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

Several thousand, I’d imagine.

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

Details:

• WikiFranchise.org: Immigrants as Prey, Cannon fodder, Language shortcomings create a vulnerability
• Franchising Opportunism, 2005 paper

 

 

 

7-Eleven (version Australia) and Big Franchising: conspiracies of fraud, extortion and theft.

I have defined Big Franchising and the role of industry enablers elsewhere.

Click here to watch a 45 minute expose called 7-Eleven: The Price of Convenience.

Modern franchising runs identically, internationally, on all countries sharing a British Common law heritage.

The highest levels of national government known full-well for decades that wage theft is largely responsible for the extraordinary ROI that is achieved by franchisors such as Mr. Withers and Ms. Barlow.

• see Immigrants as prey on WikiFranchise.org.

Cross-posted on WikiFranchise.org.

Is the Tim Hortons takeover primarily a designed to fail, pump-and-dump, engineered financial product?

Canada has a well-earned, international reputation for franchise investors.

Image by John Fewings

Mom-and-pop Tim Hortons franchisee investments:

1. $1.8-Billion of current CDN franchisee cash flow is removed from +1,000 Canadian family’s life savings, and
2. replaced by a government guaranteed “liar loan” program (moral hazard) which will be the debt trap for the next-generation of CDN immigrant Tim Hortons franchisees?

see William K. Black and an criminogenic environment,

Weak Ontario franchise law + lapdog CDN insolvency law + predatory franchise lending = Canadian securities regulation weakest link into North American capital markets

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

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

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

• List of CFA Members: Brands, Banks/Financial Institutions, Lawyers

God I am soooo sick of franchisee families’ pathetically, neverendingly bleating about injustice.

Moral indignation is a technique used to endow the idiot with dignity.

The latest pathetic example is the entirely predictable Lick’s “fiasco”.

Please: give me a break. Like it hasn’t been  happening for 30, 40 years with the full knowledge of the legal, banking and political communities. Take a look at WikiFranchise.org to hear those inconvenient life stories.

Sure when you lose big-time it hurts. but where were the tears for the thousands of others that went before you?

My experience is that the real reason many franchisees are upset about not being on the power end of the relationship. They got stuck with the shit end of the stick before they could stick the next guy.

And this may sound harsh, but they will double-cross anyone that offers help in good faith.

Drop the scales from your eyes and grow up.

I wouldn’t have seen it if I hadn’t believed it. Marshall McLuhan.

Why is Lick’s Homeburgers & Ice Cream being killed off by its franchisor?

What franchisor sends this message to the retail market?

Is it in acting in bad faith by destroying all existing Lick’s franchisees’ equity?

• Who would buy any of these outlets?

Media coverage:

• Lick’s franchisees left fuming as restaurant suddenly closed, Toronto Star, June 28, 2013 (on WikiFranchise.org)
• Lick’s founder denies chain in financial distress, Toronto Sun, June 27, 2013.
• Troubled burger chain Lick’s has closed seven locations in eight months, Toronto Life, June 29, 2013.
• Couple baffled over burger franchise lockout, CBC, June 18, 2013 (link to television coverage).

The franchise bar, with perfect foreknowledge, will take what is left of their money in what will be (in the end) a hopelessly futile attempt at legal justice in Ontario. Talk to your premier and your small business loan provider not your a franchise lawyer.

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

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 Post: Opportunity 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 program, CSBFP:

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?

• Only one I know of: a father and son PhD/B.Eng. team I worked with. The  Oudovikines (pronounced: ou-doe-VEE-kin), RCMP Commercial Crime Unit affidavit, Country Style, CIBC, lawsuit

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 a 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.

Business or real estate brokers’ role in franchising.

A clever animation that mentions Subway but is universal.

Spot on for the United States and fundamentally accurate for Canada and any other country.

• Nice touch mentioning the veterans’ franchise program scams (VetFran).

See Little Caesars: Ist U.S. discount program Imported for Canadian military veterans, January 2009 post on FranchiseFool.com.

Cross posted on FranchiseBanker.ca.

 

TD Bank and franchisor sued over lending practices involving U.S. guaranteed small business loans

From Shane D. Gosdis at the franchiselawblog.net, on December 8, 2011 (Franchisees Sue Matco Tools and TD Bank Alleging Loan Fraud Scheme):

The plaintiffs allege that Matco Tools and TD Bank “in a loan fraud scheme to encourage unsophisticated borrowers to enter into risky business loans to buy Matco Tools franchises.”  According to the plaintiffs, the “scheme enabled Matco to sell more franchises and TD Bank to make risky loans without concern” because the “bank knew if the loans failed, the loans would ultimately be repaid by the United States taxpayers through the SBA guaranteed loan program.”

Copy of Verified Complaint and Jury Demand (download, 24 page pdf)

Moving attorney estimates a class action suit involving “between 150-to-200 plaintiffs” stretching back until at least 2004.

Other coverage:

• The Villanos v. Matco Tools, TD Bank, Franchise Times, January 20, 2012
• Matco Tools, TD Bank Franchise Class Action Lawsuit: Something Screwy?, http://www.lawyersandsettlements.com, December 6, 2011
• TD Bank tool case: Suit alleges small-biz loan scheme, Mark DeCambre, New York Post, November 15, 2011

Cross-posted on FranchiseBanker.ca