il Duce Franchise Lawyer

September 15, 2008

Il Duce means leader in Italian.

It is a term that is often applied by those that choose to influence others in a dictatorial manner.

A national franchise association assists the setting up and marketing of business format franchises in that country.

They lobby and represent the franchisors’ view and oppose franchisees when their interests are in conflict with their masters’.

Most national associations are members of the World Franchise Council, WFC. The WFC is headquartered in the franchise powerhouse nation of New Zealandand controlled by the U.S. International Franchise Association.

Each Nation: Every country has one lawyer who is recognized as Il Duce, the general, the top dog or alpha male (ie. the individual in the community to whom the others follow and defer.).

He wields influence primarily through the national franchise association where he is often the general counsel, Chairman of the Board or other such title.

Their job is to co-ordinate the defence and promotion of franchising within their country.  They are profit maximizing businesspeople who rely on the public’s erroneous belief in their professionalism and impartiality. They give advice freely when they there is no client:solicitor duty to do so (before a contract is formed) and remain in the shadows otherwise.

Because of the credence good nature of legal services and their closely guarded monopoly on providing legal services, many franchise lawyers act as fraudulent experts. They are fully aware of this which explains why there are so many unhappy lawyers.

The Il Duce is seen as an expert who is never personally tested on his abilities by a discerning superior: He never goes to Court. These cowards:

  1. control their clients (franchisors) by preying on their fears of what franchisees could accomplish if franchisees were smart and organized (the weakest franchisee group is stronger than the strongest franchisor),
  2. promotes the self-serving and hazardous thought that you should talk to only to a franchise lawyer (akin to having a murderer’s brother performng the autopsy),
  3. make sure the most lucrative legal service referrals (international expansion from North American franchisors) go only to lawyers who “play by the rules” (franchise lawyers who “support” the franchisors’ position),
  4. speak to governments under the guise of an “impartial” expert (although they NEVER take on franchisee cases),
  5. punishes franchisee advocates by suing them into bankruptcy (just for fun and as an example),
  6. award revenue-generating opportunities (speaking at association-sponsored trade shows) to themselves and “their team”,
  7. write carefully crafted legal columns in the national franchisor-sponsored trade rag (sales: see Franchise Canada magazine or pseudo-journalism, see Franchise Times),
  8. a senior partner of an internationally influential multi-line law firm (allies of friends into political back rooms),
  9. degrades the political process credibility by showing that money buys laws,
  10. keep active in the state, national and international bar associations, and, especially
  11. the American Bar Association’s Forum on Franchising (the latest and greatest ways to serve those that buy 95% of their services: ie. franchisors),
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Big Franchising

July 18, 2008

Most small business investors define franchising in an inaccurate and childlike way.Everyone knows McDonald’s and that it has made many franchisees millionaires.

McDonald’s is a franchise and so all businesses that are franchised must be a success. Maybe the relationship is not 100% causal but it’s a close relationship. Right?

Wrong!!

We Deceive Ourselves: We notice the flashy new sub sandwich shop or the prestigious dog poop scooping service trucks. We always wanted to go out on our own but didn’t want to risk too much. Franchising is pre-sold as a less risky alternative.

We think we might like to look into buying a franchise and this one seems pretty good, so far. Unconsciously we have started down the road in remembering information that would support a yes decision but also ignoring any negative data [confirmation bias].

Humans tend to over-rely on the physical, on what you can see, hear and touch. That evolutionary predisposition has worked well for thousands of years but in a complex, commercial setting spanning international corporations, our “lizard brain” is not too well equipped to deliver a good decision.

 

WHAT IS BIG FRANCHISING?

Little franchising is what you can see [the branches, leaves of the tree]. Big Franchising is what you can see plus the invisible organizations that feed and nourish the organism [the roots].

  • As the son of a farmer’s daughter, lawn care operator and retired agronomist, I know that 90% of the weight of a plant is underground. The power and danger of franchising is hidden.

Relationship: the first factual error that the power dynamics are simple; that they are limited between the franchisor and the franchisee. The unwary pre-sale or unaware ex-franchisee believe that it is fairly simple David and Goliath story and that this individual franchisor is either a “good guy” or a “bad guy“.

Nothing could be further from the truth.

Public Policy: the true face of Big Franchising is revealed when you watch closely what happens when a law is proposed. Most of the aligned interests prefer the shadows and only come into the light when their favoured positions are threatened.

Big Franchising: Expert specialists

Definition: an informal understanding between legally independent corporations and organizations that serves their mutual commercial, power and political interests.

Members & Role

1. Product franchisors: The Big 3 [Auto, Grocery & Oil] but also very large corporate concerns such as Coca-Cola. Massive, aggressive and willing to get on the phone and bully any politician into the middle of next week.

2. Business-format franchisors: The Blue Chippers [McDonald’s, getting fewer and fewer]. Largely co-ordinated through the national peak trade association [ie. AU National Franchise Association, Kiwi Franchise Association of New Zealand, Canadian Franchise Association or the U.S. International Franchise Association. or their subservient members and the other [usually] 80 to 85% of franchisors who do not belong to the national franchisor association. These are public apologists and training centres for franchisor opportunism.

3. Franchise Bar: The very few large international law firms that have a very lucrative franchise specialty and other boutique practices. A useless law to investors [McLaw} is a great law for The Bar because of the irrelevant, but seriously misleading disclosure documents that need to be written. This is a very protective group of extremely sensitive businesspeople who happen to discuss law in their spare time.

Any lawyer hoping to join the club better play by the rules. Rule Number 1 is serve Big Franchising who arranges to pay 95% of all legal fees. You can usually find the majority of the Franchise bar in the national franchisor association’s membership lists. [Australia, New Zealand, Canada]

Franchisee clients are thought of as a means to pay the rent until you can do some serious billing to the franchisors. When I was in high school, certain girls were considered practice girl friends. I believe I don’t have to go into too much detail here. The high school male and the struggling franchisee lawyer have the same thing in mind.

Each country has a King Rat franchisor lawyer. His job is to discipline the Big Franchising members and instill fear in dissenting opinions. I could name the U.S., Canadian and Oz/Kiwi guys but I promised my wife, no more lawsuits.

4. International peak association: the World Franchise Council is an information sharing project for Big Franchising. It provides training in keeping each nation’s public asleep to the true nature of franchising [higher risk, rent not own business, churning, on and on]. It keeps all their members aware of the defenses available to thie members: The “How-to” of defeating all franchise investors’ claims.

Responds to Oz’s public understanding is a babe in the woods when compared to the U.S. and Canada. The U.K. are still in Big Franchising’s womb, largely because of a very docile business media.

5. Financial Institutions: franchising is extremely lucrative for lenders and financial service providers. National programs are set up that kick back millions of franchisees’ dollars every year to franchisors. Lenders often will disregard the law when they fake their lender’s due diligence duties. They often engage in a cluster of behaviors I have defined as Predatory franchise lending. [Australia, New Zealand, Canada]

6. Product suppliers: franchised businesses are higher margin customers. The franchisor negotiates their kickbacks and the franchisee is forced to pay the inflated price. This is really an undisclosed add-on franchisee fee [often, at least, doubling what you thought you would be paying]. Here is an example: A franchisee paying more for shipping [franchisor] than he did for rent [no head lease].

7. Salespeople: these charming individuals call themeelves consultants, business brokers or researchers. Some even hide behind their PhDs. They steer you to those systems who pay them for for their ability to invoke your trust. Don’t be fooled: Almost 100% of the time, they don’t get paid until you say yes and only from the franchise system that they get paid a commission from. They may charge you a few thousand bucks to find the “right fit” but the real dough will flow when the trap snaps shut [sign the franchise agreement or loan papers]. [Australia, New Zealand, Canada]

8. Media: this is the more subtle one. Experienced journalists know all the sordid details of franchising and have known them for many years. Editors do not publish stories that interfere with the commercial interests of their bosses which are in the same Big Franchising club. Occasionally, stories are published but they are simple open-and-shut cases that would never give the public an idea that the problems are systemic [affecting all parts] rather than individualistic [blame the victim]. The lies the media tell are told in silence.

9. Politicians/Regulators: politics is the brokering of competing interests. Big Franchising represents some of the world’s biggest corporations.

Politicians and regulators know their career is short and corporations’ memories are long. The practice of law has almost entirely been taken over with corporate interests. The widespread use of compulsory private law contract provisions [arbitration and mediation] hides the industry’s abuse.

Franchisees are unorganized mom-and-pop shops, mostly. People that think that even national inquiries will discover the truth and then the truth will will result in a good law [reflects reality] are hopelessly naive about how power works.

10. Miscellaneous: this category includes academics, especially [with some notable Oz exceptions] those pesky consulting fee-dependent business administration professors, Trustees in Bankruptcy, equipment and business appraisers, mediators, arbitrators, non-franchise bar law firms, financial services ombudsmen [apologists for predatory lending practices], national privacy commissioners, law societies [very attentive listeners to large law firms’ economic concerns].

Summary: There exists a complex web of invisible but very real relationships that created, supports and aggressively defends the franchise industry’s dominant power structure [status quo].

  • All things being equal: You may be profitable or achieve your financial goals.
  • But, all things are not equal in franchising, are they?

Ignorance of your potential adversary’s power and influence is no excuse. At least for those with ears to hear.


VetFran: Polishing a Turd

July 8, 2008

This colourful phrase was explained to me by my franchise lawyer as such:

When an attorney has a loser of a case, his job to put it’s best foot forward. Your job is to “polish a turd”.

All experienced judges, lawyers, even legal secretaries know it is a loser of a case but, hey, that’s the business side of running a law practice.

In this case, the VetFran program may be used to lure ex-military into a dead franchise industry. For the latest breathless media article see Veterans have edge in franchising effort.

While I have tremendous respect for the individuals within the military, I not believe success in the military will automatically translate into success within a dying industry. My experience and training would, in fact, predict the very opposite.

But prudence seldom gets in the way of selling franchises. Let VetFran speak for itself:

It is because the community of franchising wishes to honor those who have so bravely served our country that a special program called VetFran was created.

Okay…so this is primarily an humanitarian effort, is it?

So who are the players in this altruistic initiative?

  • 200 U.S. franchisors (discounts on franchise purchases),
  • International Franchise Association (U.S. franchise trade association),
  • U.S. Department of Veterans Affairs,
  • Veterans Corporation (?), and
  • U.S. Small Business Administration (Hurricane Katrina response).

Time will tell of course if this is just another way of Trapping the Trusting. Interim proof will be available if many deals fall apart when:

  • the ex-military spouses refuse to co-sign on any franchise debt or contract.

You’ve earned your meager pensions. Protect your own family as cope with navigating onto civvy street.

Don’t become trapped in SBA debts pedaled by an industry desperate to replace exiting sharecroppers.


Selling a McLaw: Solomon on Oz

June 28, 2008

In an op-ed post on Blue MauMau, U.S. attorney Richard Solomon presents his extremely important views on the future of Oz franchise law. He speaks with true authority.

The article is called Australian Franchise Law: Assurances of Protection or Just More Christians Thrown to the Lions? and should be nailed to the forehead of everyone who thinks government or the ACCC will do anything other than serve their masters.

Richard starts his summary in his usual, no BS manner:

…Will Australia become a dumping ground for over the hill concepts that can no longer find growth in America? Yes it will in very many cases. Will American franchise companies pre-empt the market, stifling Australian concept creation? Probably. Will the flavors of Australian culture now found in its native small businesses be lost or diluted? Of course. Now aint that a shame?

What about the useless U.S. “protection systems”?

Will the Australian regulatory scheme track the franchisor advantaged regulatory scheme in America? You’re damn right it will. If that is what’s in store for our friends down under, why the hell do it at all?

Isn’t it bad enough that America blindsides its citizens with a pretense of investment protection in the franchise business? Why are the Aussies considering a similar system for themselves? Are they so self loathing that they would consciously set their own people up for investment disaster?

The franchisor lobby will win any battle in the political arena.

When the IFA [International Franchise Association] is finished with the Australian government, it will have either no franchise regulation or it will have regulation so weak as to be a ridiculous charade.

The only power the franchisor lobby fears is digital information sharing because it cannot control its distribution. They use the law (word-, type-based, linear); the fools use the new media: the internet (electric, acoustic, all-at-once)

Power never takes a back step – only in the face of more power. Malcolm X


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