iSold It Contemplates Liquidation
iSold It May Have To Sell It, The Company That Is. Firm Grapples With Reorganization, Litigation and Possible Liquidation.
MONROVIA, Calif. (Blue MauMau) - David Crocker, Sr. Vice President of Marketing and Business Development of iSold It, LLC has confirmed with Blue MauMau that a letter posted from an anonymous source on Franchise Pick originated from Chief Executive Officer Ken Sully. The letter to iSold It's franchisees has been emailed directly to this publication (see below).
Mr. Crocker stated, "In the letter, it says that we are considering litigation, reorganization or liquidation." Regarding a time frame to declare bankruptcy, he said, "I cannot comment on when any liquidation might occur." When asked whether the eBay drop-off store model works, he replied, "The model works for some and doesn't work for others. There are stores that are profitable."
AN OPEN LETTER TO OUR FRANCHISEES
As we have previously announced, we are now focusing all our headquarters resources on supporting our current base of franchisees, while limiting the sale of additional stores to new franchisees. We will continue to add new stores with existing franchisees under current development agreements and will also help facilitate transfers of existing stores to new owners. iSold It, now in its fourth year of operation, currently has over 170 franchised stores open. The chain has sold more than $100 million of merchandise on eBay since inception.
As you may know, in December 2003, iSold It joined the fledgling eBay drop-off store category, still in its infancy. The first two iSold It stores, one company owned and one franchised, generated significant interest from customers, the press and franchise candidates. The initial customer response was so strong that, encouraged by their results, that first franchisee quickly went on to purchase additional development areas and opened more stores. As the category rapidly grew and sales volumes were easily tracked (due to the transparent nature of eBay), franchise candidates moved forward to open individual stores, often securing areas large enough to develop multiple stores. After 18 months of operation, the 100th iSold It store was opened, and no stores had closed.
Today, while encouraged by system-wide sales exceeding $4 million per month, the distribution of sales by store has proven to be a bell curve – with top stores exceeding $80 thousand per month and others struggling to attain $10 thousand per month. Compounding the situation, average selling prices and labor hours per item also vary significantly by store, creating a wide range in store contribution margins. This has resulted in a significant number of stores operating below break-even, and has contributed to over 60 stores closing. Tragically, many individuals who believed passionately in the potential for the category have lost sizable investments, including homes and retirement savings. We personally find this unacceptable and, despite continued interest in this category, we do not feel comfortable selling any new franchises until we get the failure rate lower.
Over the past 40 months, in an effort to support the network, we have invested nearly $20 million in infrastructure, systems and marketing -- spending most of the $8 million in shareholder contributed capital and $13 million in royalties and franchise fees. During this time, no director or shareholder has ever received any distributions or dividends from iSold It, with an exception for a small distribution to shareholders in early 2005 to cover pass-through tax liability related to 2004 company profitability. The company has not been profitable since 2004 and no further distributions have been made. In addition, with the exception of CEO Ken Sully, members of the Board of Directors and shareholders do not draw any salary from the company.
Going forward, the company faces significant challenges.
First, the company must preserve its remaining cash so it can remain solvent to support its franchisees. This is being addressed through significant reductions in expenses, including difficult decisions regarding headcount reductions and moving the office to a smaller location.
Second, the company is now focusing all resources on supporting the existing franchised stores. This is the rationale for eliminating the franchise development group and exiting the company store. (In separate posts, we will keep you current on the 3.0 conversion.)
The third and most significant challenge is addressing the claims of a group of franchisees who regrettably have each suffered significant financial losses. While we all feel very badly for anyone who lost money, we believe we presented this concept fairly from the beginning and it is unclear if we will be able reach a conclusion without litigation, reorganization or insolvency.
The team at iSold It remains committed to supporting our current franchisees and finding a success path for the network. We recognize the hard work and sacrifices that each one of you has made to help build your business and this company. We remain passionate about the potential for our business and appreciate your continued support going forward.
Ken Sully
President & CEO
iSold It, LLC
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Further readings:
iSold It Contacted by Blue MauMau Last Week
Mr. David Crocker, Vice President of Marketing and Business Development for iSold It was contacted early Wednesday morning on April 4. An invitation was sent to the CEO by Blue MauMau to comment on rumors concerning the company.
A letter to iSold It's franchisees from CEO Ken Sully was released April 5.
Mr. Blue MauMau
Editor
iSold It Hiding the Facts for So Long
iSold It were hiding their condition as long as they could until the press started to inquire. And where was the press for so long?
Thanks Blue MauMau. Those rumors are now being confirmed as true. And AmITheOnlyOne.org was right on target. Amazing!
Franchise 500 Credibility
Here's Entrepreneur Magazine's List of Newcomer Franchisors for 2007. iSold It is ranked by Entrepreneur as their #1 pick! Take a look.
2007 Ranking, Top new franchises from the Franchise 500And here we are, in our fourth month of 2007 and iSold It is in serious system-wide trouble. iSold It was ranked top five in 2006.
Franchise Sales Least of iSold It Problems
It looks like AuctionBytes grabbed hold of this story this morning and had an interview with Ken Sully, CEO of iSold It, LLC. Even with the letter, their headline is "iSold It Suspends Franchise Sales of eBay Drop-Off Stores".
They are not getting the bigger picture though. Suspending franchise sales is one of the smaller problems iSold It, LLC has. Surviving is the big picture.
iSold It Contemplates Liquidation
I’ve been watching the meal assembly industry since early 2004 pretty much from its beginning. I’m in the industry and have seen the massive changes that have taken place since its inception. I think that the next companies you will see contemplating liquidation will be in this industry. The franchisees have already started to drop and the franchisors won’t be able to survive without the sale of new locations.
Over saturation of any valid territory is one of the major problems in the industry. As I have stated in other posts, one of the following happens with every store. Are there exceptions? Sure, but these two scenarios cover the majority of the stores open right now.
1. Stores that have opened in an area that just can't support the concept so they never make any money.
2. Stores that open in the right location are very successful and then everyone else in town seems to think the market is unlimited so lots of copy-cat stores open up, none of which will ever replicate the success of the first store.
Mealblogger
http://www.mealassemblywatch.com/
Meal prep next?
For several years, we have heard rumblings about "meal prep"; it is one of the biggest threads on FranchisePundit discussion board (7 pages of posts) and several articles by Ryan including links to articles about trouble in the sector, my favorite title: "Not So Super Suppers ".
Once again, we see a concept where the oldest companies in the sector are but a few years old. It is risky enough to invest in a new franchisor. But to throw your money into a new sector run by a new franchisor... well, there goes the 401(k).
Unbelievable --Entrepreneur wrong again and again!
Now we have Quiznos, The UPS Store, and iSold it in Top 5 picks in Entrepreneur and Isold It is ranked by Entrepreneur as their #1 pick in 2007.
What Franchise 500 Credibility?
Why does Entrepreneur push these cheating churners and incompetents to the public? What's going on here?
Experts Pushing Entrepreneur.com Franchise List
Craig,
Here is an article just this morning from the Gainsville Times using Entrepreneur's list to suggest to people what franchises to buy. A couple of days after the announcement that iSold It is reorganizing, fighting major litigation and possibly going under, this small business consultant suggests the top franchise picks:
The small business consultant wisely adds, "I would also suggest diligent research about a franchise. Look over the franchise's business prospective and talk with current franchisees to hear about their experiences."
Due diligence indeed...
Disgusting Pushing of Franchises by Experts
The article by Smith in the Gainsville Times is a good example of the "brain washing" of the American Public.
The conspiracy of interests to capture the savings of the naive and unsuspecting who will sign their rights away under a contract of adhesion is frightening.
The carefully designed rhetoric of this article to SELL franchising and the weak disclaimer "I would also suggest diligent research about a franchise......." is typical of the dishonesty in the franchising sector.
Entrepreneur and these other business experts have no liability problems when they hype and push these unviable franchises to the public.
How can this be stopped? Our small protests on Blue Mau Mau are not heard by "the powers that be" who probably want to continue to be blind and deaf concerning the fraud in franchising.
JC Smith recommends...
... the HOT franchises from Entrepreneur magazine!!! Get 'em while they last! Don't delay!!
And for those that think that there are no risk factors specific to newbie zors, check out this company that had been in existence for ages but found that franchising is a whole different skill set....
As JC would tell you, this company is HOT, it is one of the HOT Entrepreneur franchises for 2006!It is a PHENOMENON which only started franchising 'cause all the customers DEMANDED to BUY their own franchise!! Check it out! Buy it NOW while it lasts or for those less into Barnum, skip to the epilogue posted on this Board.
Meal Prep Next
Interesting comment on meal preparation being the next weak franchise sector to look at. It's a brand new sector. It's growing very fast, which spawns a host of support problems.
This sector is also a good pick in light that both Super Supper and Dream Dinners are ranked #4 and #5 on Entrepreneurs Top New Franchises from their Franchise 500 list. Entrepreneur.com is showing itself useful to prospective franchisees in being an inverse barometer. Given the magazine's poor record of guessing winners, it seems reasonable that this is the next sector to go bad since they place it so highly.
Truth Is Growing
"Our small protests on Blue Mau Mau are not heard by 'the powers that be' who probably want to continue to be blind and deaf concerning the fraud in franchising." - Guest
I'm not so sure of that. I suspect that some of 'the powers that be' are beginning to take notice - quietly. They may not know what to make of us.
Franchisee voices are definitely growing. And shining a light into some of these franchise concepts have definitely made a difference.
More Entrepreneur B.S. ---Bad smell!
It would be interesting to know how Entrepreneur derives its revenues.
Do they just print anything as "product" for their readers and do they have no responsibility under the law for hyping this shit to the public? Do they have no responsibility for the damage it does to so much of the public who believe what they see in print!
Chinese Wall
How does Entrepreneur make money? Primarily from ads, some revenue from reprints. And let's not forget that the main reason people buy Entrepreneur is to be sold on buying a franchise. I really doubt most purchasers want to hear bad news.
Separation between advertising and editorial content is problematic for any publisher, particularly in the trade press. I think that recently Franchise Times has been doing about as well as one can, with the balance of puff pieces and some meaty stuff like the famous Quizno's cover story, and pieces by Bennett and Sparks.
Chinese Wall and AARP
Those readers of the AARP publications do not read AARP to find out about franchising! Yet, AARP, because they need "product" PUSHES these unviable franchises, based on Entrepreneur awards and statistics, to that segment of the population that FRANCHISORS are targeting for their 401's and 403's, etc...
This is irresponsible and you don't expect this from AARP who you believe is representing the interests of retired people.
But, we can be sure there is no conspiracy to push franchising, even unviable networks, to the public?
I assume that picking up some of these failing Quiznos stores for almost nothing is, perhaps, a good investment because one is then greatly reducing their risk and has a chance of a gain in the future.