The Fixer: Getting professional thieves out of Trouble

January 6, 2009

fixtweedProfessional 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.


  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.

Franchise bankers are Always there for you (whoever you are)

December 23, 2008

friendIn August I wrote a post called Why Australia will get a McLaw.

WA Today ran a story this week by Chalpat Sonti called Franchising inquiry slammed as golden opportunity missed.

Perth-based Narelle Walter, a former franchisee who claims that an induced breach of contract left her out of pocket by $5 million, said the committee did not go far enough:

“Franchise renewals have not been addressed properly and I am distressed that the apportion of good will has not been determined,” she said.

“Franchisors can misuse this loophole in the franchising code and the (Trade Practices Act) to steal the assets of small business investors (through a process known as “churning”, when the franchise is on-sold by the franchisor to someone else).”

Interesting that Ms. Walter draws specific reference to franchise bankers co-operating closely with franchisors:

There was still a big incentive for banks to support the franchisor in the churning process, because they would rewrite loans with an [newer] “unsuspecting” franchisee, she said.

These allegations echo others, especially MP Jo Gash in my September post called Collusion allegation: AUS bank and franchisor.

I wrote about the very cozy franchise banker :: franchisor relationship in a paper to Industry Canada in 2005 called  Franchising Opportunism. It is also a good summary of how the Canadian and Australian franchise industry really works.

  • Feel free to download a pdf copy of Franchising Opportunism right here.

With friends like these bankers, investors do not need any enemies.

Franchise bankers are very, very good businesspeople.

December 21, 2008

sandallifebrianAnd I have come to the conclusion that I am not a nearly as good in business. Retraining is probably in order for 2009.

I think I have simply lost the desire that comes from calling the next Mr. Victim.

This realization substantially accounts for my continual CLMs (Career limiting move) in the last 10 years and my family’s resulting subsistence living.

  • It has precious  little to do with throwing sandals at a $1.1-billion sales per year North American franchise industry.

I should have persisted in my 6 week Canadian banking career but I have to be careful who I associate with. It would have been much easier for everyone, I suppose.

Oh well…

This is a good bit about those bankers who are still very keen about their careers.

Down on Bullshit Avenue

September 27, 2008
International Symbol of Deaf and Near-Deaf

International Symbol of Deaf and Near-Deaf

A second great depression upon us all and all the U.S. media gives the world is BS.

The reasons behind the recent worldwide economic crisis are the same things that are killing franchising: inappropriate regulatory structure.

Industries require rules and enforcement to make sure the pirates don’t take over the ship from the ethical operators. Chesterton said that there are two ways to succeed: doing good work or cheating.

Absent any meaningful oversight and considering human nature, Guess which one always trumps the other?

  • Every time…under all conditions…The lesson learned from World Depression I.


Long Play: I would direct your attention to a very good article called Turning a Blind Eye: Wall Street Financing of Predatory Lending by Kathleen C. Engel and Patricia A. McCoy. It is 65 pages of the most comprehensive and accurate explanation of what happens when you let the 2 year olds loose in the candy store. Free download. [What’s not to love about]

Short Play: Listen and follow along with George Harrison‘s 2002 posthumously released album.

Our gullibility and laziness are used as the yeast that leavens frauds of many colours. Don’t look to the baker; if he doesn’t do it, someone else will assuredly know the recipe.

Maybe thinking for ourselves and questioning the glib sound bites is a way around and through this sewage?

Brainwashed, George Harrison

Brainwashed in our childhood
Brainwashed by the school
Brainwashed by our teachers
and brainwashed by their rules

Brainwashed by our leaders
By our Kings and Queens
Brainwashed in the open and brainwashed
behind the scenes

God God God
A voice cried in the wilderness
God God God
it was on the longest night
God God God
An eternity of darkness
God God God
Someone turned out the spiritual light

Brainwashed by the Nikkei
Brainwashed by Dow Jones
Brainwashed by the FTSE
Nasdaq and secure loans
Brainwashed us from Brussels
Brainwashing us in Bonn
Brainwashing us in Washington
Westminster in London

God God God
You are the wisdom that we seek
God God God
The lover that we miss
God God God
Your nature is eternity
God God God
You are Existence, Knowledge, Bliss

The soul does not love, it is love itself
It does not exist, It is existence itself
It does not know, It is knowledge itself
“How to Know God” Page 130

They brainwashed my great uncle
Brainwashed my cousin Bob
They even got my grandma when she was
working for the mob
Brainwash you while you’re sleeping
While you’re in a traffic jam
Brainwash you while you’re weeping
While still a baby in your pram
Brainwashed by the Military
Brainwashed under duress
Brainwashed by the media
You’re brainwashed by the press
Brainwashed by computer
Brainwashed by mobile phones
Brainwashed by the satellite
Brainwashed to the bone

God God God
Won’t you lead us through this mess
God God God
From the places of concrete
God God God
Nothing’s worse than ignorance
God God God
I just won’t accept defeat

God God God
Must be something I forgot
God God God
Down on Bullshit Avenue
God God God
If we can only stop the rot
God God God
Wish that you’d brainwash us too

Namah Parvati Pataye Hare Hare Mahadev
Namah Parvati Pataye Hare Hare
Namah Parvati Pataye Hare Hare

Shiva Shiva Shankara Mahadeva
Hare Hare Hare Hare Mahadeva
Shiva Shiva Shankara Mahadeva
Shiva Shiva Shankara Mahadeva

Namah Parvati Pataye Hare Hare
Namah Parvati Pataye Hare Hare
Shiva Shiva Shankara Mahadeva
Shiva Shiva Shankara Mahadeva

Suing your Franchise Banker: Girding one’s Loins

July 24, 2008

Since I have set this up for a client and defined Predatory franchise lending to the Canadian government, I can tell you.

In 1995, an award-winning Canadian investigative journalist named John Lorinc published his first book, called Opportunity Knocks: The Truth About Canada’s Franchise Industry. An excellent resource; totally blackballed by the industry.

  • Canada is the first stop overseas for U.S. franchisors so our experiences are very relevant anywhere in the world.

Click here for an emphasis-added excerpt from Lorinc’s Chapter 4 called, The 90% Solution: Franchise Economics.

It deals with the a specialized corporate entity: the Franchise Banker. You should find this book and order it online if you are at all serious about learning about modern franchising.

Interesting stuff. The government guaranteed loan program is really just the icing on the cake for these most aggressive of bankers.

If it doesn’t jingle, it doesn’t count.

Rich Mimick, my business school accounting professor

Learn how franchising is financed to know who really is in charge. The brains of this outfit sure ain’t the franchisors, my little overly-trusting friend.

BTW: I should mention I had an eventful 6 week career with a Canadian bank in 2000. The training program was going well [we both thought] until they realized I was that Les Stewart.

  • Big Franchising delivers very sharp disincentives to those that raise uncomfortable questions.

The latest example was last month regarding selling insurance into the Canadian franchise industry. Who wouldn’t want me as their insurance broker, I ask you?

It seems history means nothing to some industries:

It’s probably better to have him inside the tent pissing out, than outside the tent pissing in.

Lyndon B. Johnson, 36th U.S. president

An early (around 1400) drawing of a chastity belt. [above, thanks to Wikipedia]

Why is Oz investigating franchising?

July 19, 2008

Seems like a stupid question with a profoundly dead-nuts simple answer: Because franchisors are black-hearted bastards willing to pry the last nickel from a dying widow’s hand.


But let’s hold our perfectly understandable emotions for a moment. I’ve had that response but have worked my way through that.

A few questions, though

  1. Do you think franchisor alone are smart enough to put together such a sophisticated, all-at-once machine?
  2. Do you think your national banker or lawyer is any less ruthless in getting their way, when push comes to shove?
  • Or, maybe, part of the franchisors’ role is to be a scapegoat for the real but hidden economic powers?

I’m pressed for time right now so I will be coming back to this topic but let me throw out an idea or two as I snatch a few moments away from moving my son back to university for the fall.

I think:

1. Oz politicians mean to investigate “franchising” really mean looking into little franchising [and not Big Franchising]. They want a superficial look a the visible fall guys instead of a systematic inquiry into the complex commercial arrangements I have defined. They only want bewildered, traumatized franchisees asking naive questions about things they will fake ignorance of. The politicians know all about franchising’s unfairness: this is a PR stunt to create another useless oversight process that will keep the abuses off the front pag

2. The real strength of modern franchising is in the Franchise Bar. Let’s call Oz’s King Rat lawyer and make him answer questions. These litigators do not like being asked questions by a well-prepared politician [assisted by a smart, good looking franchisee advocate]. See here the 2000 testimony from the Canadian Bar Association – Ontario.

3. Big Franchising is all about wealth re-distribution. The bankers and lenders are professionals with a statutory duty because lending is a credence good. They are a self-regulated industry whose lap-dog regulators run a dog and pony show of trapping and defeating complaints, How about inviting 3 or 4 of the franchise bankers to explain specific franchisee loans and patterns as they contrast to what I have seen in Canada.

  • Sure, the bank robbers are a nasty bunch. Guaranteed
  • But who exactly is driving the getaway car? [that’s franchising’s strength and its greatest weakness: its Achilles’ Heel]

If you want a solution, follow the money.

If you want to float down Big Franchising’s river, do as you’re told, talk your brains out and be happy with what they give you.

  • You are being played like a violin [again]. Wake up for God’s sake.

Anyone with any imagination can see this and knows the only rational response to this facade is to:

  • create a digital Big Franchising kangaroo Court with rules designed to broaden the inquiry .

Oz banker writes off its own franchisees’ loans

July 14, 2008

An interesting development with the Bank of Queensland. I haven’t ever seen this type of franchisor debt cancellation before.

The Financial Standard of Australia reports today that BOQ writes off franchise loans.

Of 55 owner-managed branches in New South Wales for BOQ, most have been trading for only three years or less. More than three-quarters of the BOQ franchises set up in Sydney over the last three years are failing to meet business targets.

Normally the costs are very high when a franchised business fails: personal and corporate bankruptcy for the investor.

Owners of BOQ outlets in Sydney often walk away from their businesses. The owners of the Kellyville and Rhodes franchises are two to have done so in the last two weeks.

That is not happening here.

When an owner of a franchise opts to walk away from the business (and its continuing losses) BOQ invariably employs the staff directly in order to keep the branch open.

In a number of cases BOQ has also hired the former franchisee as branch manager, a situation that appears to include relief from at least some of their liabilities to the bank as part of a package deal.

I believe there are several solid reasons for this very unusual banker charity:

  • the business model clearly does not work, everywhere making it difficult to scapegoat any individuals,
  • the financing was almost 100% by the bank itself [a few conflicts of interest: duty as lender, duty as employer, self-regulated operator],
  • banks are extremely sensitive about charges of bullying or loan pushing and do not want to be dragged in as Exhibit A in the upcoming national government inquiry,
  • these former franchisees seem very savvy [national media, threats of collective legal action], and
  • maybe a few of these banker-now-franchisees-now-banker remember the intricate details of franchise financing [ie. they know where the BOQ buried their franchise dead].

As I always say, whenever you get a chance, complain to self-regulatory authorities and sue the professionals [lawyers, bankers, accountants, appraisers]. Double that sentiment when you can threaten to put dozens of pissed-off whistleblowing industry insiders on the stand within a massive a civil lawsuit.

  • I bet the newly re-employed bankers actually got a bump in pay and some much needed job security. Better security that the bozo BOQ execs who took the doofus idea of franchising branch services: hook, line and stupid sinker.

These are just like Canadian professionals.

Tell you what: I’ll let the kids carry on at university while T and I emigrate. Let me find out where the washrooms are [a little draw] and let me keep, say, 5% of all settlements. Heck, start passing the hat.

Les Stewart :: Ace Bounty Hunter

BTW: This article shows how much franchisor:franchisee relationships are very much like employer:employee relationships.

In fact, some franchise contracts have been seen to be so controlling of the franchisee’s business that the relationship was judged to fall within labour law. In other words, the franchise was seen for what it is: the veneer of an independent business with all relevant control given over to a dominant party.

  • The most recent situation was the Coverall system and the Supreme Court of Massachusetts, USA [see Michael Webster’s Are Franchisees really Employees? on Blue MauMau].
  • Webster has a particularly deep understanding of both franchise, business opportunity and labour law.

I think this is very fertile soil for getting money back. Complain to labour boards saying franchisors are just trying to evade duties as an employer. The janitorial cleaning segment is notorious for having microscopic control over their faux investors

I bet a clever banker could make the same argument because of the complexity, huge information investments needed and memberships in affinity programs such as Visa, MasterCard.

I wonder how much lending the Bank of Queensland does for other franchise systems and if this is what they really want to protect from scrutiny?

  • In 1998, I was told by the head of franchise banking for the Royal Bank of Canada that franchising is the most lucrative form of commercial lending there is. Period.

No question: guaranteed loans at prime +3% v. prime or less for mortgages.

Red Flags: Predatory franchise lending

May 14, 2008

If you have experienced 4 or more of these most significant warning signs, you should investigate further.

Your problems may have much more to do with falling into a well-concealed trap rather than anything you could have done after you signed.

Predatory franchise lending: a commercial arrangement between bankers, sales agents and franchisor that results in catastrophic but predictable loss to the lender/franchise investor.

Predatory lending breaches the banker’s lending duty to: act prudently, perform adequate lender due diligence, and not “loan-push”.

Red Flags

  1. I worked with a business broker or sales agent to look for a good franchise system.
  2. I came to talk to the the sales agent about one franchise system but ended up buying another one.
  3. There was more than one equipment and leasehold improvement appraisal done.
  4. It took two checks or bank drafts to buy one franchise.
  5. The loan proceeds were disbursed before I saw: a disclosure document, franchise agreement or took possession of the store.
  6. I was sent to talk to a specific loan officer, of a specific bank, at a specific branch.
  7. The bank, who chose the appraisers, also chose the highest appraisal.
  8. The loan registration form came from the franchisor or sales agent.
  9. Government guaranteed loan was approved in less than 14 days.
  10. My banker said they’d have I’d have to have two loans instead of one.
  11. More than three other franchisees in my system, had the same lending officer.
  12. The franchisor is a member of a national trade association.

There are things you can do and I will be writing on these in the near future.

Any of this sound familiar?

Bankers squeeze while the coppers ponder

March 13, 2008

In a recent New Zealand story, it seems the people who own both the Green Acres system and the bank that loaned into a +200 victim ($5-million) scam want the losers to make a decision:

…sign a “rescue package” or warned that the company would commence proceedings to get back the $25,000 its financial arm, FBL Finance, had paid on his behalf to former area manager Keith Lapham.

Another bank seems to also say one thing and do another:

Finance Now Ltd, also issued a final notice to about 30 Green Acres franchisees as it too sought repayments for about $150,000.

In franchising, it is not uncommon for banks and franchisors to work very closely; Even including unauthorized withdraws from business accounts.

“The company had taken one instalment out from my account for $700 to pay the loan and I immediately had to cancel that bank account so they cannot continue to take out any more.”

He has written to Green Acres asking for the amount to be refunded, but said he had not had a response.

Meanwhile, since Dec 2008, the police have been doing exactly what about the missing cash?

Yesterday, Serious Fraud Office chief executive Grant Liddell told the Herald that investigations into the Green Acres case were ongoing and that a decision had yet to be reached of whether any charges would be laid [my emphasis].

Investigating the bank (2)

February 25, 2008

Ottawa Citizen logo

Franchises are often financed with government guaranteed loan programs. The bankers, sales agents (aka “franchisor associates”) & franchisors have a very organized way of dealing with unsuspecting franchise investors.

In March 2006, the Ottawa Citizen newspaper published an article called: Mounties investigate ‘predatory lending’. This is the first public mention of a specific example of what I had defined to Industry Canada as Predatory Franchise Lending.

Mr. Oudovikine says his case shows how big banks, franchisors and franchise brokers team up to take advantage of franchisees, many of whom are recent immigrants like him.

“It’s predatory lending. (CIBC) didn’t do any of the due diligence they should have done,” says Mr. Oudovikine, who sent the Citizen e-mails confirming the RCMP investigation. An RCMP official said the police force doesn’t confirm or deny investigation.

The Ottawa Citizen has also published Bank springs another privacy leak on May 14, 2005.

Mr. McLeod said CIBC is also investigating the loan granted to Mr. Oudovikine to start the franchise. But he said it is standard practice to make such loans payable to the franchisor, and noted that bank loan documents make that clear.

But Country Style chief executive Patrick Gibbons said he’s never heard of such a practice. He was unaware of any dispute over Mr. Oudovikine’s loan.

“A loan agreement is business between the franchisee and the lending party, period,” he said.

Two bank drafts made payable to the franchisor of +$230,000 in loans plus +$80,000 owner’s equity but with no current account signing officer’s signature?

So it goes in franchising.

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