(false) Patriotism is the last refuge of a scoundrel.

September 16, 2010

Is preying on a military  family’s post-service vulnerability the sign of insincerity per se?

From a New York Times classified ad:

Come join a network that has pioneered and led the industry for 30 years. The UPS Store is the #1 Business and Postal Services Franchise for the 20th consecutive year (2010 Entrepreneur Magazine’s Top 500 Franchise List). The UPS Store is the #1 most popular franchise with veterans in the IFA’s Vet-Fran Program (2008 International Franchise Association). With over 4300 The UPS Store and Mail Boxes Etc. locations nationwide, our network continues to lead the market.

Baiting the Fish: Note how Cialdini’s “Weapons of Influence” are used to lure pensions and life savings capital:

  1. New York Times (authority of a traditional media outlet),
  2. Entrepreneur magazines’ Top 500 franchises (McMedia: authority for the unskilled and unaware),
  3. 30 years… (franchisor success means individual franchisees will succeed, see Dunning-Kruger above),
  4. Vet-Fran program (liking: acceptance, a member of the fraternity, endorsed/vetted by the “government”),
  5. International Franchise Association (expertise/authority, funded 100% by franchisors and their friends), and are especially
  6. vulnerable to the authority siren song from 2 directions: vivid, personal success born from supporting a strict command-control structure  while lacking the airy-fairy concept of discerning legitimate from illegitimate sources of authority.

Vets believe very strongly that people get what they deserve in this life (Just World fallacy) and would, therefore, strongly but heavily discount any non-authority based advice on a pre-sale basis. Going on “civvy street” is one of  life’s major transitions involving new/strange: work, employer, location, one/two incomes, schools, income levels, physical/mental challenges, diminished family/friend support.

Setting the Hook: The next marketing stage is an “exclusive” invitation to a very sophisticated, one-day seminar at head office (a “discovery day”). Just like in a gambling casino, these environments are very, very well thought-out, for one side’s benefit only. A real investigative journalist (John Lorinc) published an excellent description of this circus in a real media outlet (The Globe and Mail) in 2000. The Sure Thing describes the extremely effective individual and social psychology that allows predatory franchising to flourish in plain sight.

I’m glad to know great spirits like Peter Thomas or Carol Cross who, by making wise choices for their future, help me make mine.

Samuel Johnson 1709 – 1784

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Is confidence in all franchising past the Tipping Point?

March 19, 2010

The CEO and president of the International Franchise Association, IFA announces his retirement.

And then their board of directors announces that it’s looking for his successor?

  • Hello…does anyone talk to each other on the premiere franchisor-dominated trade association any more? Nobody cared on the board of directors enough to do anything until Matt Shay went public?

Don over at Blue MauMau makes a great point in his Importance of succession planning.

It is a healthy sign when a board of directors is strong enough to carry out one of its most fundamental jobs, making sure there is a leadership successor.

In the hidden world of the board room, it is a rare outward sign of possible cronyism or a weak board when it has not carried out this function. A vacuum of leadership in a trade association can be disconcerting to its membership. It can be an incredible opportunity for competitors.

The IFA announced yesterday that it has hired an executive search firm—probably with “urgent”, “critical” and “HELP!” stamped all over the job description packet—to find a suitable candidate to replace its outgoing CEO, Matt Shay. He has given his month notice, April 16.

I added my two cents worth in Excellent point on Leadership continuity.

I suggest every half-baked, local not-for profit plans for their leaders’ recruitment, training and inevitable replacement. Leadership planning is the core competency of any boy scout troop let alone the “brain trust” of everything that goes bump in the night in franchising worldwide.

It seems the IFA Board is in crisis. A crisis, I suggest, that has been triggered by almost no new sales or re-sales in a recession (contrary to past cycles). They denied it first, got angry at scapegoats, bargained with Uncle Tom social medias, sulk/in a funk and then will be dragged unwillingly into accepting a new, higher-quality business model (see death stages).

D’oh!!

The elite’s catching on: their dinosaur practices has pushed the industry past the Tipping Point with investors’ confidence.

And they realize they are powerless because the internet’s reputation mechanism lacks an off switch.

John Q. Public investor is waking up (becoming conscious) to the fact that modern franchising is Unsafe at any Brand.

  • This is very good news for franchisees wanting to co-operate with each other and good faith franchisors.

Not so much for the opposite: house negro franchisees and predator franchisors.


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


If we forget, We will continue to repeat our mistakes

August 4, 2009

WikidFranchise.orgWe created WikiFranchise.org 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 Franchise-Chat.com or BlueMauMau.org 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.

WikiFranchise.org is a revolutionary tool for those willing to use it.


MBE, The UPS Store executive behind bars

February 24, 2009

I started looking closely into franchising in 1998.

One of my first big system investigations was Mail Boxes Etc., MBE. Since then, that system has morphed into The UPS Store brand and can be followed on Blue MauMau’s thread called The UPS Store, Tales of Gore.

The photograph above is of the president of MBE Canada Michael Martino. He was chairman of the Canadian Franchise Association, CFA and spoke at the International Franchise Association’s, IFA 46th annual convention in 2006.

In December 1998, Martino appeared as a part of an article by John Lorinc in Canada’s monthly national business magazine (The Report on Business). Lorinc, an award-winning  journalist, wrote a very interesting 1995 book called OPPORTUNITY KNOCKS: The Truth About Canada’s Franchise Industry which is still available on used book websites. I recommend picking it up.

The accompanying article was called The Sure Thing: Peter Thomas thought he’d bought into a can’t-miss franchise. That was $170,000 ago.

Here is a pdf of the article, courtesy of my Information Sharing Project archive.

Doug Forster took the photograph. We both agreed that franchise executives, as a general rule, should not allow themselves to be posed behind bars.

  • Especially when you read the contents of the article.

Peter and I were sitting beside each other in the Legislative Assembly of Ontario when our first franchise law was passed in 2000.

I sometimes wonder what happened to Peter and to Mr. Martino over the last 10 years.

Anyone know?

UPDATE: A direct link to Lorinc’s article is now available on WikiFranchise.org. I’ve also lost touch with Peter since the Ontario franchise law was passed. Hope he is well.


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.


IFA: Oversight good for U.S., bad for AUS

September 29, 2008

Big Franchising‘s primary mouthpiece is certainly flexible.

As an example, witness a current press release from the International Franchise Association (IFA) commenting on the amended bailout to Wall Street entitled The Franchise Industry Applauds the Government Rescue Plan.

1. This is in support of government’s increased oversight and will reward those engaged in unfettered corporate predatory behavior in a trillion ways (at least, in US$).

“The addition of crucial oversight and taxpayer safeguards strengthens the plan,…”

2. On the other hand, notice how 12 days ago the IFA was warning (threatening?) Australians that they should not change (READ: increase or improve franchise industry oversight) or all hell would break loose (Blue MauMau: Washington Trade Lobbyist Warns Against Changing Australian Franchise Law).

  • So, it appears, what is good for the U.S. hen is bad for the AUS rooster?

Some logical bridges:

  1. effective oversight of financial institutions is good but the same for franchising is bad,
  2. the illusion of oversight (because God is in the details of any deal) is always good (able to fool all of the people…),
  3. when you praise one country put your talking head’s name to it but don’t when you threaten another,
  4. in the age of globalized markets, what is good for the U.S. is bad for AUS,
  5. the Australian government needs to come up with some cash to bail out their banks, or
  6. sales of franchises are so pathetic that the IFA is running around like a chicken sans their head.

Former U.S. Secretary of Labor and economics professor Robert Reich mentioned on CBC radio on the weekend that this is not a financial crisis: it is much worse (it’s a crisis of trust or confidence). In my opinion, Reich’s blog is a reasonably unbiased source of commentary in viewing the farce of U.S. banking oversight unfold.

  • The IFA are experts at the management of confidence.

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