Daily News for Franchise & Small Biz Owners
share franchise news, to prosper and amuse
FRANWHACK NEVER LIES!
FRANWHACKED FRANCHISE COMPANY IN COLLAPSE
Last year, Dagwoods‘s Sandwich Shoppes was touting itself to potential FranWads as the hottest entry into the world of sandwiches. Those who came to me about possibly investing in Dagwood’s franchise were told by me that the concept was nothing but talk disguised as a business opportunity, and that they should not become Dagwood’s franchisees. Dagwood’s went near the top of my FranWhack list.
What I saw was total nonsense claiming to be a proven system, being touted by people who claimed to have been executives at Popeye’s, Denny’s and McDonald’s. People bought territory rights as high as 100 stores at a time (Atlanta). As one might expect, these folks touted Dagwood’s as a proven system with name recognition, the famous Dagwood sandwich, saying that they don’t sell franchises. They award them. To me this was transparent nonsense.
In The Nation’s Restaurant News for 7th January 2008, it is reported that Dagwood’s is in a state of collapse. All but four of its employees are gone, including its director of training, being told that Dagwood’s could no longer make payroll. The management burned through more than $ 10,000,000 in about two years, and by October 2007, was unable to pay its debts on time, according to management statements to NRN.
Thankfully, most of the franchise investors were wealthy, experienced people who knew what they were doing and could afford to buy market rights to major metro territories. I have no idea how many single unit “normal" people were wiped out by this, but no one who was advised by me bought one, notwithstanding the braggadocio and hard sell sales pitch.
How does one burn through over $ 10,000,000 in two years? I have my suspicions, but no hard facts.
I have been telling people very aggressively about supposedly respectable people with lots of industry experience fleecing franchisees by falsely claiming that something is a business concept when in reality it is nothing but noise. Dagwood’s is my poster child for FranWhack. Will these franchise territory purchasers continue to pay royalties into a collapsed franchisor? I rather doubt it. What will happen to those agreements if Dagwood’s files for bankruptcy? Will Dagwood’s creditors try to enforce the franchise agreements in order to get paid? I think I know what the outcome will be, but it might not be fair to speculate about it in public.
FranWhack never lies!
(1 vote)
- Franchise topic:
Franchise with patent
Even the FranWhack has got to love this one:
It is a barbershop franchise , but this one is unique--it has a patent (ok, it is 'pending').
Of course, Solomon will likely whack it once he finds out they only serve "discerning gentlemen," which Solomon most assuredly is not.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Patent
From the franchisor's website: " Kennedy’s uses a patent-pending, membership-based process and involves an exclusive grooming experience for discerning gentlemen of all ages. "
Membership based process! Ok, sounds like a whack to me.
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
FranWhack Alert The Cereal Bowl
There is a new breakfast cereal franchise announcement on the board this week.
This concept was previously reviewed by me and I am of the opinion that, like Dagwood Sandwiches, Cereality and SoupMan, this should be considered a FranWhack franchise offering - one that will take every franchise investor down to bankruptcy.
Some of these are so investment unworthy, in my opinion, that it would be inappropriate to charge anyone a fee to advise them concerning an investment in the franchise. This is one of those situations, and I put this admonition out there as a public service.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
What a joke this company is.
What a joke this company is. Started by a few kids. If anyone is stupid enough to hand over their hard earned money to a few kids deserves to get whats coming down the road. Especially with this type of concept.
I was familiar with Cereality which was runned by middle aged professionals. We all know what happend to that concept.
Good job richard. This should be number one on your franwhack list.
Re: What a joke
This comment has been moved here.
No Joke Here
As far as Cereality goes, this brand is still around and now has partnerships with Cold Stone Creamery. This company may be taking it's time, but isn't that what you want to do when you start a business with an entirely new concept in the food industry? In comparison to Cereal Bowl, this company has gone through ups and downs and is still around. The Cereal Bowl is just barely getting around to franchising and opening up its second store.......after 3 years.
What does zor1 Know?
I read about these guys and first of all i didn't know that being in your late twenties means you are still a kid. One thing that does stand out is that they took more time then cereality to launch their franchise program. I think adding a lunch day-part is also a wise move. Knowing your concepts weakness can be a real strength
Re: What does zor1 Know?
the concept as a whole is weak, just as your argument is. and yes being in your twenties you still are a kid.
Re: Re: What does zor1 Know?
Starbucks was considered weak when they started... guess that didnt work to well and the last time i checked some of the top companies in the last 10 years were started by twenty-somethings... facebook, google, chipotle to name a few... currently there are major league baseball GM's under 30...
Re: Re: Re: What does zor1 Know?
why dont you buy a terriitory from them?
Re: Re: Re: What does zor1 Know?
why dont you buy a terriitory from them?
Suggestions?
Got any suggestions on a Dagwood competitor that would be a better investment?
A Dagwood Competitor Worth Owning
Try Quiznos.
Dagwood's Earnings Claims
From their website:
"Based on Federal and State franchising laws, Dagwood’s, is limited in how much information we can supply on potential earnings. You are welcome to speak with any franchise owner in the system regarding this matter."
There are no limits as to what the franchisor can supply as long as it is in the UFOC.
Interestingly, these types of reverse earnings claims are being deemed as deceptive trade practices by the FTC in the new biz op rule.
Michael Webster PhD LLB
Franchise News
The New Number One FranWhack Company is...
UFOOD. THis is said to be a rehash of KnowFat - being rehashed by that poster boy of colorful franchising history - none other than George Nadaff - Remember Him?
Lets all get a pool going on how many folks will get fleeced on this one, franchisees and investors combined, or two separate pools, one for fleeced franchisees and one for fleeced investors.
First prize is an evening with me at Muldoons. Second prize is two evenings with me at Muldoons. Third prize is.......--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
FranWhack Never Lies
'Tis true that Richard never lies and that he gives very valuable advice for "NADA" on Blue Mau Mau.
If I were at Muldoon's, I would drink to Richard. We need to clone him and hand him out with UFOC's as part of the sales process.
Re: Dagwood's Earnings Claims
Dagwoods is out of business. The corporate office has shut down a few months ago.
The thought that Dagwoods is even...
continuing to sell franchises while in a state of collapse/insolvency, without amending the FDD to disclose that they cant pay their bills when due (as reported in the NRN to have been acknowledged by a Dagwood officer) is outrageous per se.
That, to me at least, is further dramatic evidence of what low lifes their management team are. Too bad the FTC aint looking for an easy victory to make their activism stats look good. Dagwoods is an enforcement birds nest on the ground.--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Eileen Harrington
Eileen Harrington of the FTC said at a CLE conference back in 2001 that the FTC often heard from prospective franchisees who were annoyed at the FTC because (according to the franchisor) the FTC prohibited the franchisor from telling the prospective franchisee how much they could make.
At the time, Ms. Harrington remarked that she considered this to be a deceptive practice, since the only thing the FTC requires is that if the franchisor chooses to make an Earnings Claim that the claim be made in a prescribed format.
franwhat?
Come on Richy Baby you cannot be serious about the Guru of Franchising. The Guru wrote the book on franchising, if it weren't for him you would not have a website. All hail the Guru!
Muldoons
Think the guru could sell Muldoons to some area developers? You do not need any experience, just lotsa cold hard cash, and not a lot of busines sense. Nadaff would love ya, probably sell ya some stocks too.
Guest Compliments
Guest writes of Richard: "We need to clone him and hand him out with UFOC's as part of the sales process."
Richard, you ought not to post as a guest just to compliment yourself.
Michael Webster PhD LLB
Franchise News
Franwhack Please Help.
I have been in the franchising business since the beginning of time. I have been a franchisee, a franchisor, and an investor. I have seen all of the "Big Boys", and alot of the "Little Guys" I have had a full bank account, and I have lost my shirt.
I have not seen a situation like the current No-Fat, U-Food scenario, however. I luckily, or unluckily live in and around the Boston area, so I have had a front row seat of the metamorphasis of Lo-Fat No-Fat to Knowfat Lifestyle Grill to U-Food. Every franchisee, save one, who purchased into the Knowfat vision has closed, gone out of business, or was purchased for peanuts by the corporate entity. The only franchisee left has abandoned his/her store, and allowed it to hit rock bottom. Expectations are short, for this poor sap, the financial hemmorhaging will stop soon, as the tax man is at the door. So that takes us to a 100% failure rate.
So what happens when your franhcise company almost goes under? Well, hell change the name, raise money, sell more territories, and franchises. Become a publicly traded company, sweep all of the dirt under the carpet, go get some high priced free agents, and change the verbage of your sales pitch etc., etc., etc.,...
How is this Legal? How do we allow this to happen? Are we a culture who is seeking so hard to achieve financial freedom we will believe this is a good opportunity? Please, Please enlighten me. I hate to see the franchise business go this way, and I hate to see the carnage laid out, by rich snake oil salesman who are trying to get another snack for their voracious ego appetite.
Deceptive Earnings Claims
Actually under the proposed FTC Biz Op Rule, telling a potential distributor that "the FTC prohibited the franchisor from telling the prospective franchisee how much they could make." is deemed to be a deceptive practice.
You could look it up.
Michael Webster PhD LLB
Franchise News
Dagwoods
I beleive the article as I was one who was burned by Dagwood's...lost $20K
Jim Amos no doubt...
... has more Bibles around his house than The Gideons. But has he ever cracked one open and read a passage?
Every zee is supposed to be handed a UFOC, and most actually are. But no one can force a prospect to read the UFOC; and that's the real problem with franchisee due diligence.
HAHAHAHA
Very funny--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
FranWhack has hit this bozo deal already
This "franchise" (HAH!) was FranWhacked - for free - at no charge - as a public service - when it first came out.
Those who invest in it without coming to me for the due diligence just get what they get.
Anyone can paint a picture of a business model - without there really being an actual business model that has positive prospects - buy the paperwork for it, and sell it to people who think they know how to vet franchise investments, and won't spend money for real due diligence.
This is what you get into when you "pay a lawyer to read the UFOC".
Vetting the business risk has to be part of due diligence or is just isn't due diligence.
The contracts are all rather straight forward. You do what we say. You pay what we say. You buy from whom we designate - and there is no requirement that the prpices be competitive). You participate in all our programs. You cannot now or in the future for at least two years after you are no longer our franchisee engage in the same or a similar business. If your franchise is terminated FOR ANY REASON (by you or by us) you owe us royalties to the end of what would have been the full franchise term. In the event of any dispute, you resolve it how and where we tell you.
You ought to be able to ready the contract without a lawyer.
Since the contract risk is inherent in its draconian language, and since you consent to all that when you sign it - THE DEAL HAS TO BE DAMN SWEET TO JUSTIFY SIGNING IT. If you don't get professional due diligence on the deal risks - you will be slaughtered. You don't know how to do this, no matter how many business degrees you have or for how long you have worked for some company.
There may be some exceptions to this, but they are few and far between.
--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
When the contract is terminated by the company
does that mean you are free from them.
Franwhack re-visited
So let me see if I have this right, it is Illegal in the United States to go into a person's house, whether locked or not, and take valuables. But it is not against the law to sell someone a franchise that will take valuables from a group or persons. If a franchise company sells ( brainwashes, coerces, tricks, lies) a concept that is not battle tested this is theft, this is stealing, and this should be illegal. By George I think I've got it.
Dagwoods! Lost only 20K ! You were lucky!
You were lucky.
Franchisees in The UPS Store, Quiznos, Cold Stone Creamery lost $250,000 to $300,000, and those in the SonaMedScam, who were professionals and corporate types, lost millions.
These franchisees also lost time out of their lives and many have been destroyed financially and emotionally.
How long did it take you to lose $20,000? Consider yourself lucky.
Franchising :: Sacrifice of the masses
Paul,
Mere TEXT is no match for the high personal drama in the transformation of becoming a franchisee (initiation, rite of passage). Its function is not to teach but to support a near-religious experience.
No amount of disclosure can compete when the selling cycle (secular eucharistic process, psycho drama) is underway.
The bread is indeed made flesh. And then you eat yourself.
Look around as if it were a real religion and know they can only deceive you further.
You bring the garlic, I'll bring the water! esto dignus
Les Stewart MBA
Again Solomon speaks
with great wisdom. Zees and future zees should read all his post. He is direct and that is why I love to read what he writes. Thanks!
Business Risk and UFOC Review
Richard writes: "Vetting the business risk has to be part of due diligence or is just isn't due diligence."
Traditionally, the vetting of business risk has not been the job of the transactional lawyer.
Fortunately, in the franchise scams lawyers very familiar with franchise litigation see repeat plays.
Having this knowledge and experience makes certain business risks more obvious - see my prediction on what would happen to the Tasti D-Lite licensees for example.
Michael Webster PhD LLB
Franchise News
Solomon-san writes: Vetting
Solomon-san writes:
Vetting the business risk has to be part of due diligence or is just isn't due diligence.
My reply:
Highlight it, memorize it, digest it. Solomon has it right.
FuwaFuwaUsagi
Mental Violence
The current view in the US/Canada is that if the franchisor explains in legal murky language how you are going to lose your money, that is legal.
Michael Webster PhD LLB
Franchise News
And Wolverton Mountain protects her there...
Do you understand that if you "go into business" the assumption is that you are a businessperson and have the appropriate background to make businesslike decisions? That may sound harsh to you, but it is the assumption. Security law and insurance law are clearly delineated between those considered knowledgeable and those who are not considered knowledgeable.
If you are going into business the assumption is you know something about business.
I feel very bad for those who have been deceived. And I do not mean to be harsh but original deception was self inflicted when you decided you had the capacity to go into business in the first place.
Once again, you have my sympathy. But please understand how the law operates. IMNTBMFHO, the problem is many would be zees believe that business to business law operates the same way the consumer law they are familiar with does. It does not.
Solomon, Webster, Steinberg sorry for treading on your turf, feel free to correct me where my logic proves deficient.
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
Funny but not
It is sad but true. It's about corporate greed. Franchises are not considered anything but a business choice. With the corporation not having to do much but get your signature and then your had.
I like your way of saying "battle tested." We call it a proven system.
And yes you got it right.
You are correct
Mr. Soloman,
You are right on the mark with your entry. I have a college degree and prior small business experience, yet here I am. Older, wiser and so very tired. I wish I could turn back the clock, but this is my reality now. Maybe posts such as this will assist in getting the information out to others before they make a mistake. Until this company remodels their entire business structure, nothing significant will change despite Mr. Brenneman's positive press conferences forcasting great things for the future.
Elizabeth
No disclosure of Self-Help Remedies Sacrifice of the masses
And, then, after you have eaten yourself, the franchisor eats the leftovers in premeditated self-help remedies, "Hope for the best but always plan for the Worst" but only talk about the best to the "chump" franchisee!
Unethical
to say the least.
Re: Unethical
Hey Solomon, looks as if you were a real swami after all regarding Ufood. Bully for you! the fran-whack was right on. Too bad for the ones who drank the kool-aide, it seems as they were led down a nasty path. I am looking forward to the next Whack!