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.

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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.


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