Franchising and the Tyranny of Evil Men

Some money costs too much. It may not nececessarily be up to us to decide what source nurtures or what source poisons.

And I will strike down upon thee with great vengeance and furious anger those who would attempt to poison and destroy my brothers. And you will know my name is the Lord when I lay my vengeance upon thee..
— Ezekiel 25:17

Shame – humiliation emotion is a social sanction

Guilt and shame are often mixed up.

1. Guilt rides with the act.
2. Shame degrades the value of the individual in a public or social way.

Leaders of any group that opposes the powerful are shamed. Without support, they abandon their cause while internalizing that sanction.

Shame silences much more than 1,000 signed gag orders.

In this photograph, a young man who allegedly had illicit relations with a Jewish woman is marched through the streets for public humiliation. Flanked by German police officers, he wears a sign that reads, “I am a defiler of the race.” These events were calculated to both punish the so-called offenders and to make a public example of them as a deterrent to others who might not fully subscribe to Nazi racial theory. Norden, Germany, July 1935.

Staatsarchiv Aurich

Source: United States Holocaust Memorial Museum

The Fixer: Getting professional thieves out of Trouble

Professional criminals have always relied on  The Fixer.

He is someone of high political, economic and career influence who solves a professional thief’s problem for a fee.

Secrecy and deceit are required because of the extra-legal nature of some of the work.

A historical example of The Fixer would be  William M. (Boss Tweed) Tweed of Tammany Hall. [see above]. Tammany Hall, likened often to a machine, ruled the City of New York from 1790 to to the 1960s.

People wonder why franchisors, franchise bankers, sales agents, the franchise bar, etc. can get away with [almost] bloody murder. A study of history of professional thievery can provide some hints:

The professional thief generally has a record in the Bureau of Identification as long as your arm, but after most of the cases “dismissed” or “no disposition” is entered. This is due to the thief’s ability to fix cases.

In order to send a thief to the penitentiary, it is necessary to have the co-operation of the victim, witnesses, police, bailiffs, clerks, grand jury, jury, prosecutor, judge, and perhaps others. A weak link in this chain can practically always be found, and any of the links can be broken if you have pressure enough. there is no one who cannot be influenced if you go at it right and have sufficient backing, financially and politically.  p. 82

Professionals within franchising make more money by fixing problems (sabotaging valid claims) than they do by solving them (reducing opportunism). It’s that simple: Less money is deducted from the theft when you fix a case, even after paying The Fixer’s fee. It is very easy for a franchise legal expert to lie to complaining investor [Credence good cheaters]. The lawyer knows that he is not under any legal duty to tell the truth until a solicitor-client relationship is created. And the proof is in the pudding: In 10 years, I know of no franchisee-lead case that would be considered a success by the investors themselves.

The fixer acquires his position with professional thieves by service. He tries to maintain a batting average of one thousand. Not all of them can do this, but their record is so good that the thief feels secure if a regular fixer is on the case. [Blonger, the Denver fixer for confidence men, had the reputation of not having one man sent to prison in twenty years under his protection.] p. 88

Modern franchising runs on political and economic influence. Our Australian friends are simply the latest who have been wised to that reality. Again, from the past:

Fixing is a mixture of finance and politics. It is primarily a financial transaction, bought and paid for by everyone concerned. But it is made possible by politics and often involves political favors as well…For the thief, fixing is almost always a financial transaction…from the point of view of coppers, clerks, and bailiffs, fixing is primarily a financial transaction…The prosecutor and judge are probably handled with more finesse.  p. 98-9

I have already used a tree as an analogy for Big Franchising (vast weight of organism is below ground: iceberg). Modern franchising has a visible and invisible nature (Overworld :: Underworld):

From the point of view of the fixer, also, this is a financial transaction. One fixer said to a thief: “Everything I get is bought and paid for, just as you pay me. No one gets any political or other favors.” The fixer can operate only if he has the consent and good will of those who are politically powerful. he may get a start on the basis of old friendships, but he can keep his position as fixer only if he kicks in. He must turn over to the political barons the larger part of what he gets from the thief, and his standing is determined by his reliability in dealing with them. p. 100

Thieves of nominally independent corporations (ie. franchisors, lenders, sales agents, legal, supply, etc.) would NEVER act with such arrogance if it were not for The Fixer’s protection racket. The weakest link is always the franchisee who 99% of the time goes away thinking they had a one-off bad luck with a cartoon-character type of franchisor thief. They are satisfied to receive 10% of their own money back and remain in silence via shame and contract. Professional franchising practitioners are, however, experienced and shrewd students of human nature.

No thief ever expects to have the bad luck to run into a case that cannot be fixed in some manner. This conclusion is not formed because of he thief’s conceit but because of his knowledge of the weaknesses and limitations of the average citizen and public official. p. 106

National franchisor associations act as a forum for coordinating Overground and Underground activities. The Fixer usually enjoys a very influential role such as Chief Counsel or Chairman of the franchisor controlled association. The Fixer is a lawyer because solicitor-client privilege harbours his clients’ extralegal activities. Politicians who are very often lawyers, know their political career is short and are not foolish enough to destroy their future legal earnings by crossing a mandarin partner of the some of the most influential and aggressive internationally-based, multi-line law firms.

It is sometimes believed that he fixer is the general boss of the thieves. This is an error. The function of the fixer is to get thieves out of trouble, not to control them. He often gives some advice to out-of-town professionals, after agreeing to take care of them. p. 107

The Fixer runs a monopoly on the most lucrative and industry-challenging cases [national, well-funded franchisees group or class-actions) while allowing the tactical fixing to happen to Tier 2 law firms who are seen as franchise experts within the franchise bar. The Fixer operates a protection racket that has the appearance of a law practice.

There is in every large city a regular fixer for professional thieves. He has no agents and does not solicit and seldom takes any case except that of a professional thief, just as they seldom go to anyone except him. The centralized and monopolistic system of fixing for professional thieves is found in practically all the large cities and many of the small ones. p. 87

Source: — The Professional Thief, Chapter 4: The Fix, The University of Chicago, 1937 [my emphasis]

I am at a serious disadvantage when discussing the subterranean nature of franchising. I am not a member of that brotherhood and have only caught glimpses of behavior that has piqued my interests over the years.

• Professional thieves and modern franchise executives function in a similar way, in so much as they are primarily profit-making activities that need to manage risks and returns, under stealth.

They are highly energetic, charming, some exceptionally well-educated people who hold 2 conflicting ideas in their heads: They know they prey upon society but also want not to be an enemy of the state (which as profiting from crime, they surely are).

• This internal, unresolved conflict (cognitive dissonance) accounts for their bullying, arrogant, irritable, defensive and plain mean behavior. They can’t ever quite buy their acceptance into respectable society.

They:

1. possess highly migratory and portable special skills (especially persuasion, and communication),
2. rely primarily on on-the-job training (often passed down from father to son, mentorship, tutelage),
3. are highly congenial and supportive of other professional thieves (including competing trademarks, are compelled to warn and bail out even those they personally dislike),
4. steal in a full time, planned and methodical manner,
5. converse privately in a highly-specialized language (argot: legalese, mumbo-jumbo)
6. achieve recognition for competence from other peers (who you know is important),
7. operate in a very rigidly adhered to code of behavior, and [above all else]

8. particularly loathe anyone that (a) would inform “squeal,” or “squawk” and/or (b) has yet to lose their integrity.

They inhabit a modern version of The Waste Land or purgatory. Their only defense is confusion and attempting to degrade those impertinent enough to hold up a mirror to their face.

Separate the Act and the Actor

There is a tendency to get confused when you are not meeting your financial goals in franchising.

Clear thinking is particularly important when you start becoming aware the something is wrong.

I get a little upset and  a lot suspicious when I hear name-calling (ad hominem arguments) going on. When ever I hear them from experienced industry players, my ears perk up and I question their real motives for speaking.

Not only are these arguments distracting and hurtful but most of all, they interfere with accurate decision making and the very serious work of determining what went wrong (in order to avoid the same mistake in the future).

What I think people should do, if put in an old-fashioned way is to Love the sinner but hate the sin. This is a fairly useful way of falling into a very human perception trap:

1. For every cause there is an affect (A is caused by B) and
2. Most outcomes are within the control of the franchisee (if I work hard, I will succeed).

I can absolutely tell you that both are functionally FALSE in modern mom-and-pop franchising.

• But it serves the elite’s purposes to scapegoat the individual while suppressing institutional memory via gag orders and other silencing techniques.

The mistake you made was to sign a franchise agreement. At that moment, you lost control of your life savings and it was only a matter of time. That you were unaware of that fact does not change it.

• The specific life saving Death Certificate is unique; it’s your life’s story for heaven’ sake.

But for all intents and purposes, the cause of death in immaterial. Dead is dead.

The King’s Death Certificate

The True Evil of Gag Orders

Hitler’s words on his mouth is Redeverbot or Ban on Speaking

The caption reads:

• “He alone of two billion people on earth may not speak in Germany.”

This poster reflects the fact that for a period in the 1920’s, Hitler was forbidden to address public meetings in much of Germany.

The artist is Philipp Rupprecht who is best known for his cartoons Julius Streicher and Der Stürmer (“The Attacker”).

Tricking franchisees into signing gag orders when they evaluate a franchise, when they renew, when they re-finance and then when they sell is next to useless.

Gag orders are powerful but not for the way most people think.

1. The conventional wisdom is that confidentiality agreements act to stop the flow of information (negative stories) coming back to the market. Usually, information flows reward good operators or franchisors and punish opportunistic franchisors (people are unwilling to invest in their systems.

This is part of their function but they are much more useful than just that.

2. Gag orders are a sophisticated form of mind control that taps into exiting franchisees’ guilt and internal conflicts. The gag order is only the symbol of a franchisee’s betray of another person, another family.

Franchising sets up a Bargain with the Devil that is disguised within an economic model.

1. The deal seems to say: ” You get 15% of the value of your investment you must sign a gag order”.
2. But what it comes to mean [in the franchisee’s mind] is: “I will betray someone else in order to get my 30 pieces of silver.”

As an exiting franchisee from a deadbeat investment, you know anyone that buys the store from you will lose their life savings. You also know (at least on some level) that by agreeing to the “deal” you are becoming complicit with the franchisor: the very party who has basically ruined your family and future.

You are maneuvered into believing that the “best of the worst” alternatives is to screw another unknown future franchisee to the wall.

• I believe franchises get really sick because of this internal conflict, of knowingly betraying a stranger in order to survive.
• Franchisees that I have known that died, often attribute their cancer, heart attack, etc. to franchising (via stress).

Allegorically throwing anyone in front of an approaching train in order to save yourself, has some deep psychological and spiritual consequences. When you conspire into luring someone else into slavery and a life of pain, you not only join in the franchisor’s culpability…but

• in a very real sense, you become more of a slave than the new guy because you were aware of what would happen.

This internal guilt or cognitive dissonance (two contradictory ideas at once: “I hate my franchisor for lying to me” but “I lied to escape”) is what keeps former franchisees sick, inactive and silent. You have created an internal conflict that is next-to-impossible to reconcile. It’s called being eaten alive and creating yourself as your own worst enemy. I know this very well as someone who has never signed a gag order.

Scribbling your name on a document means next to nothing.

• Intentionally conspiring with and becoming buddies with evil, means the world.

Franchise’s best practices get much worse: Gresham’s Law

Sir Thomas Gresham (1519-1579) was a British merchant and financier. He is best known (in a very backhanded way) for something called Gresham’s Law which is commonly stated as “good money is driven out by bad money”.

He had urged Queen Elizabeth to act to restore the debased pound sterling. The value of all money is weakened by allowing low quality species to circulate within the economy.

One application: second hand automobiles.

…lemon automobiles (analogous to bad currency) will drive out the good cars. The problem is one of asymmetry of information. Sellers have a strong financial incentive to pass all cars off as “good” cars, especially lemons. This makes it chancy to buy a good car at a fair price, as the buyer risks overpaying for a lemon. The result is that buyers will only pay the fair price of a lemon, so at least they won’t be ripped off.

High quality cars tend to be pushed out of the market, because there is no good way to establish that they really are worth more. The Market for Lemons is a work that examines this problem in more detail.

Franchising is just like selling used cars.

• There are heavy incentives for franchise offerings to be of much lower quality than advertised. Over time, this trend continues: The highest quality offerings achieve the same (or lower) rate of return than does the lowest quality.
• The highest quality franchisors leave and the lowest quality ones multiply, based on information asymmetries, made worse by confidentiality agreements and SLAPP lawsuits.
• The insurmountable costs involved in accessing justice or remedy for fraud accelerate this race to the bottom.
• There is no use of quality improvement methods such as ISO.

The franchise industry’s practice becomes worse (not better) over time.

YouTube says Franchising is slavery

YouTube will become a very effective means of information sharing for franchise investors.

This is the first general franchise message [ie. it’s not this brand or that brand that is acting in a predatory fashion] to hit YouTube. It reflects the reality that all franchise relationships have the same characteristics, the same tools or potential; everywhere, all around the world.

What makes franchising different than independent business is its ability to ransom your life savings. This is done because, at the moment you sign, your investment instantly changes from 100% liquidity to next to zero [transforms into a sunk cost]. You imagine yourself in control but have lost 100% control of your assets.

New franchisees come to realize quite quickly that they go along with the franchisor or they will be punished. Many franchisees kid themselves; hoping upon hope that their masters will allow them to exit by selling to the next sucker. That rarely happens because the franchisor makes more money the less you make at re-sale.

Over years and after signing a confidentiality agreement, investors realize that it was always this way: the moment you signed, 90% of what they put in was always at the franchisor’s absolute use. The sunk cost nature is the source of a franchisor exercising their discretion in a one-sided manner (opportunism).

• The franchisee’s near total net worth is tied to the whims of a party that has next-to no penalties if they choose to act in a dictatorial manner.

Soon I think we will have a franchising channel with dozens of trademark correspondents bringing back information that is not constrained by government decisions, coerced confidentiality provisions or SLAPPs.

That is very good news for good systems and not so good for opportunistic ones.

• And this should be applauded by all stakeholders that want to improve quality, in what we perceive to be a free market economy.

Shouldn’t it?

Thanks to the folks at BakersDelightLies.com for bringing this out.

Don’t pay the Ferryman

The role that the franchise bar plays is an ancient one. Not all debts are settled with folding money and you should try not to, permanently, ransom your future life to avoid pain in the present.

Franchising is a tremendous adventure: Maybe even more if the outcome is a surprise.

Don’t Pay the Ferryman, Chris de Burgh

It was late at night on the open road, speeding like a man on run
A lifetime spent preparing for the journey.
He is closer now and the search is on, reading from a map in the mind:
Yes there’s that ragged hill and there’s a boat on the river.
And when the rain came down, he heard a wild dog howl
There were voices in the night
(Don’t do it!)
Voices out of sight
(Dont’t do it!)
Too many men have failed before, whatever you do;

Don’t pay the ferryman!
Don’t even fix a price!
Don’t pay the ferryman
Until he gets you to the other side.

In the rolling mist, then he gets on board, now there’ll be no turning back
Beware that hooded old man at the rudder.
And then the lightning flashed and the thunder roared,
and people calling out his name,
And dancing bones that jabbered-and-a-moaned on the water.
And then the ferryman said “There is trouble ahead,
So you must pay me now.”
(Don’t do it!)
“You must pay me now.”
(Don’t do it!)
And still that voice came from beyond, whatever you do;

Don’t pay the ferryman!
Don’t even fix a price!
Don’t pay the ferryman
Until he gets you to the other side.