How many of the 25,000 Syrian refugees will become cannon fodder to the franchise industry via government guaranteed liar loans?

December 29, 2015

Several thousand, I’d imagine.

20151229 Syria cannon fodder1

How? The moral hazard-riddled, Canada Small Business Financing Program.

Details:

 

 

 


What advice might Taleb give the CDN Target and Tim Hortons franchisees who are thinking of “lawyering up”?

February 4, 2015

Someone once called me franchising’s black swan.

Taleb Kahneman

In science, you need to understand the world; in business you need others to misunderstand it.

What does Nassim Nicholas Taleb define as a “sucker”:

The sucker’s trap is when you focus on what you know and what others don’t know, rather than the reverse.

Suckers think you cure greed with money, addiction with substances, expert problems with experts, banking with bankers. economics with economists, and debt crises with debt spending.

We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract. What they call “risk” I call opportunity; but what they call “low risk” opportunity I call a sucker problem.

I have no pecuniary interest in these schmozzles, only a few friends and their staff that I care about.

You are rich if and only if money you refuse tastes better than money you accept.


What is the Canadian Franchise Association doing to protect the 1,100 CDN franchisees and 96,000 employees at Tim Hortons?

February 1, 2015

The Canadian Franchise Association says it …advocates on behalf of franchisors and franchisees in Canada

CFA

Tim Hortons is a member of the CFA. The CFA’s Code of Ethics says that their members’ should treat each other with fairness.

Tony Martin former ON MPP and MP made certain recommendations from his experiences during the public hearings which led to Ontario’s 1st franchise law.

News Release
April 4, 2000

Investigate Franchise Association Abuses: Martin

Tony Martin, MPP

Tony Martin, MPP, Sault Ste. Marie
New Democratic Party
News Release
Legislative Assembly of Ontario, Canada

INVESTIGATE FRANCHISE ASSOCIATION ABUSES: MARTIN

TORONTO – The Consumer and Commercial Relations Ministry should investigate the Canadian Franchise Association over its failure to help Ontario franchise holders, NDP MPP Tony Martin said today.

The CFA is advising the Conservative government on proposed changes to provincial laws governing franchise agreements. But the association is under fire from hundreds of its own members for its indifference to their complaints, the NDP Critic for Consumer and Commercial Relations said in the Legislature today.

“The CFA has been of no help to many hundreds of entrepreneurs who lost their shirts in shoddy franchise deals,” Martin said. “Instead of taking the CFA’s advice this government should be sending in ministry staff to thoroughly investigate this association’s failures.”

Martin raised the case of Brenda Hope, a mother of two from Coldwater who lost $90,000 as a Chemwise Inc., franchisee. For more than a year, the CFA has refused to look into Hope’s complaints, although it endorsed Chemwise as a member.

Similarly, the CFA has refused to accept a registered letter from Bulk Barn franchisees who have a series of complaints against the franchisor. Martin was also refused when he tried to deliver the letter. The Sault Ste. Marie MPP called on Consumer and Commercial Affairs minister Bob Runciman to act now to protect small businesspeople.

“Perhaps the minister can convince the CFA to live up to its responsibilities to mediate franchise disputes. If he can’t, we need a full-scale probe of this group. It’s the least we can do for hard-working families who lose everything in dubious franchise deals,” Martin said.

The MPP has proposed his own legislation, Bill 35, that is far tougher than the government’s Bill 33. The Martin Franchise Bill would require full-disclosure of franchise contracts, a dispute resolution mechanism, the right to associate and the freedom to source products outside of the chain when not trademark related.

-30-

Also: Martin’s questions directed to the CFA during their Mar 2000 expert witness testimony.

Source

CFA National Sponsors


Your quest for franchisee justice will lead you to a “white knight” lawyer who will betray you.

September 2, 2013

The franchise bar appears to 1st time user franchisees as fundamentally fair, adversarial and zero sumThat is a dangerous myth.

(c) Walker Art Gallery; Supplied by The Public Catalogue Foundation

The economic incentives for the “franchisee-friendly attorneys” are to give the pretence of a fair fight (definition: an attempt to make something that is not the case appear true OED) since your being sold-out can be easily explained. Franchisee stupidity and shortsightedness is the most cited, least reality-based reason given.

Answer:

Your franchisee attorney will defect on 100% of all large cases because the franchise industry is effectively a single-payer industry for legal services (franchisors: +95%). As in other human waste treatment systems, the franchise bar functions to let pass the little cases go to trial (to keep the payers fearful and motivated) but skims off the large chunks for the elite 2 firms.

Question:

Why would any franchisor pay out 100% of a massive claim to a group of franchisees for multi-year bad faith dealings when they could cut two cheques (1. their own lawyers and 2. your attorney) to manage the case to a “satisfactory conclusion”? Would 10 per cent of what franchisees are owed be a reasonably figure?

If you were a rational, profit-maximizing multi-decade career Big Franchising professional (who has their own very high sunk costs invested in the status quo industry practices and structure, btw), Wouldn’t YOU just keep your mouth shut, turn a blind eye and play along, too?

There are ways to deal with these perfectly explainable and rational, multiple-level credence good dangers but you may need to start serving legitimate authority instead of the posers that scatter when the light switch goes on the industry.

Sir Galahad:The Quest of the Holy Grail,  Arthur Hughes, 1870.


Les, you’ve been a disappointment.

May 15, 2013

An outstanding observation after 4 years of work with a franchisee association.

Vonnegut

Generally speaking, espionage offers each spy an opportunity to go crazy in a way he finds irresistible. Kurt Vonnegut Jr. 1922 – 2007


The franchisee is not to see where power lies, how it shapes policy, and for what ends.

April 28, 2013

Being sold out is the rule not the exception in all legal, consulting and association representation.

norm chomsky

Quote:

The public is not to see where power lies, how it shapes policy, and for what ends. Rather, people are to hate and fear one another.

Norm Chomsky 1928 –


Opportunity Knocks and Liars’ Loans: required reading to understand modern franchising

September 1, 2012

John Lorinc wrote the book on franchising from a franchisee’s investor viewpoint.

I’m glad to see it is still available to buy online and is in many Canadian libraries.

The hidden banking side is revealed in Chapter 4, The 90% Solution: Franchise Economics, some of which I excerpted in a WikiFranchise.org post.

What did the business press have to say about Lorinc’s work?:

  1. National PostOpportunity Knocks: The Truth about Canada’s Franchise Industry, is an impressively researched look at the myriad of franchises that mushroomed across the country in the past decade. An award-winning magazine journalist, Lorinc has produced an engaging account that charts both the spectacular successes of some franchisers and the utter failure of some franchisees. How franchises seduce those with the most to lose, Jennifer Lanthier, November 2, 1997
  2. Globe and Mail: At its worst, Lorinc says, franchising is a haven for the unscrupulous who prey on the unwary – typically recent immigrants willing to labour long hours in dreary businesses, unaware that those operations have little chance of prospering – using them as pawns in a shadowy real estate game. Rather than reflecting an insatiable consumer demand, he inquires acidly, is it possible that all those new doughnut shops may reflect a quiet understanding between landlords and franchisors that the best way to fill fallow commercial property is to sell franchises to credulous investors? Franchise book of interest to anyone who pays taxes, Ann Finlayson, November 1, 1997

Finlayson strikes a cautionary note, specifically about the hinted at misuse of the Canada Small Business Financing programCSBFP:

Does all this matter to you? Yes, it does. In 1993, in the wake of vigorous complaints by small-business owners that Canadian banks were reluctant to finance them, Ottawa raised the ceiling on loans guaranteed by the Small Business Loans Administration to $250,000 and its guarantee rate from 85 per cent to 90 per cent, sparking a bank lending rush to franchisees and shifting the risk of franchise investments onto taxpayers’ (your) shoulders.

The Risk: Only a fraction of the Liars’ Loans are ever claimed by the banks, thereby grossly understating Industry Canada’s default statistics (Franchised v. Non-Franchised loan performance). The franchisee thinks he signed a government-backed loan but it never gets registered as such. As their bankruptcy, loss of life savings, marital and family breakdown escalate over the life of their 12 to 18 month franchise career, the franchisee NEVER looks to Box 9 of the CSBFP loan application form (Projected Sales ) as the source of their trouble; where the lie is put into the “Liars’ Loan”. The proceeds of these engineered-to-fail loans is split upfront by the franchise banker with the bank, banker, franchisor and sales agent. If questioned, the bank shreds the paperwork and waits for the lawsuit.

And, seriously, how many of these Immigrants as prey losers could or would ever sue a Schedule 1 chartered bank?

The Return: Smashing quarterly earnings goals, record profits, high turnover in the small business division of each of the banks, and making franchise lending the most lucrative form of commercial lending in Canada. Private gain/public loss enabled by a criminogenic environment, moral hazard, regulatory capture…

Lorinc carefully mentions the “windfall profits” in this arrangement of churning:

What’s more, some banks and franchisors have put the SBLA program [predecessor government guaranteed loan program] to questionable use during foreclosure actions against franchisees, says one former owner who has been through the process. When a bank calls a loan against a non-performing franchisee, the 90% guarantee effectively relieves the bank’s receiver from trying to get the best possible value while disposing of the owner’s assets. With most of the loan covered by the Canadian taxpayer, the assets – fixtures, kitchen equipment, inventory, etc. – can be sold quickly at a deep discount, possibly below market value. This allows the franchisor too step in and buy back the property at better-than-firesale prices, thus generating windfall profit when the store is later re-sold to another franchisee.

An important work that, depressingly, is as relevant in 2012 as it was in 1995.

______

Disclosure: My lol pecuniary interest here and here. Cross posted on FranchiseBanker.ca.


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