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.
FranWhack never lies!- Franchise topic:
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
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
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"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
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. 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.
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
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
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
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
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.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
... 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.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
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
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
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
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
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
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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."
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
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.