Franchising as a dying Totalitarian State

July 22, 2008

Václav Havel is a Czech writer and politician.

I have played many roles within franchising. My overall approach is similar to Havel’s description of a dissident.

Definition: a person who actively challenges an established doctrine, policy, or institution.

The dissident does not operate in the realm of genuine power at all. He is not seeking power. He has no desire for office and does not gather votes. He does not attempt to charm the public, he offers nothing and promises nothing. He can offer, if anything, only his own skin — and he offers it solely because he has no other way of affirming the truth he stands for. His actions simply articulate his dignity as a citizen, regardless of the cost.

Franchising treats its opponents in a very harsh manner. I doubt if my notoriously short attention span could have been maintained if it weren’t for the shrill reaction of the industry’s leaders.

As always, those that challenge you are your best motivators and instructors.

You do not become a “dissident” just because you decide one day to take up this most unusual career. You are thrown into it by your personal sense of responsibility, combined with a complex set of external circumstances. You are cast out of the existing structures and placed in a position of conflict with them. It begins as an attempt to do your work well, and ends with being branded an enemy of society.

I believe we are very close to the end of Mom-and-Pop franchising.

The elite were the only ones using the industry’s specialized terms, words and language. Now every amateur observer is taking over the discussion. You can hear the professionals moan about their sudden loss of authority and deference over at Blue MauMau.

The degree of impertinence and questioning of the status quo regarding churning, integration clauses, FDDs, gag orders, FTC, etc. is a sure sign franchising’s Berlin Wall is crumbling.

When the internal crisis of the totalitarian system grows so deep that it becomes clear to everyone, and when more and more people learn to speak their own language and reject the hollow, mendacious language of the powers that be, it means that freedom is remarkably close, if not directly within reach.

The Information Sharing Project translates the mind-numbing, legal mumbo-jumbo “FranchiseSpeak” into common English usage. It speaks in the language of the investor, not the apologist lawyer.

It will, in fact, replace some of the functions of the franchise bar. It is a part of what will become a franchising expert system. This will assist in breaking the current economic monopoly on information and developing a common experience shared by the non-elite.

I collect franchise documents in much the same way as Charles Darwin collected beetles. Once you have them, you look for similarities and differences: you create a taxonomy which is the practice and science of classification.

A franchise industry taxonomy and expert system makes investor risk assessment more accurate.

Stripped of its propaganda and confusion, franchising is very similar to a Soviet Union gulag.


More garbage info in = better decisions?

July 12, 2008

A good article from the Mr Video situation that illustrates many of the basic problems in franchising, worldwide.

Australia and New Zealand investors and media have really picked up on the industry’s propaganda in the last 12 months or so. As I have increased my knowledge about franchising, the more I want to wash my hands.

Slindile Khanyile reports from South Africa in the Business Report article: Information is franchisees’ best friend in agreement with franchisors.

More is always better?: Partially true in theory but is absolutely misleading in franchise practice. It’s called baffling them with bullshit so the contract is seldom even looked at.

In FranchiseLand, things are often much more complex and counter-intuitive than a “rookie” small business investor would believe. Sheep are useful for both a fine woolen sweater or the barbecue

I would suggest that South Africa’s franchisor-only trade association has some explaining to do. BTW: whenever you see the words “franchising consultant” together, translate that into a commissioned salesperson. You’ll be right 95% of the time.

I took this article into the Information Sharing Project and these are the keywords I extracted:

  • 100 per cent of settlements have gag orders,
  • Access to justice is not available,
  • Apologists,
  • Cannon fodder,
  • Can’t afford to sue,
  • Churning (serial reselling),
  • Complaint letter to franchisors trade association,
  • Designed to fail as franchise investment,
  • Disclosure laws: 10 per cent solution,
  • Disclosure laws: false sense of security,
  • Financial failure of first franchisee a material fact to the second,
  • Franchise laws protect franchisors, not franchisees,
  • Franchise agreements are so complex, they are breached the moment they’re signed
  • Franchise agreements create a License to Lie, Cheat & Steal,
  • Franchise agreements: Masterpieces of deceptive wording and artful omission,
  • Franchisee repudiates loan,
  • Franchisee-on-franchisee opportunism,
  • Franchisor association not trusted by franchisees,
  • Franchisor association not trusted by professional journalists,
  • Franchisors want the minimum regulation they can get away with,
  • Gillian K. Hadfield
  • I own the assets but the franchisor controls them,
  • Incompetent or predatory: for the small business investor, the outcome is the same,
  • Loan repudiation,
  • McLaw: toothless legislation designed to protect the dominant parties,
  • Mediation: information gathering that aids the destruction of valid legal claims,
  • More one-sided information leads to greater deceit,
  • Must sell business (eventually) through franchisor,
  • No franchisor support,
  • Only 3 ways out: resell (next loser), independence (be sued) or abandon (bankruptcy),
  • Opportunism: contract creates powers which are used to strip investor value during relationship,
  • Opportunism: self-interest with deceit,
  • Opportunism Test: If asset ownership were reversed, would decision likely change?,
  • Stores shuttered,
  • System designed to fail for franchisees,
  • Sunk costs: franchisee’s trapped capital keeps them chained to treadmill,
  • Short-term profits to franchisor much higher with cannon fodder investors,
  • Shocked, I tell you: just shocked,
  • Unproven business model,
  • Unsophisticated buyers,

Want to gamble? You better know when you sit down with businesspeople who the chump or the fool is. If you don’t have superior relevant information and power, look for the victim in the mirror.

You may believe you are getting into a sort of a partnership with a franchisor. It is much, much more. You may not care but, believe me, if you ever have to disagree with your franchisor, these parties will create every barrier imaginable to your pathetic attempts at justice.

Usual Suspects

  1. your specific franchisor (good, evil, whenever…),
  2. a national trade association that defends the rights of the best franchisors to behave [if they see fit] as the most predatory [see FASA],
  3. an international network of these apologists & spin doctors (see next logo),
  4. the biggest law firms in the country who are paid 95% by the franchisors to destroy little guys like you [franchise bar],
  5. banks and lenders who love loan pushing, Predatory franchise lending,
  6. franchise consultants/sales agents [only paid when someone says yes],
  7. politicians whose jobs depend on giving the powerful what they want and
  8. monopoly suppliers.

If you don’t understand these issues, you are incompetent to evaluate a franchise offering in any country.

  • You are, however, fully qualified to sign a contract that gives others the right to Lie, Cheat and Steal from you.
  • And you should not be surprised when they, in fact, do so.

Harold Brown, Esq. didn’t call franchising a Trap for the Trusting for nothing.


What a franchise system does versus what it says

July 7, 2008

You look and perceive the bricks-and-mortar of a store and conclude what a franchise “system” is and is not.

You search for information and start to look into it. Your heart or fear sometimes takes over.

Humans tend to accept some information and discount other data [confirmation bias] based on non-rational notions. The problem is we won’t know until it’s too late; after we’ve signed [hindsight bias]. Some deals are written in blood.

By looking you see what you wish to see, we deceive ourselves [wishful thinking bias]. We are sometimes aided by advertising we didn’t identify as propaganda.

The system is the means of mining value from the franchisor’s customers [franchisees]: Max. cash per unit of time. The pre-sale means are best accomplished by deceiving and encouraging self-deception.

  1. Modern franchisors are in the life savings appropriation business. They use the mask of an operating business to confuse.
  2. Franchising is marketed to those individuals who have sufficient (1) ignorance and (2) capital to make the effort worthwhile.
  3. Qualified investors sign franchise agreements that re-defines (degrades?) themselves as near-slaves in the hope of return [Faust or Deal with the Devil].
  4. When you become aware, you are unable to defend yourself [$, emotion, trust].
  5. Franchise bar members are paid handsomely to maintain the machine and clean up the mess.

Lately, people seem to believe that betrayal is without personal consequences.


Propaganda

April 11, 2008

But propaganda can be as blatant as a swastika or as subtle as a joke. Its persuasive techniques are regularly applied by politicians, advertisers, journalists, radio personalities, and others who are interested in influencing human behavior.

I found this site to be especially interesting.

…every day we are bombarded with one persuasive communication after another. These appeals persuade not through the give-and-take of argument and debate, but through the manipulation of symbols and of our most basic human emotions. For better or worse, ours is an age of propaganda.

The author splits Propaganda Analysis into 3 sections:

  1. Words Games: Name-calling, Glittering generalities and Euphemisms
  2. False Connections: Transfer and Testimonial
  3. Special Appeals: Plain Folks, Bandwagon and Fear

Lawyers have become more and more powerful within the franchise industry. Their monopoly on expertise is almost total.

This, to me, is the greatest danger: the transfer of credibility from the government and the law sanctions a thinly veiled scheme of re-distributing (not creating) investor wealth.

BTW:This poster promoted the principle of killing the mentally retarded.


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