Franchising loves veterans because of their ability to get into debt

April 13, 2010

Deadbeat systems can be disguised as sweethearts very easily.

Veterans should be very careful.

Oscar P. Hoot on Blue MauMau spells out why returning service people should just say no: During the credit crunch, franchising needs veterans.

A top leader in the franchise industry… has told me that the recent push by franchisors to reach veterans is less about patriotism and more about going after a market that has available money during the deepest credit crunch and recession since the Great Depression.

Lenders are favoring veterans to finance because of their access to financial programs that favor them. The rest of America is having a much harder time getting financing to start a business. And franchisors know that.

Want to gamble with your life savings?

Vets: Franchising wants your money. It needs your money. But be forewarned, trusting in authority is not a virtue in buying a business. And not having a background in buying and running a businesses makes you an easier mark in selecting a bad business in an industry that the buyer is not acquainted with. The consequences of being easily persuaded to buy bad businesses is that veterans can lose their house, surrender their possessions, and put tremendous financial tension on their marriage.

That would be a very poor welcome home for a soldier. Of course, one might get lucky.

Many veterans find their pensions being used to prop up abusive franchise relationships.

Unsustainable Levels of Debt by John Ralston Saul

April 13, 2010

Got crushing personal or national debt?

Is enslavement and stagnation the only answer?

Not necessarily.

John Ralston Saul suggests in his 1994 book that both private and public debt can be dealt with in creative ways.

I quote at length on his one section but encourage everyone to read this and Saul’s other work.


National debts are treated today as if they were unforgiving gods with the power to control, alter and if necessary destroy a country. This financial trap is usually presented as if it were peculiar to our time, as well as being a profound comment on the profligate habits of the population. The reality may be less disturbing.

1. The building up of unsustainable debt loads is a commonplace in history. There are several standard means of resolving the problem: execute the lenders, exile them, default outright or simply renegotiate to achieve partial default and low interest rates.

2. There is no example of a nation become rich by paying its debts.

3. There are dozens of examples of nations becoming rich by defaulting or renegotiating. This begins formally in the sixth century BC with Solon taking power in debt-crippled Athens. His organization of general default – “the shaking off of the burdens” – set the city-state on its road to democracy and prosperity. The Athens which is still remembered as the central inspiration of WESTERN CIVILIZATION was the direct product of a national default. One way or another most Western countries, including the United States, have done the same thing at some point. Most national defaults lead to sustained periods of prosperity.

4. The non-payment of debts carried no moral weight. The only moral standards recognized in Western society as being relevant to lending are those which identify profit made from loans as a sin. Loans themselves are mere contracts and therefore cannot carry moral value.

5. As all businessmen know, contracts are to be respected whenever possible. When not possible, regulations exist to aid default or renegotiation. Businessmen regularly do both and happily walk away.

The collapse of the Reichmann financial empire – larger than most countries – is a recent example. The family was able to turn around, walk away and almost immediately begin a new life, promoting the biggest property development in the history of Mexico.

6. There are no general regulations dealing with the financial problems of nations simply because they are themselves the regulatory authority. There is however well-established historical precedent. Mexico effectively defaulted in 1982-83, thus regenerating its economy. The reaction of Western lenders has been to treat these crises as special cases. The sort of thing that only happens to Third World countries. That’s nonsense.

7. The one major difference between private and public debt is that the public sore cannot be based upon real collateral. This makes default a more natural solution to unviable situations.

The question of national collateral was fully addressed in the eighteenth century when it became clear that an indebted people could not owe their national rights (their land and property) to a lender. The citizen’s natural and concrete rights took precedence over the lender’s abstract rights.

One of the most peculiar and insidious aspects of twentieth-century CORPORATISM has been an attempt to reverse this precedence. The managerial imperative suggests that national debts can be indirectly collateralized in several ways. Governments can be forced to sell national property to pay debts (PRIVATIZATION). They can also be pressed to transfer ownership of national property to lenders, as has been done in the Third World.

There is also the threat that defaulting nations will be treated as international pariahs. This is a strange argument since it doesn’t apply in the private sector (see 5). It is also an idle threat, as Mexico has demonstrated (see 6).

8. Debts – both public and private – become unsustainable when the borrower’s cash flow no longer handily carries the interest payments. Once a national economy has lost that rate of cash flow, it is unlikely to get it back. The weight of the debt on the economy makes it impossible.

9. A nation cannot make debts sustainable by cutting costs. Cuts may produce marginal savings, but savings are not cash flow. This is another example of the alchemist’s temptation.

Mrs. Thatcher spent a decade trying to slash the British national debt. She had the advantage of being able to use North Sea oil income for this purpose. The result was a damaged industrial sector, economic stagnation and endemic unemployment.

The payment of debts is a negative process which can only be a drain on investment and growth. The more successful major repayment programs are, the more the economy will be damaged.

10   Strong nations weaken their own economies by forcing weaker ones to maintain unsustainable debt-levels. For example, in spite of enormous efforts on all sides, the Third World debt has continued to grow. In 1993 it was $1.6 trillion. This costs them far more in interest payments sent to the West than the West sends in aid. The practical effect is to make economic growth impossible. The Third World thus constitutes a dead weight in our ongoing DEPRESSION; a barrier to renewed cash flow

11. Civilizations which become obsessed by sustaining unsustainable debt-loads have forgotten the basic nature of money. Money is not real. It is a conscious agreement on measuring abstract value. Unhealthy societies often become mesmerized by money and treat it as if it were something concrete. The effect is to destroy the currency’s practical value.

12. An obsession with such false realities and with deb t repayment indicates a liner, narrow managerial approach to economics. The management of an economy is the profession of finance-department technocrats, economists and bankers. Their approach is quite naturally one of continuity. This is a means of denying failure.

To treat money or debt as a contractual matter – therefore open to non-payment or to renegotiation – would mean treating the managerial profession as of secondary importance and unrelated to fundamental truths. What sensible people might see as originality or practicality, fiancnial expers see as a threat to their professional self-pride.

13. Does all of this mean that governments should default on their national debt? Not exactly.

What it does mean is that we are imprisoned in a linear and managerial approach which denies reality, to say nothing of experience. Money is first a matter of imagination and second of fixed agreements on the willing suspension of disbelief.

In other words, it is possible to approach the debt problem in quite different ways.

14. There have been changes which limit our actions in comparison to those of Solon or Henry IV, who negotiated his way out of an impossible debt situation in the early seventeenth century and re-established prosperity. First we have to recognize and protect the investment made by citizens directly (government bonds) and indirectly (bank deposits) in the financing of national debts. Second, there is the new and unregulated complexity of the international MONEY MARKETS, which now constitutes an important corporatist element.

15. Our central problem is one of approach. For two decades governments have been instructing economists and finance officials to come up with ways in which the debt can be paid down and interest payments maintained.

No one has instructed them to propose methods for not paying the debt and not maintaining interest payments. No one has asked them to use their creativity in place of a priori logic.

16. Were the members of the Group of Seven (G7) each to pool their economists and give them a month to come up with modern versions of default, we might be surprised by the ease with which practical proposals would appear.

17. There are two simple guiding points:
A. The appearance of continuity is easily achieved in default scenarios through paper mechanisms which can be categorized as “debt retirement.”
B. What is difficult for a single country in contemporary circumstances is easy for a group, particularly if that group speak for the developed world. See: ETHICS.

The Doubter’s Companion: A Dictionary of Aggressive Common Sense, John Ralston Saul.

Control a man’s living and You control his will

March 3, 2010

Especially if you control his debt @ prime + 5.

Economics has been used to degrade human rights, throughout history.

Only fascists separate human and economic freedom.

The SA‘s 1993 sign says:

Germans! Defend Yourselves! Don’t buy from Jews!

Boycott of Jewish businesses, 1933


Self-fulfilling prophecy: Franchisees are a skittish, easily spooked & dull beast-of-burden

March 2, 2010

Common observations about women a few decades ago.

Franchisors often make the same ignorant assumptions about franchisees.

If the words “Jews”, “blacks”, “indigenous peoples” were switched with franchisee, this rhetoric would be seen for what it is: hate mongering toward an identifiable, at-risk population.

Self-fulfilling prophecies are the primary barrier in modern franchising.

Self -fulfilling prophecy:

a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior. Although examples of such prophecies can be found in literature as far back as ancient Greece and ancient India, it is 20th-century sociologist Robert K. Merton who is credited with coining the expression “self-fulfilling prophecy” and formalizing its structure and consequences.

As I observe franchisors closely, it is breathtakingly apparent that they haven’t cracked a management or social science textbook in 40 years.

Franchisors can’t see the solution because they don’t get the fucking problem.

Their paternalism blinds them to the reality that franchisees’ want: 1% to do with $ and 99 per cent acknowledgement that families have a right to a decent level of material security.

Hint: It’s about freedom, missy.

Freedom from your over-reaching which causes financial ruin.

Debt creates slaves and slaves are indeed revolting. In ways that you will cause from your willful adherence to an authoritarian ideology.

Franchisors create a cage which affects franchisee behaviour

February 26, 2010

Franchisors control 95% of the business model (ie. when you work, what you wear, who you associate with, what you can afford, etc).

Every environment changes the people within it (franchisors and franchisees).

Franchisees, as a consequence of group and individual cultural, social and psychological forces become institutionalized.

…individuals in institutions may be deprived (unintentionally) of independence and of responsibility, to the point that once they return to “outside life” they are often unable to manage many of its demands…

The law and internet has freed franchisees: but these very powerful, internal and misunderstood forces continue a chain gang mentality.

I see this every day. Franchisees who have lost their former life-skills: confused, conflicted and in unnecessary pain. And it’s in the family where this toxic play is acted out.

Listening to you partner is the key.

Shaming debtors so they pay up

October 19, 2009

ElCobradorDelFracI think I love the Spanish.

They understand that public ridicule is a very powerful motivator.

I’d love to specialize in franchise industry-specific debt collection under the El Cobrador del Frac brand.

Or in English: The Debt Collector in Top Hat and Tails.

I had covered it in a previous post but a 2008 Independent article asks a very good question to recalcitrant payers:

If you owed a few thousand euros and found your footsteps dogged by a man wearing a top hat, tails and silken cummerbund, wouldn’t you pay up rather than face the humiliation of being shadowed by someone dressed like Count Dracula?

… El Cobrador del Frac – “The Debt collector in Top Hat and Tails” – is a nationwide operation which sends employees dressed like Hollywood villains to collect debts. To underline the message, the theatrically-clad collector carries a black briefcase with his calling spelled out in capital letters.

This YouTube video gives you a pretty good idea how they work. (I think when the 6 foot bunny follows you into the washroom, you’d tend to pay your debts.)

There is a very important distinction: They only target those debtors who (1) can afford to pay but (2) chose not to do so (voluntary deadbeats).

“We use no aggression, we just reclaim our debt. We fulfil an important social function,” he insists. “We don’t prey on cash-strapped individuals. We are dealing with professional debtors who know all the tricks and who can pay but don’t.”

I stay in franchising to reclaim debts.

3 Classes of Risk: The Known, The Unknown and The Unknowable

September 11, 2009

PetlandElizabethCarlisleAny business has to manage risk.

Before you start an investment, you need to add up all types and then compare them to the likelihood of achieving returns to see if the proposal makes sense to do.

In franchising, you cannot do this with any degree of accuracy before you sign.

Your investment is often tied (a sunk cost) to a losing concept of a self-interested franchisor.

Your debt will be used to make you comply to others interests; not your own.

1. The Known Risks: research your brains out by interviewing current franchisees, make sure the technology is okay, study the vertical market the proposed investment would operate in, do 5 years worth of monthly cash flow statements, talk to lawyers, accountants, former franchisees.  Get some type of idea.

2. The UnKnown Risks: these are real but discoverable. These are ones that come as a surprise that you need to find out before you sign. A good defense: take a minimum of 6 months; do not be pressured into signing. The  best defense is to work as a labourer within  a franchise, for free if you must. If you don’t think you can afford that investment in lost wages, believe me, you can’t afford to be a franchisee.

The Unknowable Risks: these are real but you (or any mortal) cannot quantify or scale them. They’re random but when they strike, they knock you out of the whole game: all your labour, 90% of your investment…all of it: gone. People (especially young people) think that the world is rational and foreseeable. It is not. There are winners in franchising just as there are winners at Casino Rama or Vegas.

Some examples:

  1. a nice franchisor sells out/retires/decides/is forced to give control to someone not so nice or patient,
  2. your VP of government relations cracks jokes about your corporation killing 22 Canadians (food poisoning),
  3. your store is a staggering success and the franchisor wants it for his own,
  4. you are smarter than the franchisor or his heirs (become a threat),
  5. after years of 3 to 4 hours sleep you drive your truck into a group of children,
  6. physical illness requires you to leave (the franchisor picks it up for a song and flips it in 3 months),
  7. the new territory manager decides he likes your store and he happens to be the franchisor’s brother-in-law,
  8. the franchisor racks up too much debt so decides to go insolvent to shake off his creditors,
  9. you spend all your time at work and become divorced (Can you divide your net worth by the number “2”?),
  10. you talk to a few of your peers and get terminated for trying to better your business,
  11. your tradename is sabotaged by some food tampering incident showing up on YouTube (Domino’s),
  12. you’re a Petland franchisee and a photo of 2 drowned bunnies  goes onto Facebook (above and here),
  13. the W.H.O. decides tanning is a deadly health risk,
  14. a competitor contracts for a social media site to trash your shared tradename,
  15. etc., etc., etc.

Franchising is awash with unrecognized, rapidly increasing business risks.

These are all real life examples I have seen that are featured on case studies.

Franchising was an imperial Empire

August 17, 2009

When you think about it, franchising uses a lot of military terms: conquer markets, roll out regionally then nationally, blitz the consumer, attack markets. The very term marketing “brand”originated, of course, with heraldry and military regalia.


Franchising had operated as a type of self-governed nation state that has traditionally been held together by British common law principles.

They acted as if they were above the law.

This ability to exercise coercive power is over, however.

By 1920, see above, the sun never set on the British empire.

An empire is:

a State with politico-military dominion of populations who are culturally and ethnically distinct from the imperial (ruling) ethnic group and its culture. Wikipedia

The franchising elite is what I have defined as Big Franchising: product franchisors, key business-format franchisors (lapdog peak associations), and the franchise bar. If you doubt the transnational of modern franchising methodology, I direct your attention to the World Franchise Council.

Franchising is an imperial empire because it gains its strengths from “domains of knowledge, beliefs, values and, expertise”. Wikipedia These near-religious beliefs are found in full-blown vigour at the International Franchise Association’s continuous cliche-ridden press releases (see SmartBrief).

In most empires, there is a visible difference between the rulers and the ruled such as skin colour, language, education, nationality, ethnicity, etc. Not so in franchising.

The differentiating factor is between the investors’ ears.

Awareness that franchising is a game designed to re-distribute wealth (not create it) is what separates the haves from the have-nots. That franchising is often a debt-induced form of servitude is what the “innocents” have not learned yet.

The British empire held control by exerting a monopoly on sanctioned violence via their military, colonial administration, police and courts. This was possible through misrepresentations and control of information.

  • Franchising has done the same via the franchise bar’s jealously guarded monopoly on franchise legal work and access to justice in the civil court system.

Franchising as a coercion-based empire is over not because digital information can now be shared (internet). There are many digital house negroes actively trying resist the inevitable.

The empire has ended because credible and honest sharing is happening here, a few IndFA sites  and at

All empires pass away.

Bait and Switch: Deceptive business practices

April 28, 2009

baitandswitchI read Barbara Ehrenreich‘s first major book, Nickel and Dimed: On (Not) Getting by in America and I found her treatment of the working poor very well done.

From the back cover:

Millions of Americans work full-time, year-round, for poverty-level wages. Barbara Ehrenrich decided to join them, inspired in part by the rhetoric surrounding welfare reform, which promised that any job equals a better life. But how can anyone survive, let alone prosper, on six to seven dollars an hour?…

Nickel and Dimed reveals low-wage America in all its tenacity, anxiety, and surprising generosity –  a land of Big Boxes, fast food, and a thousand desperate strategems for survival. Instantly acclaimed for its insight, humor, and passion, this book is changing the way America perceives the working poor.

Ehrenreich followed it up with another one called Bait and Switch: The (Futile) Pursuit of the American Dream. I intend to get that one (time/money) but let’s take a look at the term bait and switch.

Bait and Switch

In retail sales, a bait and switch is a form of fraud in which the party putting forth the fraud lures in customers by advertising a product or service at an unprofitably low price, then reveals to potential customers that the advertised good is not available but that a substitute is. This term has lots of other meanings, even outside of the marketing sense.

The goal of the bait-and-switch is to convince some buyers to purchase the substitute good as a means of avoiding disappointment over not getting the bait, or as a way to recover sunk costs expended to try to obtain the bait. It suggests that the seller will not show the original product or product advertised but instead will demonstrate a more expensive product. Other advertising practices, such as the use of sales techniques to steer customers away from low-profit items, depend on many of the same psychological mechanisms as a bait and switch. Wikipedia

In these hard economic times, potential employees are particularly vulnerable to these deceptive practices.

  • Why not advertise a full-time salaried position at, say $60,000 only to offer (3 months down the line) a cheesy 31 day labour independent contractor contract?

And if you question the deal: Send 100% of the work to a “friendly” consultant, possible because the quasi-government agency granting source is very “flexible”.

Personal flexibility or discretion with taxpayers’ money; when disbursing hundreds of thousands of public funds? Hmmm…

These are words not normally used by any forensic accountants I know.

Not much you can do when the employer is in the private sector but when this happens with public funds, it raises the perception, if not reality of wrongdoing.  Any experienced member of  a volunteer board of directors, not-for profit executive or purchasing professional would know that oftentimes reality IS what is perceived.

By acting recklessly, the individual office holder is acting outside their legal authority (ultra vires) and is therefore personally liable for legal action as well as damaging the affiliated organization’s credibility when someone who knows how the law works, holds them accountable.

— see Misfeasance or Malfeasance in Office

The Class War is Over, and We Lost

January 30, 2009

redstallionFranchising is one part of a bigger picture.

Increasingly, it is more difficult for good people to do ignore this hollowing out. You make your choice by choosing to do nothing.

My brother-in-law Leo ran a gas station and then had a Red Stallion franchise. His dad ran the same 2-bay Sunoco garage in the east end of London, Ontario for decades.

When I was just starting into looking into franchising, about 10 years ago, Leo said something that I remembered when I watched the video below:

Franchising is just a part of the puzzle, Les. They’ve been screwing small businesspeople for years and years.

It’s like a lot of things” is what Gordon Pitts said this to my wife in 1998 when she called about franchising. Pitts is the  editor at The Globe and Mail newpaper, Canada’s national business daily.

Below is a video 9:43 video with Bill Moyers interviewing economist Dean Baker and journalist Bob Herbert. Dean is a frequent contributor to Beat the Press weblog where his comments seem ring true.

These are my impressions:

  1. Franchising is only one part of  an ongoing economic clear-cutting of non-elites.
  2. Predatory actions are the new American Dream, including small business lending.
  3. The media is not asking for solutions, they’re part of the problem (bias is not recognized).
  4. Listen to the nuns: chicanery happens when you neuter the watchdogs.
  5. Bailouts have zero accountability (paying out the elites who got us in this mess).
  6. Debt enslaves. Usury is a forgotten concept.
  7. Any collective impulse such as unions (or Independent Franchise Associations or national groups of IndFA) is ridiculed which maintains the elite’s control.
  8. Employers simply terminate troublemakers: It’s cheaper to drag it out for 2 to 3 years and pay a small fine, if anything at all. Ditto in franchising.

I never really thought about class warfare before.

  • I think about it a lot more lately.

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