National franchisor sales teams: Creating the Illusion of Respectability

August 19, 2009

GoodHousekeepingSealWhat do all these associations have in common with the Good Housekeeping Seal of Approval?

They are organizations controlled by franchisors that promote the sale of franchises into national jurisdictions.

  • That is all they do: sell.
  • There is no quality, at all, in what they do.

They also have, at best, voluntary Codes of Ethics which are almost never enforced.

In fact, some of the worst predatory franchise systems I have ever known, are long-standing members. It pays for them to join to bolster their credibility.

  • Do not be fooled: these members are NOT  a measure of investor worthiness.

In many cases, predators use this Mask of Respectability to disarm unwary potential franchise investors.

  • World Franchise Council: Enhancing the global Franchise Community Take a look.
  • International Franchise Association
  • Canadian Franchise Association
  • Franchise Council of Australia
  • Franchise Association of New Zealand
  • China Chain Store & Franchise Association
  • The Franchise Association of Southern Africa
  • British Franchise Association

As usual, I am always very pleased to debate any representatives from these organizations.

Or anyone from their financial institutions which buttress this facade.

WorldFranCouncillogoInternationalFranchiseAssociationCanadianFranchiseAssociationFranchiseCouncilofAustraliaFranchiseAssociationofNewZealandChinaChainStore&FranchiseAssociation

FranchiseAssociaitonofSouthernAfricaBritishFranchiseAsscoation

Advertisements

U.K. franchisor leaders record a new ethical Low: Hard-selling to the recently Unemployed

January 26, 2009

the_bfaTalk about stealing a guy’s life savings when he’s down.

And when I thought I had heard it all and that franchise hustlers would do anything for a sale.

Now word out of Liverpool that their franchisor-only trade association, British Franchise Association, BFA is hard-selling directly to recently laid off UK workers, via their former employers.

It’s like a scene out of the movie, GlenGarry Glen Ross, totally hardcore, old-school boiler room ABCs (always be closing):

We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize? [Holds up prize] Second prize is a set of steak knives. Third prize is you’re fired.

Lie. Cheat. Steal. All In A Day’s Work. Source

It reminds me of the ambulance-chasing personal injury lawyers forcing their business cards into the hands of people lying in the street from a car accident.

Obviously, what I (or the British public) consider to be ethical business behaviour may not be what the BFA brain trust considers to be fair game. The 2 characteristics of an ideal franchisee are: Did their cheque clear and Can they fog a mirror (alive)?

The story (Franchising could be your next career move) is a little awkwardly worded but these are the most flagrant lies that support this propaganda piece:

  1. franchising is a lower risk than non-franchised businesses (proven to be false),
  2. a BFA franchisor is less risk than someone who is not a member (not proven),
  3. the BFA is a benevolent society doing a public service (they serve their members’ interests),
  4. franchisees fail only because of their sloth or stupidity (fraudulent systems?) and
  5. the BFA represents both franchisors and franchisees (only franchisors).

All of these assumptions are false and dangerous. The BFA executives are either incompetent or knowingly perpetuating a cruel fraud, this time on the newly laid-off Brits.

  • You will be preyed upon when you are at your weakest time in your life.
  • Unemployment is an excellent time to buy into a phantom dream (In business for yourself, not by yourself; Be your own Boss) because you want so much to believe it (mortgage, kids, debt, etc.) you are temporarily a very shitty decision maker.

I know. I signed my franchise agreement two weeks before my unemployment benefits were to run out in 1992. BTW: an Ontario Justice said in 2000 that I had done the best due diligence she had ever seen but still lost $140,000 in 4 years, being sued, bankruptcy.

Another veteran but anonymous observer, Lionel Hutz PA, picked up the story and wrote about it on Blue MauMau under the following banner, BFA Wants Unemployed to Buy a Franchise. Lionel leads in with:

The British Franchise Association, the counterpart to America’s International Franchise Association, is directly approaching companies that are laying off employees, to persuade those newly unemployed to buy a franchise from one of their franchisor members.

Lionel goes onto say and pose a most relevant question:

Note the false claims that franchised businesses have higher success rates, and the assertion that British Franchise Association members must “meet the strict ethical and business criteria.” I wonder if the BFA has ever expelled a franchisor for bad franchising conduct?

Ray Borradale, a very effective Australian franchisee advocate and mouthpiece chips in with:

AFA, BFA, IFA and FCA read from the same book.  This is symptomatic of franchisors; good and bad – and it is dangerous.  I note the reference; “educate people about the many benefits of buying into a franchise” with contempt.  Where is the education about risk and due diligence?  This unbalanced marketing of franchising is not new and BMM has covered many similar stories. It is misleading and deceptive but it appears to be accepted by authorities in every country. [I would add the CFA to Ray’s list of talking heads.]

Remember: Franchising is practiced identically around the world. Some countries know about the dark side of franchising and have developed national spokespeople to combat the propaganda. Some countries (like the U.K.) do not know.

IN CONTRAST, note the level of discernment found in this Australian headline of January 26th (care of Franchise-Chat.com), The Franchising Trap:

The Australian dream of becoming self-employed can be the path to financial security, but it can also go disastrously wrong.

For years franchising has been viewed as a reliable, somewhat less-risky option for small investors looking to start their own business. But the 500-plus complaints received by the Australian Competition and Consumer Commission every year arising from disputed between franchisees and franchisors show that franchising is often not the easy entry to business that some people think.

In the U.K. there is a greater danger than is faced by franchise investors in Australia.  Aus does not have a small business government guaranteed program, but the U.K. does.

  • A guaranteed loan program can be misused to fuel franchise fraud. I wrote about it in Canada, I know that that it is happening in the U.S. and also in the U.K.’s aptly named Small Firms Loan Guarantee Scheme.

Heads up to these other countries that have a similar loan guarantee program for small business (Canada CSBFA, U.S. SBA 7(a), and U.K. SFLG):

  1. Korea,
  2. Japan,
  3. European Union (Netherlands, Denmark, Belgium, France & Germany),
  4. Indonesia,
  5. Malaysia,
  6. Nepal,
  7. Philippines and
  8. Taiwan.

Every country gets the type of journalism that it is willing to accept from it’s traditional media outlets. This type of breathless and mindless regurgitating of franchising propaganda is almost never seen in the U.S., Australia or Canada anymore. It was pushed out by volunteer franchisees getting on the back of its nation’s business editors.

  • These blatant lies will continue as long as they are not shot down by a small group of knowledgeable, experienced and vigorous group of Web 2.0 U.K. warriors.

Their basic training can begin once they choose to speak out.


Repetition does not transform a lie into the truth.

August 13, 2008

In a previous post entitled United Kingdom franchise media: What soap?, I took exception with an article that appeared in the Eastern Daily Press called Flourishing franchises buck trend.

It riled me so much that I fired off an email questioning the credibility of the sources (franchise banker, British Franchise Association, consultant/salesman, etc.).

Perpetuating the falsehood (franchises survive longer and are more profitable than independent businesses) is dangerous. This specific misrepresentation was exploded due to the academic work of Timothy Bates and Scott Shane some 10 years ago. No credible scholar would make these statements.

Bob Purvin’s recently re-issued book The Franchise Fraud [Amazon reviews] directly addresses this distortion also.

There probably is no specific quality franchise research having to do with U.K. franchisee survivability. There isn’t any in Canada, Oz or New Zealand either. The only work credible work is from the U.S. but that’s okay: That is where franchising is created and exported.

I promised to report back if the deputy editor, Adam Aiken, contacted me. This is my sixth email I have sent to other UK business media asking them to stop simply re-typing the franchise industry’s always rosy media releases. All of the these have been ignored

To Adam’s credit, he actually wrote back and this is what he emailed me:

Thanks for this, Les.

I’ll include some of your comments on our new business blog and provide a link to your blog, if you’re interested . . .

Adam

I accepted his offer and thanked him as any polite Canadian would do in the situation.

Title courtesy of Franklin Delano Roosevelt.


United Kingdom franchise media: What soap?

August 8, 2008

UK journalists are still a lapdog when it comes to franchising.

Whenever I read the regurgitated franchisor press releases routed through the Kiwi-based Franchise-Chat.com, I want to retch. You seldom see such drivel ever making it past any self-respecting business editor in North America.

  • Kudos to the Oz and NZ rodeo clowns for wising your media to the International Brotherhood of FWW-FIBS [Franchisor Wankers Waiting for Franchise Investors to Bend down for the Soap]

A good example is the breathlessly titled: Flourishing franchises buck trend that was published by Adam Aiken at the Eastern Daily Press.

These “facts” are given to us by Natwest Bank and the British Franchise Association survey while some consultant [read: salesman] named Roy Seaman of Franchise Development Services says:

  • only 5% of franchises fail when
  • 65% of non-franchised small businesses fail.

Bullshit. Bullshit. And then more bullshit.

Please find below my very restrained email to Mr. Adam Aiken, Deputy Business Editor.

No response yet but I promise to report back, if they bother to wake up.

Date: Wed, 6 Aug 2008 21:30:13 -0400 (EDT)
From: “Les Stewart” <xxx.com>
Subject: Flourishing franchises buck trend
To: “Adam Aiken” <adam.aiken@archant.co.uk>

Adam,

I would question the credibility of the survivability of franchised versus non-franchised businesses. The North American franchise industry was well-known for bragging of such lower risks than independent businesses but was subsequently proven dead wrong by academics such as Timothy Bates, Gillian K. Hadfield and Scott Shane.

Knowledgeable scholars who study franchising issues routinely express contempt for the failure rate statistics publicized by franchisors. Francine Lafontaine, for example, states ‘one of the major selling points of franchising to franchisees over the years has been the statistics vehiculated by the trade press on the very low failure rates of franchised businesses compared to independent operations. These statistics never had real scientific basis’ (p. 14, 1994). Such criticism does not deter the industry.

Survival Patterns among Franchisee and Nonfranchised firms started in 1986 and 1987, U.S. Department of Commerce, p. 6.

The information that is in article, in my opinion, is seriously misleading to potential small business investors. I suspect an Australian site [BakersDelightLies.com] is more representative of UK investors’ experience rather than one-sided franchisor-only hyperbole.

If you’d like to take a look, I think my weblog and the U.S. Blue MauMau community provides a more independent view.

Les Stewart MBA
Midhurst, Canada
lesstewart.wordpress.com


%d bloggers like this: