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Dear Franny (Guests Post Questions Here)

Franny answers franchisee questions

Ask FrannyThis forum was created so that readers and members of Blue MauMau can post questions to Franny about issues of interest to small business and franchise owners. Franny sometimes invites world-class subject matter experts to answer tough questions

If your post is answered by Franny, it will be featured on the front page of this journal under the "Ask Franny" column.

In your post, please do not mention your franchisor's, vendor's or your own firm's name. The intent of this forum is not to give press to a brand name but rather to ask general questions that franchise owners within and outside one's brand might find of interest. (There are press release areas to sell what's great about a brand or other forums to tell tales of franchisee rip off.) Your question may be edited for clarity, brevity and frankly, some entertainment value.

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PCI Compliance

Franny - All businesses that take credit cards are supposed to be PCI compliant. Is that something the franchisors do for the franchisees since they dictate the systems used?

Super constructions

Thirdly, and most importantly, a split level house is more affordable compared to full-story homes. Diverse Design. Though we've described the typical http://plane.site11.com split level house (3-way-splits), there are many other unique layouts out there that would qualify as well: Bi-level: This layout consists of two stories. When entering the home, you step into an area between the two floors; a foyer that immediately opens up to two staircases, one taking you up to the kitchen, living room and bedrooms, one leading you down into a partially submerged basement/family room. 4-Way: Using the same design as a 3-way-split, there is sometimes a fourth addition below the lower family room: a partially excavated basement (which is great for regions with high water tables) that can be finished off or used as storage. Raised Ranch: It uses the same layout as a ranch, except half the house is slightly raised to form an upper story for extra bedrooms and baths.

failure rates

When are you going to post the 2013 failure rates?

Do not rely on SBA failure rates

Several franchises, especially childcare related franchises that sell building as part of the franchise do not mark the loan as franchised loan. Therefore, SBA records do not indicate any relation of those failed loans to the franchises. Do not rely on these failure rates only. For example, Discovery point childcare franchise shows very low failure rate, less than 10%. In reality,out of the 15 new starts in 2006-2007, 10 went bankrupt with closure and/or owners handed over the business. Several of the remaining are behind payments and banks and the franchise are ignoring the late payments to avoid more failures. The franchise is not losing money as Cliff made nearly half a Million Dollar profit from each of the centers personally.

Fsn online hair shop

hello. i am new to here.Nice to see you all.
Can someone tell where I can find hair extensions purchasing agent??

Considering a franchise

do you have any information regarding the spa for girls called Sweet & Sassy?
What questions should I ask of them?

Failed Franchisor

What if a franchisor decides to go out of business. Just quits.

Jim Coen's picture

Franchisees would have to fend for themselves

That is one of the benefits of forming an Independent Franchise Owners Association. Franchisees that are organized are much better prepared when a franchisor closes, sells, or is acquired.

The best thing for franchise owners to do is form an independent franchise owners association.

There can be numerous

There can be numerous consequences resulting from quitting a franchise, including unearned future royalties. Of course, there might be other financial pitfalls, including unpaid vendor bills, years left on a lease, outstanding bank loans, to name but a few problems that could crop up once you shut your doors.

My firm, Bridge Management Consulting helps franchisees and other small businessmen with these issues. Fell free to call me @401-390-3801, for a free consultation, or visit our web page at www.bridgemgt.com.

Franchisor/Franchisee relationship

If a well known Pizza Delivery Company takes a step back from any responsibility from a franchisee's employee who kills a person while speeding to a delivery - how is it that they send Area Supervisor's to lower a person's store status (score) for low DOT (delivery on time), therefore encouraging speed?
If a franchisee is being virtually threatened for low DOT's - isn't that an issue of double standards?

This happened in March with a Southeast Texas woman.

Does my franchisor break laws?

I am a franchisee of a fast food chain.

I am wondering my franchisor is breaking the law or not by collecting payment of credits or debit cards of costumers directly from banks instead letting these payment go directly to franchisees from banks.

My franchisor pays the plastic cards money to the franchisees twice a week now after some franchisees made complaints,,before once a week.

In this way,franchisor almost control half of my cash flow.They can spend that money in their way without my consent.

Is this a wrong doing?
Franchisor gets more protections than government and banks if they manage the money flow in this way.

Thank you in advance for your reply.

This business does really work?

I am thinking start a cooking oil filtration service in area by myself but I did some investigation about this business i found what get a good filter machine, filters, etc. is not a problem but my real concern is the demand... Is there a real demand for this business? and how much charge for the service? other insight about it..

thank you.

Is there a future in QuickPrint?

I quick print franchise has recently been listed for sale in my area. Is there a future in this business model?

Discovery Point in NC with new website

After failing to promote Discovery Point in the existing states like GA, TN, FL, they are now trying in NC. Rumor is that an immigrant is being targeted. If you know the potential buyers, please alert them of possible fraud. Tell them to read about Discovery Point frauds before investing. A totally new website is created to fool the potential buyer - http://www.discoverypointraleigh.com/

Discovery Point in NC proceeds with construction in Wake Forest

Some franchisee is doomed. Feel sorry for them.

http://constructiondatacompany.com/construction-projects/108326/discovery-point-wake-forest-nc/

Keep Chens in your prayer - they are ready for a long suffering

Chens are opening a new Discovery Point. They are perhaps going to suffer and paid for that service. New market, new target, new SBA arrangements. This franchise changes corporation names during closing and SBA cannot track them with the loan failures. Noticeably another immigrant couple, who believed in the US system- they will soon have a lesson of a life time from a college drop out.

"Owners, Jan and Hong Chen, are excited to open the first Discovery Point Child Development Center in North Carolina. “Our goal is to build a premium childcare facility where quality and care are top priorities,” said the Chen’s."

Franny's picture

Dear Franny, I Want to Sue My Franchisor

Dear Franny, I am a former franchisee in Illinois who needs advice on suing [my franchisor]. Regretfully, Ms. Yvana Sue

Franny answers this question in her column, here.

Red Hot Franchises

Anyone knows how the red hot franchise website ranks franchises? The list has so many unknown names - how do they decide on these rankings? Is it how much the franchiser pays? Saw that questionable Discovery Point is ranked 22 and it is national ranking. So it is portrayed as the top childcare franchise in the nation, ridiculous. I am sorry, had to bring this up and hope the angry boss does not initiate another virus attack to this site.
http://www.redhotfranchises.com/franchise_list/

Red hot

List is determined by who advertises on their site

Capriottis

Do you know anything about the Capriottis Franchise?

Cappriotti's

I am familiar with Cappriotti's. Long before franchising was ever a consideration for me, I frequented Cappriotti's. Phenomenal product, that attracted a loyal following - that was almost 23 years ago while attending the University of Delaware!

23 years later, I am a multi-unit owner of a national franchise. I have looked into some of the my college favorite concepts, but can not seem to justify the 7% royalty... I would agree with Granville Bean that Cappriotti's does not have national "brand" recognition. That may not matter, but why are you paying 7%, and $40,000 for a franchise fee - they make subs.... f I was on a road trip and saw one, I would stop! If you are in the Delmarva area, then maybe it is worth it; they make great turkey subs... If you are in So Cal, maybe do your homework and do it yourself... What ever you decide dig into the brand..... Call every current franchisee you can that matches your prospective market, and call ALL franchisee's that have left that system in the last 3-5 years....

Granville_Bean's picture

Capriotti's: never heard of them (and that says something)

The primary value of a franchise is that its brand name brings in business. NOT its "proven system". Also, a system that has one or two or even three locations per state in scattered states is a yellow flag. It means it is not likely to be able to afford more advertising in any local market than a local Mom & Pop so what's the good of being a franchise?

Yes, MCD jumped from SoCal where the McDonald Bros. had their restaurant, to the Chicago area where Ray Kroc was from, but usually concentric regional growth is a better model to build critical advertising mass and name recognition.  But if you are SURE you're going to get in on the ground floor of the "next McDonald's" by being first in for your state, go right ahead, it's your money.

Discovery Point is better at hiding, Legacy Academy has been ...

Ichter Thomas, LLC Obtains $1.155 Million Verdict For Former Franchisees of Legacy Academy, Inc.

http://www.ichterthomas.com/2013/04/ichter-thomas-llc-obtains-1-155-million-verdict-for-former-franchisees-of-legacy-academy-inc/

Currently, Legacy is involved in five (5) other lawsuits with former Legacy franchisees, all of whom are represented by Ichter Thomas, LLC, and all of who have similar claims alleging fraud and/or a pattern of racketeering activity.

Unfortunately Discovery Point's Clark had been more slippery and destroyed all evidence and pretends to be sick while thinking of more ways to escape. Cary Ichter once saved Clark from a franchisee named Miller. So, even if he knows how to get him, cannot do it.

Two more bankruptcies for Discovery Point

Discovery Point #50 at Dawsonville and #55 at Fayetteville, GA went out of business last week. These were multi-million dollar loans guaranteed by SBA but SBA logs did not show that the loans were franchise related. The franchise corporate injected imaginary money from the profit to make the loans happen. There were perhaps overseas money transfers from these transactions. Each closing of these centers also had a parallel cash transfer among business entities owned by the Franchise owners and it happened in the closing attorneys office at the same time as the closing. Hopefully these discussions come up in search results so that future franchisees can make an informed decision. Bluemaumau has been blocked in primary search by this franchise.For example, if you Google "Discovery Point", these discussions will not show up.

If you are looking for a franchised childcare and you are a family with children, be careful because you are targeted for destruction. The owners of Discovery Point Franchise are childless but are in child related business (go figure!). They have no clue what it takes to raise a child but understand that the effort makes these families vulnerable and easy to prey upon. Past records indicate that they were after happy families with children - Craigs, Padins, Vahids, Duttas, Schuchmanns to name a few. All these franchisees were personally bankrupt under the supervision of the Discovery Point corporate. An exception: One franchisee was a Police Officer, who bought the Mall of GA location, and promptly rescinded the contract but did not bring these near criminals to court. The police officer should have done that to stop the destruction of so many franchisee families. Franchisees lost home, got divorced, lost retirement savings, could not support kids' colleges because all was sucked in by the franchise and the bank. Most of these loans were made possible by Jackie Hart, who worked with the franchise to increase the center price by a Million in a few years and simultaneously helped to increased the sale volume. She also allowed false cash injection from the franchise's profits.

These center failures are not reported in the Disclosure document and one cannot do a thing if there are lies in the FDD. FTC does not monitor each of these FDDs, GA does not have any regulations, and one cannot sue a franchise for lies in FDD. Rogue people like these use Franchise as a license to commit financial fraud with government protection.

Jackie Hart, Vice President, worked with reputed banks

Those of you do not know, Ms. Jackie Hart was a respectable vice president of a publicly traded company with stock ticker "LION". There was no reason to suspect a fraud by the franchisees in these deals. She is now jobless but still free to roam the streets and owns a mansion bought with Discovery Point transactions.

Approved SBA Lender? Again?

Jackie Hart is listed as approved SBA lender by SBA
http://www.sba.gov/content/community-advantage-approved-lenders#Georgia

Jackie Hart
Phone: (770)880-1032
Email: [email protected]

There are so many bankers working with SBA program but Jackie manages to list her contacts as an approved SBA community advantage approved lender. Though aceloans.org does not list her as a significant member.

Cliff Clark's picture

Someone was looking for a picture of Cliff Clark. Earlier they were deleted but now it is reappearing. Pictures are available at their website. Happy hunting!

Tim hortons

How do you feel about Tim hortons? I am in central Ohio and am considering investing in one.

Franny's picture

Dear Franny, How about Tim Hortons for me?

The answer to your question will appear in an Ask Franny column soon. I've asked a leading quick service restaurant analyst to answer this question.

Pat your own back

This is how you pat your own back-
First create an award and reward yourself with that award. That is exactly what happened here.
http://www.discoverypoint.com/news/gcca-award-given-to-cliff-clark/

The Clark-Vinson Leadership Award was established by the Georgia Child Care Association (GCCA) to honor the contributions and dedication to the child care industry made by Cliff and Diane Clark of Discovery Point Franchising and by Pat and Janice Vinson of Kids ‘R’ Kids International. Many of GCCA’s legislative accomplishments over the past several years have been made possible through the generous support of the Vinsons and the Clarks.

The first recipient of the award is Cliff Clark, who sponsored the award from zees money. No one should be surprised if Vinson gets the award next year.

Charity in their name too

These people have created a charity in their name too. Dirty money is being used for buying fame! Was their any foul play? No one will know- the burial was quick.

Diane's Devotion - posts get erased

There were a few posts on the truth behind Diane's Demotion here. But those were quickly removed. Is someone complaining about the truth and using the legal muscle power acquired from Franchisees hard labor to erase them?

Publicly traded franchisor info

 

Hi-

Can you point me to the best resource to get a listing of publicly traded franchisors? I am doing research on segments and valuation to guide my hunt for opportunities.

Thanks!

Kevin Cushing 

801-560-2448

Yum

Why do you not list any information or conversations from Long John Silver's or A&W on you site?

Voluntary Insurance Offerings

Thank you! Is voluntary insurance such as auto, home and life typically offered by insurance carriers to:

1. Corporate personnel (only)?
2. Franchise owners?
3. Franchise employees.

Is there an online resource I can go to with all the insurance info?

Franchisors for sale

Are you familiar with any franchisors that are financially strapped looking to possible sell?

fdd's

i am having a hard time finding fdd's on your site.

Serial Killers strike again

The latest victims of Discovery Point Franchising are the Vahids of DP #36 and the Duttas of DP #57. They were preceded by DP #11 and DP #22. All these Discovery Point franchises were located in North East suburbs of Atlanta, GA. All of these franchisees were families with children and lost everything they had. They now have the stigma of bankruptcy on their records, but the people responsible to make that bankruptcy are enjoying vacations in their private jet. These are hard working people, who saved to open their own businesses but fell prey to the perfected fraud of franchising.

Vahids and Duttas are willing to share their story to prospective franchisees, if they desire to contact them. Their contact information are available with the existing franchisees of that area.

Granville - do not miss this opportunity. This is a perfect time to pounce on these bankrupt franchisees.

More Discovery Point centers going down

Heard two more DP centers will be closing in the Atlanta area this month. Each is nearly $3M SBA guaranteed loan. These were not marked as Franchised loans and hope SBA can connect the dots. These loans were made by Jackie Hart with Fidelity Bank and Jack Gutkin was involved along with the Clarks. These will perhaps not be reported in the FDD - that is how DP operated in the past.

Discovery Point at Canton

Add another to the fallen franchisee list. Discovery point at Canton, No. 48, is now broke. The $2.5 M property will be sold in bankruptcy court this month.

SBA loans not marked as franchised loans

Several years ago, a graduate students asked,
I am a grad student and I am doing research on "Failure Rate of Franchised Versus Non-Franchised Restaurants".

The perception is, SBA loans were marked with franchised brands. But recent Discovery Point loans issued by Fidelity Bank (stock symbol: LION) indicated that the loans were intentionally marked as non- franchise. It is possible that loans issued by other banks also had similar records. Intentionally because, the good locations were marked as franchised loan and bad locations, which the franchiser knew would potentially go south, were marked as not franchised. Interesting, isn't it? Again no one gets caught in the act because investigators are busy catching the small players. These big players have big contributions and big influences. They can influence judges and arbitrators, if needed.

It is not clear if Discovery Point at Post Road had a formal business appraisal as needed by SBA. Bank could not produce one. We are talking about near $3M loans for each franchised location. Lots of tax payer's money involved- these loans would not have been approved without SBA guarantees. It is happening here, no need to look at other countries and get surprised by their corruptions.

SBA keeps historical record of bad loans related to franchises. Since the bad locations of this franchise were not tied to the Discovery Point Franchising, their SBA loan record stays clean and healthy.

SBA lax regulations are exploited by these people

http://foolingsomepeople.com/main/Einhorn%20Testimony%20Before%20Small%20Business%20Committee.pdf

"By manipulating the structure of the § 7(a) lending programs and capitalizing
upon the SBA’s lax enforcement efforts, I have found that BLX has been able to engage
in rampant, systematic fraud causing the SBA to purchase guarantees on hundreds of
millions of dollars of reckless and fraudulent loans made by BLX. The Office of
Inspector General’s (“OIG’s”) July 2007 audit that generated today’s hearing says,
“[L]enders can essentially ignore SBA’s delegated lending authority requirements
without suffering any material consequences.” As a result, lenders, “may not take SBA’s
oversight seriously.” Further, BLX understood how essential it was to helping the SBA
achieve its volume goals. BLX exploited the SBA as an ineffective regulator to commit
the largest fraud against U.S. taxpayers in SBA history.
These kinds of abuses have gone on for years and I fear that they will continue
well into the future in the absence of vigilant oversight and follow-up action by this
Committee and Congress. As I will discuss, I believe it is vital for Congress to insist that
the SBA make public all of the relevant facts and not be permitted to continue to cover
them up. I also have concluded that the SBA needs more funding specifically allocated
for its oversight and investigative function to guard against future abuses. My other
policy recommendations are provided at the conclusion of my testimony. "

I am David Einhorn. I am the President and co-founder of Greenlight Capital,
Inc. (“Greenlight”), a private investment management firm. Since 2002, I have identified
numerous instances of fraudulent lending practices under the auspices of the SBA,

It is now matter of time that SBA responds

Franchisees were used as straw buyers. These loans were much bigger than commonly reported and involved Millions. From OIG report:

Former Utah Business Owner and Mortgage Loan Officer Sentenced

On September 13, 2012, a Utah business owner and former mortgage loan officer, was sentenced to 10 days incarceration, 6 months of home confinement, 30 months supervised release, 200 hours of community service, and restitution of $165,960.49, to be paid jointly with his co-defendant. The subject had previously pled guilty to one count of money laundering. The investigation revealed that both men recruited “straw borrowers” to obtain $335,000 in loans. The straw borrowers were promised compensation for allowing the men to use their personal information to fabricate application documents in order to induce the banks to approve the loans. They also enticed the straw borrowers to submit documents indicating that they owned thriving businesses when, in fact, the businesses only existed on paper. The men fraudulently obtained a total of four SBA loans and two regular bank loans. This case was initiated as a result of a referral from the SBA Utah District Office. This is a joint investigation with the IRS-CI.

Legacy Academy is worse than Discovery Point in SBA records

There is another childcare franchise in GA that operates similar to Discovery Point. It is the Legacy Academy. Discovery Point had some centers marked as SBA guaranteed franchise loan, but Legacy Academy does not show any. All their loans are marked as non-franchise and so failures do not get in their records.
http://www.loancensus.com/Loans-to-Cover-Franchise-Costs-By-Franchise

Old Sword's picture

Legacy Academy, Discovery Point and David Einhorn

Glad to see more and more franchisees waking up to how SBA loans were used in the franchise fraud - I've been stating this since 2009.  Don't know if the 'David Einhorn' above is the real one but I can assure him that the scandal he unraveled will soon become the Second biggest fraud in SBA history.  Having spoken to several groups very interested in this subject, the word that frequently comes out starts with a "b" not an "m" as what David worked on.  And unlike his case where the franchisees knew they were providing false information, here the franchisors are providing false information to get their hands on the SBA loan money knowing their newfound franchisees and their families will soon be bankrupt.

The question is will they be caught alive?

These family owned franchisors have enjoyed lavish life styles for years based on lies and fraud and franchisees hard work. When are they going to be caught? They are in their retirement ages and have started to drop off. For example Diane Clark of Discovery Point mysteriously passed away! Similarly Turners of Legacy Academy are also getting old and the lavish life style is not going to help with longevity. If SBA keeps delaying, these people will escape justice! Melissa Turner worked with Governor Sonny Purdue- who knows how deep their connections are.

SBA Chief- Karen Mills stepping down

Is Karen Mills stepping down to escape this large-scale SBA scandal? If so, it will be an opportunistic move. She wants to take the credit for the economy but does not want the burden to address fraudulent activities. Is there any progress being made to resolve these reported frauds or administration is trying to sweep it under the rug?

Dreaming

What scandal? Are you referring to a forum on the Internet where posters have it in their head that there is the potential for a federal scandal? Get real guys.

There is substance for SBA scandal by franchises

Is there no scandal? The presented material indicates otherwise. These franchises used their name to get the loan and customers but did not put their names on high risk loans guaranteed by SBA. They used many different business entities to hide the tracks. That is manipulation and may be RICO.

Biggest fraud

Will you please elaborate on the biggest SBA frauds? If this is second, what is the first? Is it also under consideration? Will appreciate if you give us the link to the frauds found to date.

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