FRANWHACK NEVER LIES!

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.