How long will CDN organized labour & the NDP fiddle while 96,000 Tim Hortons franchisees’ staff and management burn?

January 31, 2015

Makes a citizen democrat want to burn up his orange card.

ndp card

How about the nearly 1,100,000 other Canadian employees/families that work in franchised outlets?

Don’t the union and NDP brainiacs understand that 3G Capital will be forcing the franchisees to do their dirty work by laying off tens of thousands of their hourly and managers, many of them personal friends? Hello: jacking up franchisees cost of goods to +32%, driving their “equity” into the red, makes layoffs inevitable.

Franchisees dislike unions true. But the fear and loathing for the vulture capitalists is profound, notwithstanding the company-man, shill franchisees.

Smart, silent current franchisees know the sewer they’re being sent into: Country Style, Second Cup, Coffee Time, Bakers’ Dozen, etc.

Franchise Industry Statistics, 1998

  • Number of Employees: Ontario 400,000 to 600,000 (Canada 760,000 – 1,140,000)
  • Annual Retail Sales: Ontario $45 to 50 billion (Canada $90 billion)
  • Number of Franchisees: Ontario 40,000 (Canada 76,000)
  • Total Investments: Ontario $2 to 8 billion (Canada $3.8 – 15.2 billion)
  • Number of Franchisors: Ontario 500 (Canada 1,300)
  • Franchised Retail Sales (% of Total Retail): 40
  • Number of new lawsuits per year in the Ontario Franchise Industry: 5,000 Ontario Government

I’d like to know:

  1. How many NDP executive positions in joint provincial/federal ridings (Simcoe Grey and Barrie-Springwater-Oro-Medonte) do I have to volunteer/toy with to get an audience from the ON NDP? Monthly payer?
  2. Maybe Ms. Nash MP should ask Charlie Angus ($15 per hour minimum wage?) about the work that Tony Martin former MPP and MP and I did,
  3. Or maybe Mr. Singh and Ms. Horwath need to check their egos and start bragging about what the entire Hampton caucus did to get Ontario’s 1st franchise law and the de facto Canada-wide statute after 30 years of all-party broken promises?
  4. Maybe check with the Fightfor15.org people to find out why they are very, very interested in knowing more about franchising?
  5. btw: McDonald’s (franchisor and franchisees) has just been fined by the U.S. National Labor Relations Board because they judge McDonald’s as a “joint employer” (see here, here).

Full Disclosure: I was a franchisee (twice), studied poli sci, a member of the Teamsters’ union, and continue to be viewed as a “union organizer” by franchisors and their toadies.

Based on the theory that your enemy’s enemy, is your friend, you’d think it’d be Palm Sunday for Mr. Stewart and the Canadian Alliance of Franchise Operators rather than a type of amateur hour.

Kathleen Wynne Les Stewart

With friends like this, it almost makes a guy see red.

Dale Carnegie moment: Of course, saying you care about the lost jobs is a lot easier than having to co-operate with people that have, like, technical knowledge of the most sophisticated form of international commerce: business format franchising.


What is preventing Tim Hortons in Canada from becoming a “down-and-dirty CCAA“?

January 30, 2015

Radical re-allocations of wealth require a conducive environment.

PatrickGibbons

Patrick Gibbons: “We want to grow together. My measurement of success will be how many millionaire franchisees there are out there.”

Companies’ Creditors Arrangement Act, CCAA, Industry Canada

Case: Country Style


Liar Loans deals: business brokers and specialized franchise bankers

September 27, 2012

The lie in the government guaranteed loan: inflated future sales and 6 times value on assets (leasehold and equipment).

Predatory franchise lending program

  1. An unsophisticated CDN buyer is steered by the broker to a specific Schedule 1 banker who can “make the deal happen”.
  2. Industry Canada application form/logo used as bait, as credibility.
  3. Loan paperwork is only ever seen by government auditors IF a claim is made.
  4. Liar loans are never claimed as a loss to Industry Canada (above 3% interest, admin fees, $ above real value more than make up for reckless underwriting).
  5. Deal is papered within 24 hours including compliant appraisal.
  6. Bank’s money in; franchisee’s money in.
  7. Money out of franchisee’s current account: a. to franchisor who pays broker and b. bank’s own treasury.
  8. Sales never show up. Value of franchise on a cash flow basis is negative. Franchisees subsidize and burn through rest of life savings.
  9. Franchisor manages the inevitable business collapse.
  10. Bank’s receiver sells assets at 15% of previous value within 18 months to franchisor.
  11. Consortium repeats steps (go to 1).


Opportunity Knocks and Liars’ Loans: required reading to understand modern franchising

September 1, 2012

John Lorinc wrote the book on franchising from a franchisee’s investor viewpoint.

I’m glad to see it is still available to buy online and is in many Canadian libraries.

The hidden banking side is revealed in Chapter 4, The 90% Solution: Franchise Economics, some of which I excerpted in a WikiFranchise.org post.

What did the business press have to say about Lorinc’s work?:

  1. National PostOpportunity Knocks: The Truth about Canada’s Franchise Industry, is an impressively researched look at the myriad of franchises that mushroomed across the country in the past decade. An award-winning magazine journalist, Lorinc has produced an engaging account that charts both the spectacular successes of some franchisers and the utter failure of some franchisees. How franchises seduce those with the most to lose, Jennifer Lanthier, November 2, 1997
  2. Globe and Mail: At its worst, Lorinc says, franchising is a haven for the unscrupulous who prey on the unwary – typically recent immigrants willing to labour long hours in dreary businesses, unaware that those operations have little chance of prospering – using them as pawns in a shadowy real estate game. Rather than reflecting an insatiable consumer demand, he inquires acidly, is it possible that all those new doughnut shops may reflect a quiet understanding between landlords and franchisors that the best way to fill fallow commercial property is to sell franchises to credulous investors? Franchise book of interest to anyone who pays taxes, Ann Finlayson, November 1, 1997

Finlayson strikes a cautionary note, specifically about the hinted at misuse of the Canada Small Business Financing programCSBFP:

Does all this matter to you? Yes, it does. In 1993, in the wake of vigorous complaints by small-business owners that Canadian banks were reluctant to finance them, Ottawa raised the ceiling on loans guaranteed by the Small Business Loans Administration to $250,000 and its guarantee rate from 85 per cent to 90 per cent, sparking a bank lending rush to franchisees and shifting the risk of franchise investments onto taxpayers’ (your) shoulders.

The Risk: Only a fraction of the Liars’ Loans are ever claimed by the banks, thereby grossly understating Industry Canada’s default statistics (Franchised v. Non-Franchised loan performance). The franchisee thinks he signed a government-backed loan but it never gets registered as such. As their bankruptcy, loss of life savings, marital and family breakdown escalate over the life of their 12 to 18 month franchise career, the franchisee NEVER looks to Box 9 of the CSBFP loan application form (Projected Sales ) as the source of their trouble; where the lie is put into the “Liars’ Loan”. The proceeds of these engineered-to-fail loans is split upfront by the franchise banker with the bank, banker, franchisor and sales agent. If questioned, the bank shreds the paperwork and waits for the lawsuit.

And, seriously, how many of these Immigrants as prey losers could or would ever sue a Schedule 1 chartered bank?

The Return: Smashing quarterly earnings goals, record profits, high turnover in the small business division of each of the banks, and making franchise lending the most lucrative form of commercial lending in Canada. Private gain/public loss enabled by a criminogenic environment, moral hazard, regulatory capture…

Lorinc carefully mentions the “windfall profits” in this arrangement of churning:

What’s more, some banks and franchisors have put the SBLA program [predecessor government guaranteed loan program] to questionable use during foreclosure actions against franchisees, says one former owner who has been through the process. When a bank calls a loan against a non-performing franchisee, the 90% guarantee effectively relieves the bank’s receiver from trying to get the best possible value while disposing of the owner’s assets. With most of the loan covered by the Canadian taxpayer, the assets – fixtures, kitchen equipment, inventory, etc. – can be sold quickly at a deep discount, possibly below market value. This allows the franchisor too step in and buy back the property at better-than-firesale prices, thus generating windfall profit when the store is later re-sold to another franchisee.

An important work that, depressingly, is as relevant in 2012 as it was in 1995.

______

Disclosure: My lol pecuniary interest here and here. Cross posted on FranchiseBanker.ca.


Miracles do not, in fact, break the laws of nature.

May 17, 2010

Once upon a time…

I’m free, 100% clean, I made it to the other side.

I behaved mostly okay, was given the gift of poverty without leaving home, and tried acted as if my life depended on it.

In business meetings, the old is always attended to before the new can be introduced (Tupperware, Country Style, Mr. Sub, Water Depot, WIP). The door’s open but the ride it ain’t free.

Miracles are a retelling in small letters of the very same story which is written across the whole world in letters too large for some of us to see.

It matters enormously if I alienate anyone from the truth.

All that we call human history–money, poverty, ambition, war, prostitution, classes, empires, slavery–[is] the long terrible story of man trying to find something other than God which will make him happy.

Χάρων, C.S. Lewis 1898-1963, Fisher King 1, 2 1991


Does a state of war exist in your franchise system?

April 22, 2010

Yes or no.

Is someone trying to kill your life savings?

Your franchisor has declared war on you whether or not you care to acknowledge it.

Your choice is to throw panzies (trot off to lawyer, talk) or panzers.

Blitzkrieg (German for “lightning war”): see Heinz Guderian.

Rebranding is the fastest method for franchisor to strip cash just before a dirty intentional insolvency.

The definition of throwing good money after bad.

Man schlägt jemanden mit der Faust und nicht mit gespreizten Fingern. (You hit somebody with your fist and not with your fingers spread.) Guderian quotes

Of Guderian:

Sixty per cent of what the German Panzer Forces became was due to him. Ambitious, brave, a heart for his soldiers, who liked and trusted him; rash as a man, quick in decisions, strict with officers, real personality, therefore many enemies. Blunt, even to Hitler. As a trainer – good; thorough; progressive. If you suggest revolutionary ideas, he will say in 95 per cent of cases, ‘Yes’, at once. General Freiherr von Geyr

Some warriors behave nobly despite being surrounded by human filth.

Life after the war

  • Together with his Panzer staff, Guderian surrendered to American  troops on 10 May 1945 and remained in U.S. custody as a prisoner of war until his release on 17 June 1948. Despite Soviet and Polish government protests, he was not charged with any war crimes during the Nuremberg Trials, as his actions and behavior were ruled to be consistent with those of a professional soldier.
  • After the war he was often invited to attend meetings of British veterans’ groups, where he analyzed past battles with his old foes…. Wikipedia

Sotos LLP: The McDonalds of CDN franchisee lawyers?

November 27, 2009

I have learned directly, personally, in-their-armpits relationships from the best in franchising.

Ted Gorski, McDonald’s, CollegePro Painters, Nutri-Lawn, Tony Martin, Canadian Imperial Bank of Commerce, Sam Grange, John Lorinc, Paul Herminston, Katherine Swinton, Canadian Franchise Association, Country Style, Gillian Hadfield, Michael Webster, Jay Harris, etc. They’re all brilliant in their areas of expertise.

When I got into a corner and thought I needed legal help I hired the best I couldn’t afford. John Sotos was my on-and-off-again lawyer from 1998 t0 2000 and I learned a great many things from John and his partner David Sterns. Both John and Michael told me to look at and talk to the banks. Oddly enough, the first lawyer I talked to about franchising in 1982 is now a Ontario Superior Court justice in Barrie. I like lawyers but they’ve got to cover their rent too, you know!

Many franchisees want to fight.

That’s good…and bad at the same time.

Many franchisees think in terms of black and white; now or never; us/them.

That’s good…and bad at the same time.

Many franchisees would rather choose a “white knight” professional instead of a group of franchisees plotting their own course.

That’s not good…and really, really horribly bad.

The McDonald’s U.S.A. president described his corporation as a real estate company with an interest in hamburgers. Let me repeat: McDonald’s is a landlord (to franchisees) with an interest in fast food.

I learned that the economics of modern litigation is very similar.

  1. The franchise industry legal cash flows = 95% by franchisors,
  2. Once the retainer is paid any consultants are shown the door (only one expert, please),
  3. Franchisees are one-shot clients (v. repeat business for franchisors),
  4. Disclosure laws are a God-send for billable hours, and
  5. The industry has a very, very long memory for those that oppose it’s interests.

All lawyers are businesspeople that operate in a near-monopoly on certain words and concepts.

Learning these terms is not hard if you have (1) a learning tool and (2) a willingness to face some difficult facts.

Most let their emotions rule their decision making (ie. denial and fear) but in their defense, aren’t really conscious of doing so. They’ve been conditioned to be on their knees and look to Daddy for acceptance.

Education is the only way out.

WikiFranchise.org


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