comes to leaving people without two cents in their pockets for a lawyer.

    Governments are selective when designating commercial conflict as criminal fraud. Generally such citing of commercial criminal fraud involves fraud that affects society’s wealthy elite and/or carries media interest and therefore political points. The arguments put forward against effective government regulation can be summed up as ‘buyer beware’ and ‘citizens get the government they deserve’.

    While there is truth in those points, they give a free pass to governments avoiding responsibility but worse, they show us all an ugly future where the growing dominance of the all powerful wealthy continues to treat all other citizens as insignificant lives where their purpose is to serve the wealthy.

    If we accept that a government’s primary duty is to protect the interests of its citizens and that no citizen should in law be treated better compared to another then we should demand that governments get back to basics and institute regulation that evolves with the times and which attacks new generation commercial advances for the preferential treatment of the more powerful.

    There is no argument to have government control business economic growth but there is legitimacy in arguments to establish boundaries of control over the direction that the legal profession would take business and citizens.

    If governments were interested in mom and pop citizens they would begin collecting meaningful franchise data on at least franchisee turnover and loss. But clearly they don’t and they won’t.

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  3. Carol Cross says:

    Ray always tells it like it is! He knows that it is the legal profession who drives the getaway car and who coordinate the efforts to fight any change in the laws that govern the sale of franchises to UNINFORMED Mom and Pop Franchisees.

    It is the legal profession who have engineered law, process, and procedure to protect franchisors who commit silent fraud in the sale of franchises with low profitability and high failure rates that aren’t disclosed because they CAN hide these negatives from the new buyers — and often from the regulators and the arbitrators and the courts (with their permission, of course) .

    Franchisors aren’t punished or chastised by either the courts or the arbitrators who pretend that churning doesn’t exist and that even if it does, success or failure statistics aren’t relevant as long as the franchisor has the reliance clauses in place and exculpatory language in the agreemnents that works to protect the franchisors from charges of silent fraud! —-because, of course, the franchisor NEVER promises success or profits in the written disclosure/sales agreement. Mom and Pop can’t buy a franchise unless they acknowledge that they were not promised success and profits by the franchisor.

    Because all three branches of government are involved in protecting this lack of disclosure to innocent Mom and Pop franchisees, could it be said that this is one of the most successful “confidence games” in the history of capitalism????

    http://thegreatfranchisingrobbery.blogspot.com

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  4. Ray Borradale says:

    Carol, genocide efforts abound on this planet. I would have gladly assisted Adolf to leave this world but I don’t see his efforts as much different to the efforts of those in control around the planet; be fore after 1945. The politics of the world go much further and deeper, much deeper, than sponsored scams such as franchising. Les has mentioned thought control over and over again where the masses are oblivious to their role.

    Governments too are pawns. It is a complex web but central to the theatre of streaming power are the very few ultimates and behind those few are those that strategically maintain the balance of digestible control to ensure the masses remain oblivious and subservient.

    I have lawyer friends with undeniable morality however; they all have an unmistakable need to protect the reputation of their profession. But I’m not so sure that they too are not pawns to greater drivers within that profession.

    I suspect that the web is so complex that economic management relies on each scam and each scam protects the illusion of people participation.

    We have no control. The plan is for us to have far less. Franchising turnover is a snapshot of people turnover. The people of this planet live in servitude it’s just that we get things like big screen televisions, and sometimes even food and water, to shut us up and keep our shoulder to the grindstone.

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  5. Ray Borradale says:

    I don’t believe people should underestimate the top echelon of the legal profession or the media [once called journalism]. They are critically important whores that deliver control. Enter the World Wide Web.

    Enter internet filtering.

    Who ultimately implements the inevitable and gradual demise of free speech? Those with the 30 pieces of silver that write the laws that will allow it and those who publish the ruse of protecting the peasants.

    While some of us focus on franchising let us hope others are as dedicated to the many specialty choices.

    I suspect I have another few decades to ponder on what the hell is really in it for those with everything already.

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  6. Carol Cross says:

    The Internet results in “open season” on prospective franchisees because of the sheer volume of positive and encouraging statements about the success of franchising and franchises, etc…Truth in Advertising Laws don’t stop the franchisors who lure prospects with “startup costs” that imply that if the buyer can come up with the money, he will have a “going” business. These startup costs don’t have to have any basis in fact that has to be disclosed to new buyers and are just another subsidy of franchising by government, the FTC.

    While there is NO government filtering of negative information about the dishonest regulation of franchising, there is private censorship on the Blog Sites like Blue Mau Mau and Unhappy Franchise, Franchise Pundit, etc. who will not accept my comments and bar my computer! —-Obviously because I try to warn about the “confidence game” that benefits the majority in and around franchising, and this offends the majority who operate within the status quo and who pay for advertising to promote franchising and the status quo that protects the franchisors from silent fraud.

    My orbit of influence is small but at least the search engines, like Google and Bing, carry my comments and the comments of others under the topic “Franchise Fraud, Churning, Regulation” and I hope that a few readers, perhaps, have been saved. I have also written a few articles that were read by a small number of people but maybe some of them were helped.

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  7. Ray Borradale says:

    Carol, it’s the thought that counts. I spend a lot of time in the wee hours reading anywhere and everywhere the deception is published and when there is an opportunity to comment – I comment.

    To be truthful I enjoy the hell out of annoying those who deceive. I’ve learnt to temper the message to get published knowing that a subtle message at times is better than none.

    Yes it is a small effort but it’s like being one of those internet cops chasing paedophiles and popping up saying; ‘put your pants back on you sicko bastard’.

    http://www.couriermail.com.au/business/business-owner/franchise-industry-outperformed-australian-economy/story-e6freqn6-1225943554278

    The hours might be long but at least the pay is terrible. But it is the thought that counts and I’m sure we reach people or our critics would not be so upset.

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  8. Carol Cross says:

    You are a good man, Rayh Borradale! You come from a good place! I always read your comments on BM when using the proxy engine to look in. Do you personally believe that franchising could survive with transparency as to risk? Wouldn’t there still be those who would invest no matter the risk ? — but the difference would be that they would KNOW and UNDERSTAND the risk and wouldn’t put more at risk than they could afford to lose!

    I, too, watch the Internet and Email those who are irresponsible in writing articles recommending franchises to the public with no warning of the RISK. I went after AARP and I don’t believe they are recently writing any articles for the retired about franchising. I E-mailed the Business Editor of our City Newspaper and chastised him for an article he wrote that pushed small business franchising to the public and I’ve seen no new articles. The Military Officer Magazine doesn’t accept ads from franchisors and I think most respected publications would want to be careful of their endorsement of this “confidence game” that has been legalized by all three branches of government.

    http://thegreatfranchisingrobbery.blogspot.com

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  9. Ray Borradale says:

    Good? No – human; so not even close. Personal opinion on transparency of risk and the doom of franchising. If the level of risk through risk ‘extras’ does not change then it is inevitable franchising will eventually eat itself away but that would be far too slow a process. I’d be dead twice at least and probably millions more franchisees would be destroyed.

    I was approached by a franchisor recently to come on board and I’m thinking about it. It is a relatively small select network with franchisees loving the franchisor who doesn’t make the money he should or is entitled to. No ‘extras’.

    He feels he has lost the drive and feels someone should push the brand for the franchisees.

    Compliance and standards don’t even have to be monitored although they are as a service to franchisees. The franchisor should be making more money but how to do that without taking to ‘extras’. It isn’t flipping hard – grow the bloody network on the back of franchisee satisfaction and profitability.

    Point 1. – Franchisors and select networks like that are incredibly rare, a diamond in a city sewer no less, but franchising works well there without the ‘extras’ risk.

    Point 2. – What happens when he dies or health means he has to hand the reins over to someone else? The odds are lotto odds that a new owner would add ‘extras’.

    In that situation could the system be sold to the franchisees? They too are human and that’s not very good at all.

    When the contracts and governments allow the continual introduction of ‘extras’ risk not suffered by independent businesses then franchising is too high a risk.

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  10. Ray Borradale says:

    I just know Les is sitting back waiting to rap me over the knuckles.

    Subtle: http://www.couriermail.com.au/business/business-owner/chinese-entrepreneurs-take-up-australian-franchises-study/story-e6freqn6-1225944012542

    He sometimes has a problem with my skirt. Too short – too long – I’m not sure.

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  11. Les Stewart says:

    Ray,

    At this time in point, I do not recall any arse allegations. However, tartan-school-girl-iconography is noteworthy. Les

    Like

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