Regarding the current exposé by Blue MauMau on bogus franchise loans by bankers, loan brokers and franchisees in order to have Small Business Administration-guaranteed loans for otherwise bad investments...
Not surprising when a preponderance of franchise investment decisions are more heavily weighted on emotion than factual information. The combination of greed and wishful thinking reflects ancient and powerful human emotion that is not going away any time soon as far as I can tell.
Not surprising given that FDD's do not as a rule disclose or address the cost of money / financing under Item 7 "Initial Investment", yet a large portion of franchisees borrow from 20% to 80% of the initial investment required to open their franchised business.
Not surprising given that Federal Guidelines prepared and adopted by the North American Securities Administrators Association ("NASAA") and its predecessor, the Midwest Securities Commissioners Association, provide an example for FDD Item 7 "Initial Investment" of "three months worth of Additional Funds", when in reality many franchise business models require significantly longer to reach break even, let alone sustainable profitability, just as with any new startup business. Yet just about every franchise business plan I have ever read includes exactly 3 months of Additional Funds required to reach breakeven. (Note: I have personally brokered loans for some franchises that cash flowed at or better than breakeven the first month after opening.)