PURPOSE

WHAT AM I DOING HERE?

I am absolutely overjoyed that there is BlueMauMau. A forum focused on franchising from a franchisee’s perspective is so sorely needed. It must expand rapidly in membership for its message potential to become realized. It has two message opportunities, one marginally useful and the other pure gold. The marginal road is the road of dispute resolution against a recalcitrant franchisor bent upon practices that marginalize its franchisees and bring them to bankruptcy. The pure golden road is the road down which those who participate in BlueMauMau can lead, shove, evangelize, bully potential franchise investors into doing competent pre-investment due diligence. Not investing in franchises with abusive  policies and practices, because they obstruct reasonable return on the franchisee’s investment is a goal that has the potential to cure the industry’s ills better than any other approach. Saying NO to a bad proposition is the most intelligent investment decision that can be made.        

Franchising today has its wealthy, successful business owners; many great success stories. These are mainly people who bought franchises many years ago. They do not stand as examples of why anyone should invest in any particular franchise today. There are still great opportunities out there, and those are usually sold to area developers with significant industry experience who would decline to invest in a relationship where they can be abused. They have the clout to bargain best for the deal that can be lived with. This is the ideal match up. There are exceptions to this, but they are few.           

Franchise investors who are novices interested in buying one franchise unit cannot look to the wealthy franchisees of days gone by and say to themselves that if these other folks can make a lot of money in a franchise, I can too.  The reasons why that is no longer generally true are few and glaring.          

First look at the business. What was once a fertile meadow lush with franchise investment opportunity is now an overpopulated wasteland, strewn with the bodies of failed franchise investors lined up at the door to the bankruptcy court. With overpopulation comes destructive price competition – stupidly called value pricing by those who wish to mislead.           

Is the business you are looking at in such an industry segment? How, then, can you possibly believe that there might be profits there for you? In competent due diligence, you should consider looking elsewhere for opportunities when you see this phenomenon/disease. The sandwich business is perhaps the best example of a business segment in which no one should make an investment. People offering sandwich franchise “opportunities” to first time franchise investors touting name recognition, purchasing power and proven systems are all charlatans, without exception. How many other business segments manifest the same or similar economics when you look at them? These are the first steps in due diligence. What’s in the FDD is meaningless if the business segment is overpopulated.          

If you can find a business segment that doesn’t look like that, and if your franchise investor client believes that there is suitability in that segment, only then do you start looking at FDDs, contract terms and other extraneous avenues of research.          

A major reason why novice franchisees fail is that they lack the competence, even with lawyer assistance in most instances, to comprehend what is being presented to them.          

For example, they fail to understand that a franchise that touts name recognition but that doesn’t have many franchisees in the geographic area where they intend to be located, really has no relevant name recognition. They fail to appreciate that the claim of a proven system is incapable of being true for a new franchise that has been around only a year or so and has only a few dozen or maybe 50 franchisees, most of whom have not been in business long enough to substantiate the proven system claim. They can’t even figure out that a claim of purchasing power cannot be true if the franchisor controls purchasing and there is no provision in the franchise agreement that requires purchasing to be based on sound competitive principles of price, quality and service, or no provisions that any benefits of purchasing power actually be passed on to the franchisees.           

This is terminal incompetence when vetting a potential franchise investment, and it has not been improved upon by the legal community or by any franchisee organization. None provide competent professional education to prepare an investor or an investor’s lawyer to vet franchise investments.  Any normal and rational person would think that the leading professional associations would provide competent schooling for those who offer to advise franchise investors. Why don’t they provide the resources for franchisee’ advisors to become insightful? I don’t know. It shouldn’t fall to me to have to be a bear about it. I don’t want to be the scourge of the legal profession on this issue, or, for that matter, the scourge of the franchisee organizations that tout expertise they clearly do not provide. If they did, high quality capabilities would already be available to franchisees, and they would not be lying about like corpses rotting in some recent battle field.           

The world is chock-a-block with charlatans. Are we so politically castrated that we lack the cojones to call these scoundrels what they really are – out loud and very publicly?          

This is not intended to be a tutorial on how to do due diligence. Rather, it is a statement about why due diligence of a very experienced level of inquiry is indispensable.          

You can no longer risk between half a million and a million dollars on cheap due diligence. Life is just too dangerous. Too many people are failing. The successes are fewer and fewer, but more and more loudly acclaimed. That is noise, not substance.          

I am here in BlueMauMau because I want to spread a gospel of exceptionally high quality due diligence. That is the ONLY intelligent approach to risk management in franchise investment. Finding out after contracts have been executed, fees have been paid, leases and loan agreements signed that you have been victimized by something that you could have avoided with really good help is a mortal wound. I freely acknowledge that my presence here boosts the brand recognition of my practice, and that motivation does play a part in what I do.          

This message has not until recently been spread to my satisfaction. If I feel that being aggressive, sarcastic, even rude and insulting will get attention about this message, I will happily be all of those things. I have already been professional and polite in my tutorials on my website. In here I am simply going to be an evangelist for the gospel of competent due diligence, cynical due diligence, in your face due diligence until Mr. Blue Mau Mau kicks me the hell out.