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Franchise Scandal Expose in Australia
Australian Franchisors Accused of Encouraging Franchise Reselling for Higher Short-term Profit
WESTERN AUSTRALIA (Blue MauMau) - A recent news broadcast on a Western Australian popular news program, Tonight Today, has reported an alarming increase in the number of failed franchisees. And on how franchisors can make more money having franchisees fail.
And why do franchisees fail? The program indicates that a standard answer from franchisors is such franchisees did not follow the "system". Or franchisees do not know how to manage their finances.
But the report shows that it can benefit some franchisors to wait long enough because time is on their side; with a cheap business for resale just around the corner.
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This so sounds like Quiznos Mission Statement!!
"But the report shows that it can benefit some franchisors to wait long enough because time is on their side; with a cheap business for resale just around the corner."
This is exactly what I believe Quiznos is now shifting towards. Allowing stores to close, go dark or sell for pennies on the dollar means that the next generation Zee enters into the picture with less debt right from the get go. In the case of a store going dark, Quiznos renegotiates the lease with the landlord (if the landlord will even talk to them), then they will attempt to force the new FO to buy all new equipment (80-90K) and the cyclical pattern just repeats. So, If you buy a store for 20-30k (including equipment) vs start-up cost of 320-330K (at least in the Northeast) then your fixed costs are dramatically lower. With debt service of an expensive car payment monthly, you could probably eek out a meager profit. I've preached this to corporate time after time and all I get is the "deer in the headlights" look. Funny thing though, when you want to sell your store, I believe they deliberately "stick it" to those Zees that have been able to figure them out and call them out on their tactics.
Thinking of owning a Quiznos??? Tread carefully!! Very carefully!!!
Austrailian Media Not Afraid to Uncover Churning for Profit
Often, I have heard that the "spirit" and the "values" of Australia are more like those of America after WWII and that Australians watch their government more carefully and tend to look after their "mates."
It not surprising, therefore, that the Australian media would divulge and disclose managed churning in an effort to inform the public, and for news product that puts pressure on the government to serve the interests of the people, and not allow large corporate interests to rape innocent citizens to acquire cheap venture capital and cheap labor.
Unfortunately, in this countty, except for a few reporters like Janet Sparks, who provides franchisees with the only news pertinent to franchisees and their situation, the business media and the general media aren't interested in getting the truth out there about the dirty little secrets of franchising and arbitration. The trap of the combination of the franchise agreements and the State UFOC's, that are a reflection of the federal policy as devised under the FTC Rule remains a dirty little secret that is hidden from naive and novice American investors in franchises.
The protection of our liberties in this country by media and freedom of the Press is threatened as attacks continue on the NY Times and other Newspapers, and as attacks continue on Networks etc., in the game and name of "left and right" that has so divided this country. We must remember also that the independent thinking and reporting of those who are now tied to large corporate entitites is a thing of the past. Reporters, even investigative reporters, have to eat and feed their families and are subject to the control of the editorial boards of the newspapers they write for.
The American people are put in the position of accepting the propaganda of the left or the right and really have no way of knowing who the good guys are. The truth is that the good guys on both the left and the right are controlled by huge corporations. CNN bill themselves as unbiased but they give more time to their favorite Presidential Candidates, one way or the other. There is more than one way to stack the deck and bring your favorite candidate before the public. Even the adverbs and the adjectives used in describing the candidates work to influence the public who is so easily brainwashed by all that they see and hear. Unfortunately, the American people, and especially those under forty, don't read and think any more and their thinking is disturbed by the visusal images of the beautiful people who deliver the news and their opinions of the news to us every day.
Our Congress will be involved with "bathroom" and "backroom" politics, and hearings, as usual, and the world will look on in amazment at America, the beautiful. The Press and the Media will indirectly elect our next President, and who really controls the Press and the Media? Public television fights to survive the attacks against its independence to serve the people. The global corporate interests will wine and dine together and will try to protect the interests of the global capitalists who want to maximise their profits in secular free and democratic and capitalistic countries throughout the world.
The American people are not well served by the government of the people, for the people, and by the people because the priorities inside the beltway have been purchased by special interests whose interests are not always allied with the interests of the American people. As more wealth and power is concentrated in fewer hands and more more middle class Americans fall into poverty, democracy but not capitalism will be threatened.
Too bad! So sad!
Austrailian Media Not Afraid to Uncover Churning for Profit
The Australian Media is not Afraid to Uncover Churning for Profit and to put pressure on their government to try and protect innocent citizens from being raped by corporate predators.
Our Media, except for brave reporters like Janet Sparks, who brings news that is pertinent to franchiZEES to their attention, ignores the long-standing rape of innocent Americans, who are lulled into a false sense of security by their government, who pretends that they are regulating frasnchising in the interests of franchisees. The pool of cheap labor and capital must be preserved for the "public good" even if it dishonors the longstanding belief, central to the strength of our democracy, that it is the rights of the individual as upheld by government that protects the democratic Republic.
Too bad! So sad! This is an American scandal!
Bakers Delight - the centre of the scandal
The Franchisor at the centre of this news story is Bakers Delight. Bakers Delight is the world's largest bakery franchise with stores in Australia, New Zealand, Canada and now America, where their first store was opened in Seattle. Bakers Delight trades under the name of COBS Bread in Canada and America.
Bakers Delight's conduct is currently being investigated by the ACCC - Australian Competition and Consumer Commission. This is due to numerous complaints received from current and former franchisees.
The Australian Federal Parliament have also put Bakers Delight on notice that they are under scrutiny.
There is more information on the website: www.bakersdelightlies.com including more media articles and franchisee's stories.
Re: Franchise Scandal Expose in Australia
This is a shame!
Re: Franchise Scandal Expose in Australia
Does the system need to be changed? It is a shame to have someone standing by waiting for another to fail!
Managed Churning sounds like The UPS Store
Interesting that Australian Media would expose managed churning. Maybe Corporate doesn't control their media.
This sounds like the long-standing policy of MBE-UPS to stand up their network on the flesh of first-generation franchisees who provide the cheap labor and the cheap capital to build the stores that wear the brand names.
But, even the UPS Stores that were purchased at great discounts are in trouble. UPS doesn't get involved in leases, etc.. and instead finds third-party buyers who deal with the Landlords and who, with the help of UPS, squeese the failing franchisees into fire sales where, often, the stores don't even need to be closed down at all. The public just thinks a new manager has taken over The UPS Store.
This is an American Scandal but it hasn't been exposed by our media.
Managed Acquisition sounds like The UPS Store
Interesting that Australian Media would expose managed acquisition of failed stores. Maybe Corporate doesn't control their media.
This sounds like the long-standing policy of MBE-UPS to stand up their network on the flesh of first-generation franchisees who provide the cheap labor and the cheap capital to build the stores that wear the brand names.
But, even the UPS Stores that were purchased at great discounts are in trouble. UPS doesn't get involved in leases, etc.. and instead finds third-party buyers who deal with the Landlords and who, with the help of UPS, squeese the failing franchisees into fire sales where, often, the stores don't even need to be closed down at all. The public just thinks a new manager has taken over The UPS Store.
This is an American Scandal but it hasn't been exposed by our media.
Bakers Delight comes to America as COBS --COBS ROBS ?
Our Australian friends are turning up the heat on churning as a management tool and shining the light on the ugly practices of those who will exploit and use the life savings of good-faith investors to grow their profits while destroying their franchisees.
They are being investigated in Australia and even the Australian Parliament has put them on notice but I'm sure, if they are in Seattle with a UFOC, they will be spreading out into other States.
The opportunism of franchisors is not contained under our laws and the victims are silenced. Hopefully, The Congress of the United States will take notice and not allow innocent Americans and our veterans and their families to be victimized by the vehicles for fraud and opportunism that are on The SBA Franchise Registry, that is supported by our tax dollars.
This ugly opportunism will continue in the United States and throughout the world as franchising spreads throughout the world until governments demand that franchisors divulge the KNOWN failure rate of their first-generation franchisees to other first-generation franchisees before the long-term contract is signed.
It is only because of Blue Mau Mau and our first amendment rights that we can counter some of the damage that is done. Collectively, franchisees can have a voice on the Internet and bring about change. I believe there is a website in Australia called Bakers
Delight Lies that is helping to "out" Bakers Delight and that keeps pressure on Government to prevent this ugly opportunism that is now possible under law. Franchisees can join hands with other franchisees throughout the World and bring change and justice to the World of Franchising.
The Item 20's, the enablers of churning and opportunism, will be a thing of the past. Democracy and freedom and justice will coexist with free markets.
ACCC obtains franchise fee refund for Quizno's franchisees
Statement from the ACCC website - www.accc.gov.au
ACCC obtains franchise fee refund for Quizno's franchisees
The former Australian master franchisee for the Quizno's Sub chain of quick service restaurants has given court-enforceable undertakings after the Australian Competition and Consumer Commission raised concerns that Quizno's conduct may have breached the Trade Practices Act 1974 and adversely affected its franchisees.
As a result, franchisees who lodged complaints with the ACCC are being offered an amount depending on the level of their involvement in the Quiznos franchise. This amount comprises at least a full refund of the standard franchise fee.
In 2001 the US based Quizno's Franchise Company granted Quizno's Australia Pty Ltd the right to function as the franchisor in Australia and New Zealand. Quizno's Sub retailed fast food in the form of toasted bread rolls with various fillings.
From about 2002 to 2006 Quiznos promoted and sold franchise territories in New South Wales, Victoria, Queensland and South Australia. The ACCC alleges that during this time Quiznos made various representations to franchisees and potential franchisees, including that:
the Quizno's Sub franchise system was a 'proven' operating system, when the franchise had no track record in Australia
the Quizno's Sub franchise system had been trialled and tested for two years in Australia, when it had not
the American menu had been 'Australianised', when it had not
the stores operated by Quiznos had been trading very well and operating profitably when they had not
turnover would be at least a certain amount, when information then available to Quiznos indicated that such turnover was likely to be unachievable
labour and food costs would be certain percentages of turnover, when information then available to Quiznos indicated that such percentages were unachievable, and
capital costs would fall between certain amounts, when information then available to Quiznos indicated that capital costs would exceed that range.
The ACCC considered the representations were misleading and deceptive or likely to mislead or deceive franchisees and potential franchisees in breach of section 52 of the Trade Practices Act 1974 and may have caused loss or damage to these franchisees.
Quiznos, now named ACN 098 540 633 Pty Ltd, has informed the ACCC that it has ceased trading, is no longer involved in selling franchises and that its financial position is such that it would be unable to meet any claims for loss or damage by former franchisees.
The ACCC and Quiznos have agreed to resolve the matter by means of an undertaking under which payments will be procured by Quiznos from a party independent to both Quiznos and the Quizno's Sub franchise system and offered in accordance with terms of the undertaking. The undertaking has been entered into on the basis that Quiznos makes no admission or acknowledgement of liability.
"The offer is worthy of consideration by the complainants, particularly in view of the financial state of the company," ACCC Chairman, Mr Graeme Samuel, said today. "The giving of the enforceable undertaking marks the end of a very thorough ACCC investigation relating to the promotion and sale of franchise territories by Quiznos.
"The franchisor in this case was careful to ensure that all prospective franchisees sought legal, financial, and business advice before signing up. However, this case illustrates that franchisors must nevertheless ensure that the information they provide to franchisees is accurate and that they have evidence to support it."
Re: Franchise Scandal Expose in Australia
Franchising in Australia, as in the rest of the world, provides enormous revenue to Government and therefore the people. Governments appear to believe they are protecting this revenue by allowing rogue franchise operations to exist simple because to adequatley regulate the franchise industry to remove such operations may disadvantage legitimate franchising and damage that revenue producer. As one highly respected Australian Business journalist, Peter Switzer, recently wrote; "Before looking at this embattled and poorly treated group, let's understand the importance of franchising."
What we are really dealing with, the real obstacle, is the ease that Governments can ignore the disasters in franchising simply because small business operators and franchising cover an enormous range of industries and those industries and those franchisees are small voices without a coordinated front. It is just too easy to apply spin about how terrible it all is but to then do nothing.
In Australia rogue franchises such as Bakers Delight, Lenards Chickens, Midas Car Care and at least another 30 brands produce victim consequences where franchisees suffer anything from substantial financial loss, the loss of everything including business, home and savings, to terribly sad situations where extreme health problems are created and suicides are hidden.
Government in Australia is presently making all the right noises about franchising without any commitment to doing anything. They almost acknowledge the problems but still you see the flicker of excuses being prepared to prop up what many expect are reasons to protect the industry through minimal bandaid solutions that in time again prove worthless.
The vast majority of activists for franchise Law Reform in Australia are pro-franchising. We say that that not to protect franchisees is not to protect the reputation of franchising and to therefore disadvantage legitimate franchising. But that is to a large degree very naive. Nothing will stop franchising. Morality definitely aside, franchising will continue to prosper and the only thing that will produce change is when the numbers and consequences of victims is kept in the public forum through media.
More of Peter Switzer: "It is about society complacently ignoring the suffering of fellow citizens and how we can achieve great things if we confront the truth - even the ugly stuff - and do something about it.
We need a great debate on franchising. We need and objective, national enquiry. We need to determine the extent of any problem in franchisees getting justice and, if it exists, we need a better system to deliver that justice."
Politicians understand the apathy of the people and in this situation it is definitely convenient but immoral. Death and blood and pain will not change Law. Embarrassment will change Australian Law. Sad isn't it.