Franchisors are cowards, through and through

February 6, 2011

They pee the rug when confronted with competence.

Scavengers of what’s left of the near brain-dead and character-challenged.

Franchise bankers are the brains and they stay well under their rocks.

[this isn’t happiness]

If you lost your money, Call your franchise banker.

October 27, 2010

Get smart.

Who do you think teaches new franchisors or amateurs like David Scenna (Hookers and Booze: Your tax dollars at work) franchise money management?


Your franchisor is nothing much more than a rodeo clown.

  • The brains behind the outfit are the franchise bankers. Only a fraction of the government loan losses are claimed because accurate reporting would queer the deal. They self-finance the used franchises via compliant equipment appraisers on the front end and their captured bank receivers on the other (exit franchisee into bankruptcy.
  • See 2005 details.
  • Crapola franchises.

Last time I checked, +80% of Canada Small Business Financing program loans were done via these people below. Why not give them a call and ask them for a 10 minute interview?

Bank of Nova Scotia
Mr. John Dykeman
Ms. Irene Thomson
National Franchise Programs
Phone: (877) 252-6088 Toll Free

BMO Bank of Montreal
Mr. Steve Iskierski
Senior Manager, National Franchising Services
Phone: (416)927-6026 / (877)629-6262

Canadian Imperial Bank of Commerce, CIBC
Mr. Charles Scrivener
Director & Head, CIBC Packaged Loans Group
Phone: (416) 980-3225

Royal Bank of Canada
Mr. Paul DaSilva
National Franchise Market
Phone: (416) 974-8299

TD Canada Trust
Ms. Irene Law
National Manager, Franchise Banking
Phone: (866) 871-2178 / (416) 307-9270

Source of contact information

Free riding on the authority of the state

October 12, 2010

The notion that people need to believe in and trust in their institutions is not a naive, child-like or stupid idea. It’s an evolutionary imperative because humans are social beings.

Our survival depends on a reasonable expectation of the basic trustworthiness of the officers and offices in our instituations.

A modern complex post-industrial knowledge economy requires a high-trust environment. Fairness of opportunity is the business governments are in: not passing laws that enable the the creation and cover-up of consumer swindles.

A country, a provincial parliament or a police force are not a brand.

Franchising as a bully arena is most readily seen when they start to push around people we elect to represent us.

See this coat of arms?

Canada stood for something at one time. People sacrificed a lot (continue to die for, in fact) a principle, not to enable federally regulated financial institutions to drive the lending getaway car.

See this one?

The Legislative Assembly of Ontario: hear the other side. It’s designed to remind us of something. We as citizens are diminished when its taken 40 years to prove that powerful commercial interests can deny the need for, then flip-flop in 2000 when they need a sales boost and then flop-flip(?) saying that any more pre-sale disclosure would “give a false sense of security” for investigating future franchisees.

Oh, please.

And this one…

When fraud coppers have to continue to turn away franchise victims (wives of some of their own “brothers”, even), it reduces the trust we have in the value of all police enforcement activities.

When the legitimate authority of the state is debased, we are all diminished.

How hard is it to report franchisor crime in Canada?

June 23, 2010

Not that hard really.

You can do it online at

Reporting Economic Crime Online (RECOL) is an initiative that involves an integrated partnership between International, Federal and Provincial Law Enforcement agencies, as well as, with regulators and private commercial organizations that have a legitimate investigative interest in receiving a copy of complaints of economic crime.

A few of my clients have done it to interesting outcomes.

It’s completely confidential, free and is like getting a PhD in how corporate Canada really works. In my experience, coppers know how franchising’s absolute power corrupts absolutely.

Sunlight is said to be the best of disinfectants.

Other People’s Money—and How Bankers Use ItLouis Brandeis 1856 – 1941

Criminal investigations of publicly-traded franchise systems (especially those operating in a near-monopoly) are by their nature, a just pursuit.

All you have to do is sign in.

Maintiens le droit –Defending the Law

Franchise lenders are swill

June 17, 2010

Some systems hardly have any franchisee debt.

This is particularly true of ones that converted employees to franchisees.

That changes once franchisors listen to their bankers explain how much they both can make (ie. interest kickbacks) if they leverage as many franchisees to the teats.

The primary control method of newer (maybe more formally educated?) franchisees is debt. Hundreds of thousands of supportable debt, if the franchisor who controls their gross margins, lets them service their debt.

It’s ugly:

  1. prime plus 5% (“love to give a better rate but it’s unsecured, don’t you know“),
  2. immediately callable (demand loan = short leash),
  3. plus personal guarantees up the wazzo (“just need the missus to okay the paperwork…“), but
  4. secured by NOTHING but the franchisor”s “good faith” (ok as long as the present management stays put but all deals are off if…).

If you want to unlock the chains, start asking your “preferred” lender some questions (on a public blog, btw) about their lending duty under the Bank Act.

Franchise bankers: a breed apart.

A little more sensitive than you run-of-the-mill doofus franchisor: don’t like being fingered for loan pushing, collusion or predatory franchise lending.

Franchising more than helps flush +$100 million CDN annually down the toilet

January 4, 2010

A good Canadian Press article called Ottawa’s loan program for small business still troubled: report by Dean Beeby.The revenue paid to Industry Canada was supposed to cover the default claims paid out, but the math has never worked in Ottawa’s favour.

Claims paid out have risen steadily over the decade, and now top $100 million annually, while revenues have consistently lagged, costing taxpayers a net $335 million so far.

Put another way, cost recovery is currently at only about 60 per cent rather than the 100 per cent that was planned, and is in steady decline.

“The gap between claims and fee revenues will continue to exist and most likely expand,” predicts the KPMG report, dated Oct. 30 and obtained by The Canadian Press under the Access to Information Act.

The program’s portfolio of loans has become ever more risky over the decade, now catering especially to newly established small firms with weak credit scores and little collateral, many in the food-and-beverage sector.

These loans are used extensively in franchising although the franchise bankers frequently don’t even bother to try to register or make a claim on the phantom loans. The difference between new and used equipment nicely covers the money split between the mob (see here for details).

I’ve kept a close eye on the Canada Small Business Financing program and how the franchise industry misuses it (see my 2005 paper called Franchising Opportunism)

Program results from 1999 to 2008 using Industry Canada’s own Annual Reports (franchised v. non-franchised loans):

  • Franchise Loan Claim Rate was 26.5% higher (than for Non-franchised loans).
  • Franchise Loan Default Rates resulted in over $22.9-million more Claims (Non-franchised rate).
  • The mean Franchised loan was 43.4% higher than Non-Franchised.
  • The mean Franchised claim was 11.9% higher than Non-Franchised.

Comparing the years 2008 to 1999:

  • The Claim Rate increased 858.2 times for Franchised (245.1  times for Non-franchised loans).
  • The Franchised Claim Rate accelerated 3.5 times more than Non-franchised loans.

I’d be happy to send anyone the spreadsheet.

The U.S. Small Business Administration’s 7a. loan program seems to be sticking their citizens with a $70-83-billion public debt, too.

If we forget, We will continue to repeat our mistakes

August 4, 2009

WikidFranchise.orgWe created to house the documents that I have collected and to start a dialogue.

A wiki‘s strength is in its volunteer editors.

Time will tell whether other people find this franchise industry-only indexed archive useful.

It has some merit for teaching and learning about the business risks that sometimes run counter to the overwhelming advertising message to say “yes” to every half-baked concept.

The latest, saddest example I added to WikidFranchise today is from the Washington Times’s Elise Anderson, entitled: Jobless seek future in franchising.

As Elizabeth Winterhalter and her husband, Monte, packed up their house in Glastonbury, Conn., for their move to McLean, they were eager and anxious about trading the pain of unemployment for the promise and peril of something they had never tried before — running a franchise.

Good grief.

I wish the Winterhalter, Dillen, and Prioleau families all the very best as a personal and financial outcome but I hope Ms. Anderson follows up with them in 6 or 12 months. As for the expert that Anderson solely relies on?: Alisa Harrison has been with the franchise industry for a total of 1 1/2 years.

Banks won’t do Franchise loans: It is true that there are no normal or even government-subsidized (SBA) loans to be had now.

The reason: an emerging crisis that implicates the 7(a) Loan program of the U.S. Small Business Administration which has a long and consistently scandalous history.

Predatory franchise loans are becoming visible to everyone: loan brokers, banks, re-packagers and politicians. The public bailout of the franchise industry’s greed is what is freezing everyone in their tracks: not a recession. Pending fraud indictments tend to chill even the shadiest franchising financing scam.

Estimates of a public bailout of $70 to 80-billion will seem quaint if an accurate, non-biased accounting were to ever take place.

Don’t expect to see any breaking news stories about this on or either: these off-message stories are skimmed off before they hit any franchise RSS feed. Keep the kids busy talking about the evil empires (MBE, Quiznos) or arbitration reform or how franchisees are to blame.

What I do: I took the article, coded it and saved it in WikidFranchise. Here are the business risks I assigned to it:

  1. Cannon fodder,
  2. Desperation causes bad decision making,
  3. False hope,
  4. Financing with 401k money is totally reckless,
  5. International Franchise Association, IFA,
  6. Only one side presented,
  7. Loss Aversion: people dislike losing much more than winning (the same $),
  8. Professional journalistic standards,
  9. Retirement savings gone,
  10. Severance package financing dream,
  11. Sold during time of psychological vulnerability, especially unemployment,
  12. Sold only to people with no small business experience (very naïve),
  13. Success or failure is within the direct control of the individual franchisee,
  14. Unproven business model,
  15. Unskilled and unaware of risks, and
  16. Who pays for the research?

Many families are going through very desperate times and are searching for help.

  • This article is just plain cruel.

I collected the already-published documents to give a sense of history for new investors. is a revolutionary tool for those willing to use it.

Westpac bank advances $10m, not $10,000. Oddly, NZ now short 2 BP franchisees

May 21, 2009

BPNZYou have to have some sympathy for the banker.

But not much when you know their full involvement in financing franchises in New Zealand in the last couple of years.

The New Zealand Herald reports today on a service station franchisee couple taking it on the lamb, Runaway millionaires named – may have fled to Asia:

Interpol is leading a worldwide hunt for the Rotorua couple who have fled with millions of dollars worth of Westpac’s money.

The couple, who ran Rotorua’s BP Barnetts service station on Old Taupo Road, are Leo Gao and Australian girlfriend Cara Young.

They are understood to have applied to Westpac Bank for a $10,000 overdraft and mistakenly had $10 million paid into their account.

All legality and morality aside, you have to stop and think “What Would I Do” in this situation? Pretty easy to be sanctimonious when you’ve never been tempted to am-scray.

As usual the most interesting bits are from experienced police officers:

Detective Senior Sergeant David Harvey held a media conference in Rotorua this afternoon, but would not confirm any speculation. When asked where police believed the money had gone, he simply replied “overseas”, before refusing to answer any further questions.

$6-million: That’s simply amateur hour when compared to professional thievery such as Blue Chip. The Austrialia-based bank stands to lose big-time if the investors’ lawyer can convince New Zealand courts that the contracts are either unenforceable or void.

Westpac is frequently mentioned as the money behind the Blue Chip fiasco. the latest article is Westpac embroiled in New Zealand property fall-out.

Auckland barrister Paul Dale is launching a High Court challenge on behalf of more than 250 investors. Dale says his clients’ contracts are illegal for a number of reasons including that they breached the country’s Securities Act and Fair Trading Act.

If Dale is successful and the contracts are thrown out the developers will be left with a glut of apartments unsold and unrented, with price tags well below what they originally sold for. Standing behind the developers is Westpac. The Australian bank has been a major player in the New Zealand property market and has financed a number of developers that did business with Blue Chip.

Thank God for Paul Dale because from what I have seen the New Zealand government has done nothing to help the victims of Mark Bryers’ +80 million franchise fraud.

Franchisors starve while industry rag sharpens the axe spin

April 9, 2009

Might consider not putting your neck on the block this Easter.headlesschicken1McChicken (not eggs) are on the menu this season to an increasingly desperate selling machine.

An interesting article from Franchise Times this month, entitled: Tight credit is turning franchisors into lenders.

It almost makes sense blaming the credit crisis for making selling new outlets next-to impossible.

It has the almost-true ring to it, don’t it?

I agree that new franchise sales are in the dumpster and that the normal financing sources such as the SBA 7a loans and Canada Small Business Financing program have absolutely collapsed.

However, I believe that attributing it to the credit crisis is a huge misrepresentation

I figure the 7a and CSBF program loans have stopped because of the discovery of widespread fraud as defined by predatory franchise lending.

Notice how the industry media, franchisors, lawyers, lenders and consultants seem to speak as if they were one? Funny how they act as if they’re a group or one big happy family (less the franchisee), isn’t it?

This is why these are the business risks I coded when I sucked this article in

  1. Able to finance and sell negative cash flow franchise on crooked appraisals,
  2. Any excuse may satisfy a friendly editor,
  3. Appraisals grotesquely inflated,
  4. Appraiser and lender has cozy, repeat-business relationship,
  5. Bankrupt is bankrupt whether you put $1 or $1 million in at first,
  6. Buying an existing outlet even riskier than a new one,
  7. Churning (serial reselling),
  8. Desperate to sell any franchise for any price,
  9. Do the old franchisees get the same deal as the new ones?,
  10. Easy credit fuels worthless system sales,
  11. Even the “cheapest” will drain your past, present & future earnings,
  12. Excuse du jour, tight credit,
  13. False assumptions, multiple,
  14. Fee reduction always has a catch,
  15. Franchise bubble will crash much harder (non-franchised),
  16. Franchisor association public relations machine,
  17. Franchisor financing: faster in, out & resold (serial bankrupts),
  18. Franchisor guarantees franchisee debt,
  19. Franchisor picks up stores for a song,
  20. Franchisor takes franchisee store, resells to new dealer,
  21. Franchisor takes franchisee stores,
  22. Franchisor takes store and converts to corporate,
  23. Fraud financed by rigged appraisals used equipment & leaseholds,
  24. Higher short-term ROI to franchisor when churned (versus royalties),
  25. How much cash you put in at 1st is irrelevant,
  26. Kleenex system: tradename born to die quickly,
  27. Lending is subject to expert fraud because it is a credence good service,
  28. Lending duty never enforced via regulation or litigation,
  29. Loan servicers and brokers attracts fraud,
  30. Misrepresentations,
  31. Most lucrative form of commercial lending, franchising,
  32. Only one side presented,
  33. Ponzi (pyramid) scheme,
  34. Predatory franchise lending,
  35. Predatory franchising makes more money selling than operating system,
  36. Press release dressed up like journalism,
  37. Propaganda, thought-terminating cliches, The Big Lie,
  38. Reputation damage masked by confidentiality agreements,
  39. SBA 7a loans used to fuel franchise bubble,
  40. Selling price inflated by easy credit bubble,
  41. Sincerity,
  42. Sold for as much as much as they can get (next-to worthless),
  43. Sold only to people with no small business experience (very naïve),
  44. Spouse can sue for losses also,
  45. Spouse dragged into negative investment,
  46. Spouse must never sign any document,
  47. System designed to fail for franchisees

I don’t mind lies but I do dislike inaccuracies.

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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