FRANCHISE – CRISIS FUZZY THINKING
I have come to the conclusion that most
people who become the victims of franchise scams or of franchise
relationship abuse arrive at that status because they are incapable of
analytical thought. Their heads are full of mush. They have been taught
in secondary school various principles about society and government that
are simply untrue, or at least far from competent or complete. When they
go to college they are schooled to take tests rather than to evaluate
anything, find its essence and sort it out in reality mode. They are
frat boy punks who believe/pretend to believe in order to achieve
acceptance. When they graduate and go on to work in large business
organizations, they subscribe to the mission statements of the
organization – always total bullshit – and they never ever acquire the
mental discipline to evaluate real risks.
These people are the protoplasm of the business victim profile.
Accustomed to swearing allegiance to the signature on a paycheck, they
can be told anything – true or not – and they will accept it as true if
it is coupled with the promise –usually false – that the acceptance will
When confronted with difficulty while they are working within their
business organizations, their first response is a combination of denial
and "How dare you!" Neither of these responses represents reality or the
ability to engage analytically with realities. Accordingly they will
posture, lie, threaten and ultimately hire lawyers who tell them
everything will be OK and that it’s just a matter of throwing money at
the problem – always someone else’s money (shareholders’). When they
come a cropper, it is always someone else’s fault, usually the lawyers
This article, however, is intended to focus on the franchise victim. The
fraud victim who bought a bozo deal because he believed without
challenge, and the relationship abuse victim because he failed/fails to
understand the chemistry of which his franchise relationship is made and
falsely believes he is entitled to things that are not provided for in
the agreements he signed while insisting that he was an adult with
significant business experience.
I know these things because I deal with the detritus of these issues
every day of the year and I witness this exact mental exercise in action
every day of the year.
Why am I publishing seemingly insulting epithets addressed to those who
represent much of my client base? I am doing this because not everyone
can be my client and I feel a need to try to educate people to why and
how they get themselves into these situations. If by this pro bono
effort I can cause fewer people to volunteer to be martyrs to bad
business deals, then I have paid back some of the many blessings I
enjoy. Just as the terrorist will not find himself in paradise after
self destructing surrounded by 72 virgins to whom he may do whatever
enters his mind, the franchise investor who believes business nonsense
will not find himself in a franchise heaven surrounded by the perks of
financial success. This is a wake up call!
|Dealing with the
mush in your head
First we have to deal with the mush in your head. You are incapable of
analytical thought because analytical thought is what you were taught is
insulting, rude and politically incorrect – likely to get you cashiered
from your job, club, church leadership committee, chamber of commerce.
Analytical thinking is mental assault and battery. It is the practice of
assaulting everything that is told to you, to make the people who said
it prove it. Since you were taught all your life that you are not
supposed to confront people, and you have lived in accordance with that
maxim, you lack the ability to call people out and challenge their
And so, when some smooth bore professional investment salesman tells you
that he represents a proven system that participates in a multi billion
dollar business segment that has grown by 7 % a year for the last 15
years, and that your becoming a member of that family (always described
as a family and as membership – key power words triggering instincts in
the mental chemistry of the mush minded), and that you will enjoy buying
power (almost always a lie), support (your contract says you get
whatever support your franchisor feels like offering from time to time),
you sign away everything you own in this world without ever making him
prove the truth of everything told to you. And then you go on
UnhappyFranchisee.com or some
other whiners’ club blog site to lament that some smoothbore cleaned
your clock leaving you with no money to pay for a trial lawyer to go get
your money back.
Is it someone else’s fault that you thought you could outwit the pros?
Why did you not hire competent pre investment due diligence assistance
to try to reduce the investment risk? Why didn’t you go on to any search
engine and do a search on FRANCHISE LAWYER? Why didn’t you then ask the
people who showed up on the first page of your search results whether
they did franchise pre investment due diligence as a major part of their
practice? Why didn’t you ask them if they did due diligence on the deal
as well as on the contracts and the disclosure documents? And finally,
why didn’t you plan to spend a few thousand dollars on risk reduction
before betting the farm that no one could hoodwink your poor innocent
People who think they can vet these bozo deals with their mush brained
capabilities also like to go on vacations where people tell them it is
safe to swim with sharks. Swimming with sharks is not safe. Any idiot
knows that. When you go on these stupid vacations, you are not really
swimming with sharks. It is swimming with sharks lets pretend. Any idiot
knows that too.
It is the same with investing in franchises. Some are good. Most are
not. You cannot tell the difference by yourself.
|Dealing with the
Let’s turn now to those who are already franchisees and having their
heads bit off by abusive opportunistic franchisors. I’m no longer
talking about you learning that you were cheated and that you have no
chance whatsoever of ever making a profit. I’m talking about people who
might be making a profit except for the fact that their franchisor is
ripping them off every day in every way.
How do you deal with that? In this part I am going to use two actual
case histories, actual controversies in which so many franchisees allege
the same facts that it is highly unlikely that what they say is not at
least close to the truth. How did these mush brained people get into
this dilemma? And what are they now doing about it versus how should
they have dealt with it to prevent or control the damage?
According to Quiznos franchisees in litigation with their franchisor,
Quiznos receives commissions on franchisee purchases with the resulting
control of supply giving the vendors a monopoly on selling to Quiznos
franchisees. There are other claims in other lawsuits, like there having
been 3,000 sold but never opened franchises. But let’s stick to the
abuse issues here.
In addition to this vendor deal that makes Quiznos franchisees purchase
at seriously noncompetitive prices, the current economic trends and
overcrowding in the sandwich business combine to drive retail prices
through the floor. In short, Quiznos franchisees claim they can’t make a
living and are going broke. They claim life is wrong and unfair, but
they signed agreements that provide for the franchisor restricting
supply and were told in their pre purchase disclosure package that the
franchisor will make money on this vendor restriction program. So they
signed with foreknowledge having been given to them. That they claimed
they were intelligent business people when they bought the franchise and
claim now that they were babes in the woods who didn’t understand what
all that really meant goes to show the mush brained thought processes
that franchise investors bring to the table when they think they are
sorting our the pros and cons about buying a franchise.
In another incarnation, a Franchisor who also has a vender rip off deal
going is making his franchisees buy products that fail to perform. The
franchisees lose customers due to the defective product and whine about
it but do nothing more. Finally the product is so bad that the
franchisor’s claim that the real problem is franchisee ineptitude can’t
be believed by anyone, not even the franchisor himself. The franchisor
decides to do something about it. In the end the franchisees are allowed
to buy good product and the franchisor gets a $300,000 payment from the
vendor because of defective product. The franchisor didn’t pay for the
defective product. The franchisees paid for it. But the franchisor is
keeping the $ 300,000 for himself. The franchisees are claiming that
this is a violation of the franchise agreement and larceny.
They are legally wrong on both counts, just like the Quiznos franchisees
regarding their vendor restrictions program.
In another system, the agreements are separate for each program the
franchisor offers. In his franchise agreement you get the right to be
his franchisee. To participate in each of the programs however, (and
they are all described as potential profit centers) you have to sign an
addendum agreement. In each of his addendum agreements, which you will
need and sign very quickly after buying the franchise, there is a
general release of all claims you may have against the franchisor,
including any claims you may not yet even know about. In this manner, so
the franchisor’s lawyers have told him, he gets to be exonerated for any
misrepresentations he may have made in the selling of the franchise
itself. We wouldn’t be having this discussion if there were no
misrepresentations in the franchisor’s sales process. This is actually a
franchise system in which the franchisees once made money, but it is
over the hill and the franchisor has not been upgrading it to keep pace
with the times or the industry standards. Today he is selling bozo deals
and doesn’t give a tinker’s damn how he does it. He touts his past
successes as if they were today’s successes, and describes his outmoded
programs as though they complied with the standards his franchisees have
to promise their customers they can meet. They are doomed.
This selling of over the hill franchises as if they were up to date and
currently relevant is typical of many over the hill companies today.
Investors have no way, based upon their own experiences in whatever life
they used to live, to figure this out before they are tied in to
draconian agreements and are missing payments on loans they took out to
do this deal. They claim this is a trick and illegal. They are wrong
unless they can find a lawyer who knows how to get past the releases and
they still have enough money to pay that lawyer to protect their
interests. There is also the problem of an over the hill franchisor
having over the hill financials, so that his ability to pay fraud claims
gets more doubtful each year.
Why do these so called and self proclaimed intelligent and experienced
business people get into these abuse dilemmas? Are there ways to
confront and prevent abuses that are seemingly permitted by the language
of contracts that they signed? Of course there are, but what do people
have to do to protect themselves when there is little or no possibility
that any court or arbitrator will be coming to their aid?
How do franchisees prevent what they signed agreements that permit? How
can they keep from going broke through years of trying just to stay
afloat and pay off loans? Why are they engaging in wishful thinking
about useless fantasies, like the notion that the government will step
in to protect them? Well, for one thing, mush brained thinking causes
you to think you are entitled to government protection against fraud and
There is no right that you have – and I mean NO right whatsoever – that
is self executing. You have only the right to protect yourself against
fraud and abuse. You right to be free from fraud and abuse is merely the
right to take competent steps to protect yourself from fraud and abuse.
Statutes that prohibit fraud do not prevent fraud any more than statutes
that prohibit murder prevent murder.
|Reality sets in.
Whining is ineffective.
When you start to understand how reality works, you can maybe begin to
comprehend that only you can protect you, and that in certain kinds of
situations, you really don’t know what to do or how to do it. The single
most effective tool for any franchisee group – whether your franchisor
is being abusive or not – is to form an independent franchisee
association as early as possible, and to adopt the approaches to doing
so that will help you get as close to 100 % participation as possible.
If you wait until you are in trouble you will not get the support you
have to have. Franchisees in trouble lack the ability to be militant,
fearing that participation will result in serious worsening of their
situations and that they will be targeted for retaliation by a
vindictive franchisor. Thousands of abused franchisees have learned this
lesson the hard way and have gone into total failure when they could
have prevented the harm in the first place had they only stood together
from the very beginning.
It is also imperative that you recognize that a franchisee association
is not a social club. You do not need officers, directors and committee
chairmen like you would in your Rotary Club. You need competent,
experienced association management, professionals who understand
franchising because they have many years experience dealing with all the
issues you could possibly face. You have to pay them and they are the
best investment in an abuse free future that you can possibly make.
If you use our service, we will show you how to maximize membership and
we will teach you the art and science of franchise relationship
management from the franchisee’s position.
There is one indispensible maxim – no matter what your franchise
contract says, no franchisor can force abuse down your throat if he is
confronted with a united phalanx of determined franchisees who have
provided the resources needed to get the job done.
People who tell you that there is such a thing as “fair franchising” and
touchy feely nonsense like that will never be able to lead you to a
reasonably safe future. Abusive franchisors don’t give a tinker’s damn
about chatters and whiners. They believe their contracts give them the
right to do whatever they feel like, and only confrontation can deter
the abuse. Abuse always carries with it the generation of additional
revenue from the franchisees that they never contemplated when they
signed their contracts. Abusive, opportunistic franchisors do not forego
revenue streams because some sissy threatened to call them a name or to
give them adverse publicity. Only with a united and funded independent
franchisee association can you counter these kinds of people.
Do not confuse what I am telling you with an attitude of constant
confrontation. The goal is not to have to confront your franchisor. You
don’t have to confront anyone who has come to believe that you are a
cohesive and organized force that will resist abuse. Being able to
confront usually means you rarely need to confront.
On the other hand, you never ever try to reassure your franchisor that
you are not there ready to sue his ass off if that is what he needs. You
never suggest to any potential adversary that you would even remotely
think of taking any of your options off the table. Look at your
contract. Your franchisor is not taking any of his options off the
table. Get real. You avoid confrontation by being strong. You are there
to do business, not to fight with people. But if you are weak you will
attract bullying. That is an ever constant truth in all of life. Your
economic options in franchising come only through strength. Strength
enables you to keep the benefits you were promised when you were
thinking of buying the franchise. These are all economic, whether you
understand that or not. They all affect the capital value of your
business and the health of your expected revenue stream. This is why you
went into business in the first place.
Life is not always fair. People do take undue advantage. You have to
defend your investment or it will be destroyed by predatory franchising
tactics. Your fate is in your own hands and there is no substitute for
This is tough love, straight talk about your future. Clear your mind of
all wishful thinking. You can get fleeced because you don’t know how to
vet franchise investment opportunities for fraud, and you can have your
business value destroyed if you don’t know how to stand up and defend
I make no apologies for my direct manner of speaking. This is not a
parlor game or a tea party.