Vendmax & Your Candy Company: Coming to a City near You

February 11, 2009

vendmaxbigIn a previous posting today, I drew everyone’s attention to an ad that appeared in today’s Toronto Star.

It identified itself as Sip-N-Snack and claimed three things:

  1. Attracts Customers Like a Powerful Magnet!
  2. Now Launching in the GTA!
  3. Takes only one day a month
  4. Over $75,000 Annual Potential
  5. Including Locations from $16, 995! and
  6. Free Brochure 1-866-622-8722

Now click to this Vancouver Sun/The Province newspaper .pdf. Look at bottom left corner advertisement. Notice anything similar in this October 22, 2003 ad?

This ad identifies itself as Vendamax and Your Candy Company:

  1. Attracts Customers Like a Powerful Magnet! [same]
  2. Coming to Vancouver & Vicinity, [new city]
  3. Less than 2 hours per week (1 day per month?), [same]
  4. $40,000 Annual Potential [$75k in 2009]
  5. Locations included…$14,995 to get started, and [$16, 995, locations included]
  6. Free Brochure 1-866-622-8722 [same offer and telephone number]

I wonder how the investors in British Columbia made out with Vendmax and Your Candy Company? I wonder why a successful franchisor like this would want to change their company (specifically not mentioning the Vendmax name) but not bother changing the marketing?

Vendmax’s website: lists Tom Semeniuk as president, Barry Sobovitch, and Buffy Babb. Notice the heavy reliance on the Better Business Bureau. Fastest growing.

NOTE: An ad wanting to sell 5o machines for $100 each.

Your Candy Company: seems to have a South African connection, FAQs.

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Earnings Claims in CDN franchising: $75,000 for 12 days work?

February 11, 2009

sipnsnackThis is an advertisement in today’s Toronto Star.

It is a listing under the “Franchising” section. At least 50% of the ad space in this section is hyping the Canadian Franchise Association’s upcoming The Franchise Show.

The Canadian Franchise Association bills themselves as “the national voice for Canadian franchising“.

Let’s see exactly what this alleged franchisor has to say for itself:

1. Earn $75,000 per year for 1 day of work per month. I guess that corresponds to $781.25 per hour (8 hours per day). Or if you wanted to work 2,000 hours per year, you’d be making $1,562,500 peddling branded drinks. This is what passes for investor protection in Ontario, more than 8 years after the passage of the Arthur Wishart Act (Franchise Disclosure).

2. Note how the extremely unknown franchise system trades on transnational brand titans such as Pepsi, Doritos, Lays, Red Bull, etc. This is a classic persuasion technique the confers legitimacy by associating with authority (this time, marketing or brand strength that “Attracts Customers like a Powerful Money Magnet!“)

3. It promises a system: it bundles locations with package. Why the heck at these revenue per hour figures doesn’t the franchisor just hire some flunky to stock the machines? This goes to the usual “turn key” proposition of a “proven system” that usually turns out to be nothing of the kind.

4. The flash “Now Launching in the GTA!” serves two masters: (a) it explains why no one has ever heard of Sip-N-Snack and (b) it lures those that want something new, special or up-and-coming. The phrase “This here poo-collecting franchise is the next McDonald’s…” is a related rhetorical come-on for the overly-trusting.

5. Placing the advertisement in the franchise section is intended to confer legitimacy or utilize social proof: other better-known franchise brands in the ads around this ad. This is important because this might well be the cheesiest fly by-night equipment business opportunity scam imaginable.

6. The total price point is important. At $16,995, if this were a total scam, very few investors would sue to recover their loses. The cops usually won’t investigate anything under $250,000 and the retainer for a lawyer is +$1,000. Like 99% of the defrauded, they won’t even report it to the local police and the Competition Bureau is a bloody lapdog.

7. Note the recognizable logo: Pespsi-Cola. And 5 exclamation points. This must be a hot deal!!!!! (Just because it is corny does not mean it isn’t really effective on a certain percentage of the population.) Fraud cuts across many socio-economic levels.

8. If this is a scam, the money is quickly sent away; well beyond the reach of any litigation or police investigation. Con games are well-thought out beforehand and the three-card monte table is quickly folded up.

9. But still if 10 people bite, that’s an okay return on investment for the franchisor and it keeps the revenue wheels turning at The Toronto Star, too.

10. Canada is a well-known white-collar crime incubator as recently portrayed by the CBC Marketplace in Buying into the pitch to become rich. In all confidence games, more than 50% of the marks are good for a second fleecing.

Any comments, particularly from those knowledgable about business opportunity frauds are welcomed.


Trade Show activism: Counterspin the Lies on their Selling Field

February 11, 2009

franchiseshowThis ad appeared in today’s Toronto Star.

Just a few points:

1. Contrary to the heading, you do not “buy” a franchise. You sink cash into this type of business opportunity and hope to achieve a salary and ROI over the life of your license of using the trademark using a promised “proven system”.

2. Small business is always a lot harder than you’d ever think. It takes years to develop the technical, management and decision making skills to be a success. Often the cash burn rate in franchising is so great that you never get to see profitable times: You simply flame out too early.

3. Your first contact with a trademark franchise system should never be at  a trade show. You are at a very big disadvantage at a trade show: they control the atmosphere, appear much more successful than they actually are and give the false sense of being in a group of profitable businesses.

Big Show costing Big Dough: National franchise associations such as the Canadian Franchise Association rely very heavily on the revenue that these shows deliver. These types of shows are ground-zero in the subtle and not-so subtle art of persuading mom and pop investors that the next franchise will make them a millionaire.

In 1998, I showed up with a CBC television crew to the fall CFA show. We handed out pamphlets warning attendees, intercepted the minister as he was exiting from his franchisor rah-rah speech (the last time an Ontario minister showed up, I think) and barged our way into the trade show to get some grip-and-grin footage with thinly smiling salespeople.

  • The CFA and their supporters were not amused.
  • Everyone pays a lot of money to bamboozle the next chump.
  • They certainly don’t need anyone coming to piss on their parade.

Their carefully planned PR news puff piece, was turned inside out: Toronto viewers instead saw a be careful of the predators out there story instead.

I guess it was predictable that Dan Farmer of the Royal Bank of Canada would insist that I never show up at another franchise trade show if I wanted financial support for the Canadian Alliance of Franchise Operators. I kept my word although I never saw $1 from any of the 5 banks that financially underlay all Canadian franchising.

In 1998 we had to convince a television editor to assign a reporter, a videographer, record, edit and then air the results. Tough getting media attention because franchise fraud is pegged as a niche audience item.

A little over 10 years later, someone just needs to:

  1. slip a digital camera in their jacket,
  2. record a few clips,
  3. use free edit software,and
  4. create and post YouTube video (I’ve already reserved a FranchiseFool channel, btw) that shows examples of how franchise salesmen openly lie at a trade show because the franchise agreements that give them a License to Lie, Cheat and Steal (kudos to Blue MauMau) from mom and pop investors.

Roubini and Taleb on Nationalizing Banks

February 11, 2009

mindtrip

Anyone that throws cash at a franchise now (starts, renews), has lost their mind.

  • Please note: No one invests in a franchise. You simply rent an alleged proven system and a trademark for some period of time.
  • You may think you own something of value but that is a type of sleep-walking that you will awaken from.
  • How long will you continue to feed a corpse (ie. continue to make payments into an already collapsing fraud)?

Nouriel Roubini and Nassim Taleb know what they’re talking about, notwithstanding the pettiness of people like Paul Krugman. I did study political economy and using communism as a straw dog argument is unbecoming  anyone that calls themselves a professional economist.

  • Unless, of course, bringing Monty Python in was Herr Krugman’s idea of a joke.
  • That may be a sense of humour not shared by the +500,000 U.S. laid off workers last month.

Nationalize banks (guaranteeing bad debts and a  “bad bank” won’t work).

  1. Don’t reward known thieves and reckless risk-takers.
  2. Cash is King (keep what you’ve got).
  3. Compensation IS the source of the problem.
  4. It’s only started (massive deleveraging still to happen).
  5. The recession could be 10 years long.
  6. Obama’s bailout plan is a BUST.

And don’t listen to the media morons.


Hidden Risks: Franchising as a poisoned apple

February 4, 2009

You know 100% of the time you’re dealing with a snake if they say franchising is safer than independent business.

snakeappleU.K. predators are still able  to get their media release lies printed as truth.

Comparing franchising with non-franchised businesses is normally an exercise in concealing risk. Hiding risk is exactly what caused the current economic meltdown.

Franchised businesses have unique risks:

  1. usually from several directions,
  2. very powerful because they are unexpected,
  3. many of them at play (hiding in plain sight),
  4. both sudden and slow (blow up versus slow bleed),
  5. unknown by franchisees (most veterans have no idea), and
  6. activated when the investor is least able to defend themselves.

I have identified 344 risk situations that you will face that you would never face in an independent business. There is an old saying: To a blind man, everything is sudden.

These are 8 of them in no particular order of danger:

3.  101 ways to terminate a contract
45.  Churning (serial reselling)
80.  Encroachment (too many outlets put in territory)
168.  Insolvent system renamed and sold to a relative
264.  Right to associate and right to harass
296.  System designed to fail for franchisees
317.  Trial decision always appealed
337.  When the franchisor tanks, so does the franchisee

Note that all of these risks are within every modern franchise. The franchisor decides unilaterally which tool they are going to use, on what franchisee, at this time.

  • Most tyrants keep their serfs compliant by using extreme measures very infrequently.

Sure there’s the occasional Rwandan genocide. The machete’s not needed because the stories are retold of what happens to the minority that stood up for their rights.

This is the role that public stoning or crucifixion played in a previous empire.

If you’d like to take a look at all of the 344 risks I’ve collected over10 years in the Information Sharing Project, here’s the pdf.


No franchise law: New Zealand as a Tier 2 economy

February 2, 2009

greenacreslogo1Humans have evolved a large brain to help in our survival.

It does a very good job but sometimes  it get tricked up in seemingly simple differences.

One of these is the difference between the words rent and own.

  • You rent a franchise.
  • You own a non-franchised business.

Understand? You own no thing/nothing when you rent a logo. Don’t look for equity: It does not exist in franchising.

Modern franchise law defines two terms:

  1. A franchisee is the end consumer or licensee.
  2. A franchisor is the owner and any of his “associates” (sub-contractor, selling agent, etc.)

Franchise law defines what a franchisor is very widely and a franchisee very narrowly for a very good reason: franchisors will try to wiggle out of their responsibilities by pointing to someone else in the selling chain when it hits the fan.

They are as bi-polar as U.S. bankers: laissez-faire in good times, socialists in bad.

A recent New Zealand Herald article shows this:

Auckland, Feb 2 NZPA – An Auckland man charged with fraudulently obtaining $3.5 million from people he granted Green Acres sub-franchises to, has re-appeared in court.

Keith Lapham faced three fraud charges alleging he obtained money by deception from 172 people while he was a master franchisee for Green Acres from March to December 2007.

Lapham was remanded on bail to a pre-depositions hearing in April when he appeared in Auckland District Court today.

His lawyer Peter Davey said an extra two months was needed to examine more than 30,000 documents disclosed by the Serious Fraud Office.

Lapham was an independent contractor and the Green Acres company was not the subject of any investigation.

There are only two terms: franchisees and franchisors & their associates in any jurisdiction with a half-assed franchise-specific law. Can’t really fault the Herald:

New Zealand is a Tier 2 economy in refusing to pass a specific-franchise law.

This government inaction is called enabling consumer fraud.

Questions

  1. Is it any wonder that Mark Bryers, a lawyer, structured the Blue Chip fraud as a franchise?
  2. With lots of people like Mark Bryers, being attracted to franchising, what’s the probability that it’ll happen again?
  3. Is it reasonable for Kiwis to expect more backbone from their government than having Minister Dalziel making her announcements on franchise regulation from the franchisor-only trade shows?

In contrast to almost all of the G20 countries that have a franchise law, it must seem that it’s like shooting fish in a barrel in running a franchise scheme in New Zealand.


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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