Sona MedSpa Guilty of Negligent Misrepresentation
FRANKLIN, Tenn. (Blue MauMau) - An arbitrator has issued a guilty verdict of "negligent misrepresentation" against franchisor Sona MedSpa, and its high-profile executives James H. Amos, daughter Heather Rose, and investment firm Carousel Capital Partner II, L.P. Sona's outside counsel Kiran Mehta responded, "the arbitrator ruled unequivocally that no fraud or intentional misrepresentation of any kind occurred."
Amos, a former chairman of the International Franchise Association has moved on to become the current CEO of Tasti D-Lite, a franchise business opportunity company, and Rose continues as the CEO/president of Sona MedSpa, a position she has held since October 2005. She is currently a member of IFA's board of directors.
At the center of the decision is Carousel Capital, an equity firm that purchased a majority interest in Sona MedSpa International, Inc. with Amos and Rose in May 2004. Amos became the chief executive officer and Rose the chief operating officer of Sona.
According to franchisee attorney W. Michael Garner, Dady & Garner, this is not just about his clients winning in an arbitration case. "This is a landmark decision that will have a huge effect on franchising because of all the merger and acquisition activity going on," explained Garner. "It is about the due diligence that has to be performed by anyone who is buying a franchise company. He said, "They can't simply buy a franchisor and ignore any possible misrepresentations that might have been made to existing franchisees." He feels that up until now equity firms did not have to worry about what had gone on before them. But now this decision says they have a duty to investigate.
Attorney Craig Tractenberg of Nixon Peabody, who has no ties to the case, said he's not sure he would call it a landmark case. There have been similar cases that have not been publicized. But it is a very instructive decision. He said, "Equity firms that buy franchisors also buy the skeletons in the closet. But if they are smart they will not ignore this decision. There is clearly a lesson to be learned here."
Tractenberg explained that if equity firms are just investors they have limited risk. But they must conduct due diligence because it is possible that they may later become involved in management and then will have obligations.
Tractenberg said in this case management was found not only to know about negligent non-disclosures but also had a duty to act to prevent further harm. "It was their failure to act in their capacity of management, not just as mere investors."
Franchisee Awarded $400,000
Kempton and Rosita Coady had entered into a Boston-area Development Agreement and a Burlington Franchise Agreement in September 2003, to operate franchise laser hair removal centers. The Coadys had conducted an independent investigation of the business and had consulted with their financial and legal advisors before signing agreements. Kemp Coady testified that they had made their decision based on the information Sona representatives had given them regarding their hair removal technology. But approximately eighteen months into the system, the Coadys felt the "efficacy information" procedure, a much touted Sona method of hair removal, was flawed and constituted negligent misrepresentation under Tennessee law.
The Coadys were seeking damages worth approximately $9 million on eleven counts, namely for common law fraud and negligent misrepresentation (Counts 1 and 2). Although the arbitrator did not find the respondents liable for fraud, he did rule guilty on the charge of negligent misrepresentation. But he severely adjusted down the award to approximately $400,000, which only addressed the damages the Coady's claimed through October 2006. The arbitrator's decision of a lower compensation seemed to be influenced by the plaintiff's high education level, their income producing capabilities and an already existing new store that the husband and wife team started, Viva Skin Care Center. Compensation for loss of livelihood was minimized. The Coadys will be required to pay arbitration and legal fees.
Franchisee States, "We Were Very Much Deceived."
At the time of arbitration, Kemp Coady said Sona had a total of 45 franchises in the system, but by November 2006 sixteen franchisees had gone bankrupt or had been transferred to other people. He said, "Most franchisees got in trouble after one to two years of running their centers. Basically they come unwound. The business just stops working."
Coady and his wife are past executives with MBAs from Cornell University. He said that when they invested heavily in the Sona system and the Sona promise they felt they had been deceived, both in terms of its medical premise and, although it was not found in their favor in the decision, in terms of its business model as well. He said, "We were very much deceived."
Coady said, "They negligently misrepresented the medical facts because they did not hire the proper experts to prove what they were telling franchisees was true."
He feels the arbitrator made a good decision in vacating all of the Sona MedSpa and Carousel counter-claims against them. He said, "Now we are independent of Sona, but we still have to try to make our Viva Skin Care Center succeed. That's a tall order with all the baggage we were left with because of Sona.
Sona Replies, "Award Is Small Fraction of Originally Claimed Damages"
Although Heather Rose did not respond to a phone call personally, Sona's outside counsel Kiran Mehta of Kennedy Covington stated the following:
Sona does indeed view the outcome as favorable, for a number of reasons -- first and foremost, while the claimants in the Coady case as well as all the others have predicated their claims upon fraud (the Coady claimants in fact went so far as to liken Sona and its founder to "snake oil salesmen") the arbitrator ruled unequivocally that no fraud or intentional misrepresentation of any kind occurred, and also ruled that none of the franchise or other state regulatory or consumer protection statutes the claimants relied upon were violated. I assume that even the "redacted" version of the award reflects these findings. In addition, the award itself was a small fraction of the originally claimed damages. Finally, the defense that Sona was able to mount, in conjunction with very favorable preliminary rulings in proceedings other than the Coady matter, went a long way toward persuading other claimants that resolution of their claims was the better course of action, and even prior to the entry of the Coady award most of them were resolved.
He also stated: Sona disagrees with some parts of the award, and agrees with other parts of the award -- which is a fairly typical reaction to any arbitration award. I suspect that the claimants disagree with some parts of the award and agree with other parts as well. But Sona has no quarrel with the overall arbitration process, which is predicated upon swift and efficient resolution of contested matters, with virtually no possibility of appeal Sona now has 18 franchisees with 28 franchise locations. Mehta said, "By putting this litigation behind it certainly gives Sona the opportunity to move forward and focus on business instead of lawyers, lawsuits, and arbitration proceedings."
Clarification from Attorney Michael Garner
As a clarification to the Sona MedSpa Guilty of Negligent Misrepresentation article, W. Michael Garner, attorney for franchisee-claimants Kemp and Rosita Coady, explained the total damages actually sought at trial were $1.3 million. The original Complaint sought $4.5 million total damages.
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Related readings:
| Attachment | Size |
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| Coady - Redacted decision.pdf | 1.48 MB |
- Franchise topic:
At the outset, the significance of the Arbitrator’s ruling cannot be trivialized. For clarification, the Complaint originally sought $4.5 million dollars in damages, total. This was a guesstimate that we prepared at the outset of the case and without expert input. It is typical for attorneys to claim as much as they can in a pleading at this preliminary stage of the case. By the time we got to trial, we knew that the total damages were $1.3 million, and that’s what we asked for in arbitration. We recovered roughly a quarter of those damages. The Arbitrator denied the remainder, which represented the value of the business itself. Apparently the arbitrator concluded that the value of the business, which the Claimant had kept, was worth something. Second, it is misleading to evaluate the success of the case by saying that we prevailed upon only one of a number of counts. Look at it in perspective: We prevailed on negligent misrepresentation and recovered money. Sona, which had counterclaims against the Coadys originally in the range of $7 million dollars, (later trimmed down to somewhere between $1 and $2 million dollars) recovered nothing. On my scorecard, that’s a win for my team and a goose egg for the other side. You don’t say that the team that wins the game by one run was the losing team. It was the winner, and win we did.
Now to the meat of the holding: The Claimants were originally induced to buy a Sona franchise in September 2003 on the basis of representations by the then-owner, Dennis Jones, that the Sona hair removal system was far superior to other systems; that it would remove 93 to 98 percent of a person’s unwanted hair in five treatments; that the removal was permanent; that the reason it worked was because of a unique, patent-pending “Sona Concept” that timed the laser treatments to hair growth cycles; and that it had a proprietary chemical, Meladine, that enabled the laser to work on all types of hair when, in fact, lasers typically cannot remove white, blonde, or gray hair. The problem? None of this was true or supported by any credible medical studies. Jones, however, told prospects that he had a database of 50,000 clients verifying the claims.
Coady purchased his franchise on the basis of these representations in September 2003 and proceeded to build out his facility through the ensuing year. In the interim, Carousel, Amos and Rose purchased Sona. One might think that an investment capital firm buying a company engaged in laser hair removal might have retained a dermatologist to evaluate the efficacy of its procedures or that it might have taken note of the mountains of data that said, in substance, that laser hair removal was a hit or miss proposition, that any sort of guarantees were suspect and that overreaching in selling to the public was not unusual. But Carousel, Amos and Rose did none of this. A couple of months after they purchased the company, and while the Coadys were still building out their center, other franchisees, who had been in business for a few months or up to a year, came to Rose with the news that indeed the “Sona Concept” didn’t work: Five treatments were insufficient to remove anywhere near 93 percent of the hair; it wasn’t permanent; and Meladine didn’t work to enable laser treatment of light-colored hair. As a result, customers were complaining they had been misled and were demanding free treatments or refunds. Rose, Amos and Carousel sat on this information through the Summer of 2004 without notifying existing franchisees that they were operating on the basis of bad information, telling their clients falsehoods, or correcting the bad information. When the Coadys went to training at Sona headquarters, in September, they were trained to tell prospective clients all of the same “faulty” information. The Coadys opened their center and repeated those statements to their customers. It was only a year later, when franchisees discovered the full impact of Sona’s falsehoods, and the Coadys learned from a dermatologist that there was no substance to the “Sona Concept,” that they took steps to leave the system.
What is important about the Arbitrator’s ruling is that it found the buyers—Carousel, Amos, Rose and partners of Carousel Capital—guilty of negligent misrepresentation. In short, they knew franchisees had been given bad information, and they sat on their hands and did nothing and allowed it to be repeated to the franchisees’ clients.
An important point that everyone seems to have missed, or misinterpreted, is that it is the very finding of guilt on negligent misrepresentation that makes this an important case. Negligent misrepresentation is a low threshold: It is easy to breach if you are not careful. Hence, the decision casts a very wide net: Purchasers of and investors in franchisors have a duty not to be negligent; they owe a duty of reasonable care to the existing franchisees that they acquire. I repeat: This is a broad standard of care that can be met by reasonable due diligence but also can be very easily breached by a failure to use reasonable due diligence.
There are a number of other chapters of the Sona saga that are worth mentioning here, if only briefly.
In January 2006, the Washington franchisee, also disillusioned with the falsehoods he had been told, de-identified and went independent. Sona sued him in Federal Court seeking a preliminary injunction against violation of his covenant not to compete. Following a two-day hearing, the federal judge in Virginia denied Sona’s request for a preliminary injunction, finding, among other things, that the evidence that Sona’s methods were misleading was sufficient to show a likelihood that the franchisee would be entitled to rescind on the basis of fraud. In the wake of that franchisee’s departure from the system, several others also left.
There was also collateral damage. Sona franchisees did not discover the faulty nature of the system until they had been in business for a year or more and clients had run through the five treatment cycle and found that their hair was still there. At that point, customers began to demand refunds. Also, because of Sona’s quirky cash-based accounting system, franchisees began running out of money about that time. One store, in Salt Lake City, closed its doors, and the franchisee was the subject of action by the Consumer Affairs Department requiring a payment of tens of thousands of dollars in restitution to clients who had not had all their hair removed. A similar case happened in St. Louis. Stories abound of franchisees who lost not only their personal fortunes but also their mental health, their family relations, and their homes. Sona, itself, got off lightly. The point, however, has been made: Those who buy franchised organizations cannot ignore the history that went before. They have a duty to franchisees to make sure they are telling the truth and acting fairly.
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W. Michael Garner, attorney for the Sona franchisees, is a partner in Dady & Garner, P.A., Minneapolis and New York. The firm represents franchisees, dealers and distributors in their disputes with franchisors and suppliers. Mr. Garner is the author of a three-volume treatise on franchise law, the editor of the Franchise Desk Book, and former editor of the American Bar Association's Franchise Law Journal. He has been practicing franchise and distribution law for over 30 years.
Editor's Note: Investigative reporter, Janet Sparks, contacted Mr. Michael Seid to get his response to the arbitrator's ruling of "negligent misrepresentation" against Sona Medspa. Mr. Seid stated that he did not want his remarks edited. So, with his permission, his entire email to Ms. Sparks is shown below. - Mr. Blue MauMau
Janet
I am going to take a pass on getting into a dialogue with you regarding the Sona MedSpa case. I understand that the arbitrator found that there was no fraud or intentional misrepresentation, found in favor of the defendants on the major issues and awarded what I understand to be less than 5% of what the plaintiffs and their legal counsel were attempting to win.
Given the number of substantial claims that were eliminated by this judgment when coupled with the vagaries of arbitration, such a minor award that really dealt with actions that took place before the current owners acquired the system is not something that merits the headline of your blog on Blue Mau Mau, "Sona MedSpa Guilty of Negligent Misrepresentation". Were I writing your headline, it likely would have read "Sona plaintiff's unable to substantiate the majority of their claims – arbitrator awards less than the cost of litigation." A more balanced approach would likely have alerted the reader to the proportionally miniscule award, the elimination of the guts of the plaintiff's case and the failure of plaintiff's council to meet the vast majority of the claims they used you and others to broadcast while the matter was being arbitrated. I find the use of the press during litigation to be a disgraceful tool and would wish that reporters would avoid supporting this litigator ploy. Using a baseball analogy, Michael Garner swung for the fence but barely got the ball past the pitchers mound. Contrary to Michael's opinion, calling this a landmark decision, given his failure to substantiate almost all of his case is akin to calling my last speeding ticket a capital offense. His was too absurd a claim to warrant any ink – even in a blog.
We have discussed in the past my perception of where I believe you naturally land on issues involving the IFA, its leadership and franchising in general. I have never understood what I perceive to be your consistently negative reporting on an organization I am proud to be associated with. Given what I can anticipate will be the leaning of your column in Franchise Times I really do not see the need for me to provide you with any verbal input. I can only imagine the selective sentences you may likely pull out of this hurried response but would hope that if you print some of it, you print all of it.
Perhaps, if you wish, we can discuss my perception of your reporting the next time we meet. For me, I am sadden by the personal verdict involving Jim and Heather but am pleased that this is over for them and the rest of the Sona MedSpa system. I trust they can finally get back to work on more productive issues and hope, although I don't expect it, that your column will be balanced in dealing with the facts in this case. I would also pray that you would at least highlight the fact of the failure of plaintiff's legal council to meet his burden of proof in almost every instance and how little his client benefited from this "victory".
Maybe you could consider writing a future column on the plaintiff bar and whether they are benefiting or hurting franchisees or are really the only winners in many of these cases. Maybe you can write a column on whether reporting on allegations in a case, in a way that makes the claims seem like facts while the case is being tried is fair. Now, those would be columns I would be pleased to discuss with you.
Michael Seid
Managing Director
Michael H. Seid & Associates (MSA)
For the life of me, I cannot find any franchised spa system with any history of franchisee profitability.
Am I just losing it to whiskey and syphillis? Is it old age and deterioration of brain cells?
How can I ever help anyone to an affirmative investment answer in any due diligence assignment if I can't find corroboration of any franchised spa (medspa or otherwise) ever making profits over any reasonable period of time? DUH!!!--
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
I used to believe that Jim Amos and Heather Rose were victims not unlike the franchisees who had believed the shameless puffery and false claims of Sona's founder Dennis R. Jones. Amos and Rose had even earned my respect for their desperate efforts to restructure the company's failed business model in order to forestall the bankruptcy of their newly acquired franchise system. However, their efforts were much too little and much too late for me. Sona's Founder, Dennis Jones, and CFO, Tom Noon, had already sunk me financially! Franchise buyers beware! Not much has changed at Sona Medspa. Listen carefully to everything you're told. Hitler once said, “Make the lie big, make it simple, keep saying it, and eventually they will believe it.” This is precisely what Heather Rose is trying to do with this outrageous press release. Amos and Rose even have the audacity to continue to claim that Sona Medspa is “one of the world's fastest-growing medical spa franchises” when they have seen nothing but decline in their unit numbers.
Franklin, Tenn. (Blue MauMau) - In previous articles related to the troubles of the Sona Medspa system, many franchisees have told stories of religion being used in selling and operating the business. One franchisee was told by company executives that God had blessed the Sona franchise and his franchise would also be blessed as well. Even during one legal session, one witness stated that Jim Amos was reading his Bible while testimony was being conducted.
Kemp Coady and his wife Rosita, executives with MBAs from Cornell University, have just received an arbitration award for roughly $400,000 against Sona Medspa, found guilty of negligent misrepresentation. Mr. Coady said he thinks it is unconscionable that all the Sona people used the premise of God and Christianity to try and justify the Sona system when it lacked solid medical and business research to support it.
Says Mr. Coady, "Those are the things that really disgust me. When they (Sona) mixed religion in with the business it caused us to believe that what they were telling us was somehow true but it wasn't. They negligently misrepresented the medical facts because they did not hire the proper experts to prove what they were telling franchisees was true."
Mr. Coady states emphatically, "We were very much deceived."
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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise industry. She is now a freelance investigative reporter and a columnist for franchising.
Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise industry. She is now a freelance investigative reporter for franchising and a columnist for a leading franchise publication.
Good information, but please list your sources - please. Otherwise, it is hearsay. I recall that someone listed from a case involving Amos a link to a judge's notes on Blue MauMau. Link no longer works.
Frankman
Understand this - it was only recently that the FTC revised its rules on franchising. Prior to this there had not been any substantive change for some time. Prior to that, there were not any federal laws regulating franchising at all. It is not unreasonable to assume that Congress, or the FTC, will not be revising these rules in the foreseeable future.
Knowing the current political climate, it is unlikely that concerns about inadequate Item 20 disclosure and other pertinent UFOC issues will be addressed in any subcommittee, given our government's current need to squabble over Iraq and fired US Attorneys (the only time I can recall that anyone has cared about the welfare of attorneys).
So, while one can lament, moan and wail and gnash one's teeth about the franchising industry, nothing is likely to change. Thus the onus is on the buyer to protect their own interests until such change occurs and one can rely on the government to protect one's retirement from one's own idiocy. Whether or not you believe franchising is a creation of the devil or a business concept that promotes and stimulates the economy, I think we should all agree that prospective franchisees should take measures to protect their investment. If the franchisor is shaddy, has horrible Item 20 disclosure that hides the use of the c-word (whatever that might be), promotes the cohabitation of cats and dogs, and advocates running with scissors, and that this would readily discernable with adequate legal and financial counsel, then a prospect may have a means of recouping their poorly-advised investment through the grace of their advisor's malpractice carrier.
Michael Seid is correct, and shame on Janet Sparks.
For any reporter to write about anything before adjudication is complete is totally wrong. Indeed, I would suggest that we simply print the judicial decision. Moreover, reporters should not write about any issue unless there has been a complete and open airing of the facts in a lawsuit. And for a reporter to simply pick and choose from interview remarks is unconscionable. The job of a franchise reporter is to proofread the press releases put out by the "Voice of Franchising" and members thereof.
As to Ms. Sparks' writing about negative events, Mr. Seid is dead-on once again. Personally, I have enough bad news all day, and them whining franchisees who can't take a fair lickin'.
When I pick up Franchise Times, I want to hear about the fashionable women attorneys and see photos of the male attorneys in tuxes. (I must say, I didn't know them broads could look so good in a dress and still cut the mustard in court!) I want to read about franchisors and their dogs.
I want to see photos of Mr. Seid on safari, saving the world (and making a good buck doing so!). I know a lot of people say that Seid went over with camera crew in tow and put the Press Release out before actually comforting the afflicted, but as I recall Mother Theresa and St. Vincent de Paul retained Burson-Marsteller before they began their "charitable" works, and Jesus was good buds with the hypocrites and Pharisees. Of what use is charitable work if it doesn't promote your business interests?
I don't subscribe to Franchise Times to get news which is provacative, I subscribe to get news from Pollyana.
I don't know where this idea came from that reporters should do investigative pieces, that "the job of a newspaper is to comfort the afflicted and afflict the comfortable"... but it needs to Stop and stop Now.
I join Mr. Seid, and call on Mr. Hamburger and Mr. Signowski to pull the plug on Ms. Sparks and her fellow nattering nabobs of negativism. Happy Talk, that's what we want!
I join Michael Seid in his "prayer", as I join Jim Amos, who is a patriotic ex-Marine and God-fearing man; secure in the knowledge that we do no wrong, despite what those pinko atheist judges say.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Amos and Rose were lied to by the original founder of Sona, Dennis Jones. They found out about the lies and chose not to do anything with that information. Rose and Amos are cut throats and only care about themselves. I have had dealings with them directly and the way they both deceive and spin the facts to cover their asses is scary to see first hand. Bottom line they lied...there is no way around it. They were made aware of the facts by several franchisees and they had a chance to do the right thing. The problem is that when unethical people were presented with an ethical decision they chose to ignore it. They were greedy. The Sona franchise is sinking fast and there will be no rebounding regardless of how they spin it. The individual franchisees will continue to work hard to make their businesses a success.
When the lies started to come out little Mr Marine who likes to say he leads his troops into battle jumped ship and threw his daughter under the bus. That speaks volumes about this loser's character. He will continue on deceiving people and lying and nothing will happen. He will have a higher power to answer to in the end and then justice will finally be served. Mr Seid writing he feels personally sadden for Rose and Amos is pathetic...these two are not victims. The victims are the thoudsands of clients who bought Sona services based on the lies they were told.
You don't know anything about Mike Seid. Your criticism of him is totally without merit and, as such, is totally malicious. You don't know anything abhout his practice history or about his responsibilities. His responsibilities to his clients require that he represent them vigorously and to the utmost of his abilities. I have been trying not to personalize my reactions to some of your idiotic postings, but you are really over the edge and utterly irresponsible. I know you have problems, but there is a limit to our willnigness to show you any respect when you rant irrationally and personalize what is not appropriate to personalize. You owe Mike Seid an apology, but I seriously doubt that you are man enough to give it to him.
Richard Solomon
www.FranchiseRemedies.com
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
On Public Policy: Generally true, but nevertheless a misleading statement. Public policy favors strict enforcement of contractual provisions, particularly in a commercial (i.e., non-consumer) context. There are sound economic and jurisprudential reasons for this, albeit reasons not shared in some other legal systems. Richard Solomon recently posted on this matter , and those posts are worth reading. One of the problems is that many franchisees have always engaged in transactions as a consumer or employee, and the body of law governing the consumer marketplace or the workplace is more protective of the interests of the individual dealing with a large organization.
On Plaintiff Bar: Rarely commented on is the prophylactic effect of a strong zee-side bar. It is true that there are few firms on the zee-side and they tend to be expensive for individual zees (25K and up is common), but even periodic victories tend to curb the more aggresive impulses of zor-side counsel (which, Michael Seid neglects to mention, makes zee-side fees look puny by comparison). As to negotiability of Franchise Agreements, this varies: generally the small zors are more flexible, for obvious reasons.
On Blog: I was surprised by Seid's "even on a blog" remark; he's not stupid and in an age when BlueMauMau outpulls the IFA website in traffic, and when BlueMauMau and other sites such as FranchisePundit and FranchisePick break news which gets picked up by mainstream media and which can make-or-break a franchisor... either Seid is being deliberately obtuse or ignorant, and in either case he does a disservice to his clients. I remember when I first saw the (now-defunct) QuiznosSucks website and thinking that this would revolutionize the franchise industry. The issue is not whether the blogs are accurate or not, the issue is that any franchisor must factor the Internet into its media and marketing strategy. Seid misses the point: it is the very ease with which one can blog which makes it imperative for franchisors (and corporations in general) to be more attentive to incipient problems (including franchisee revolts and misbehavior by franchisor CEOs).
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
I think it's important to also note that all of the above took place after an agreement was signed by both parties releasing me from my franchise agreement. It was written by Rose and signed by both of us. One of their MO's is to change the rules in the middle of the game. That coupled with a selective memory about what was said makes for a clear conscience I guess. I can't believe Amos still gets people to hire him. I hope the owners of the ice cream company where he now works have their eyes wide open.
In anybody's language, a hit of 400K, plus half the arbitration fees, is not a minor event. I am perplexed why Mr. Seid would say otherwise.
Michael Webster PhD LLB
Misleading Advertising Law
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
What I know of Mr. Seid is from his public comments alone. He is the Stephen Decatur of the IFA, and has nothing but high praise for his friend Jim Amos. There is nothing wrong with supporting your lobbying group and nothing wrong with supporting your friends. But...
When your lobbying group has opposition and your friend has a checkered history, you should anticipate taking some heat. Mr. Seid is perfectly capable of setting forth his position, including here on BlueMauMau; I doubt he needs proxies. As one of the most media-savvy people in the franchise industry, he chose to take a few swipes at a reporter who is well-liked and well-respected (even if we don't always agree with her). In his previous postings on MauMau, he was hardly the exemplar of civility.
As I recall, his previous defense of Mr. Amos was the Marine/Jesus defense that seems to follow Amos. The idea that just because someone was in the military and praises Jesus at the drop of a hat is not relevant to whether that person committed particular act(s). More than one person has commented to me that such public trumpeting of patriotism & piety actually makes them more suspicious of Mr. Amos.
There is a history with Mr. Amos, and while all may be just a big misunderstanding, an objective observer not acquainted with him would not be unreasonable to have some concerns as to Amos' charachter, nor would it be unreasonable to more carefully scrutinize transactions involving Amos.
One of the problems with an unwillingness to acknowledge that your organization or your friend has made mistakes is that you end up taking a position which lacks credibility. In this case, there are some serious shortcomings, and while I only know Mr. Garner in passing, I have found him to be not only legally astute, but reasonable as well. As such, I give his posting careful consideration and I would hazard that Mr. Garner gave thought to his posting before he put it up.
As to Ms. Sparks; I don't always agree with her, but her knowledge of franchising history and the players current and long-gone make Ms. Sparks a true delight to speak with. She is a reporter, and reporters search for stories. If you want soft feature puff-pieces, there are other reporters covering franchising who do that.
As to ranting posts: my suggestion is to ignore the rhetoric and deal with the substantive points raised (if any!) by the poster.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Dale <--- stepping in to shield some heat from cousin bubba!
Franchising can be a very good investment, if and when the investment is made with the right investment partner (Right Zor, determined by proper due-diligence) under the correct investment terms (Negotiated franchise agreement). Therefore I do not see anything wrong with the 'hyping' of franchising.
The SBA, VA, FRAN/VET etc... do not pick the franchise. They simply provide an opportunity to gain access to discounts and financing. The individual franchise candidate reamains responsible for selecting the RIGHT OPPORTUNITY & NEGOTIATING THE RIGHT TERMS.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I represented a client in a housing matter. His neighbor (the other party) is admitted to practice. The neighbor actually tried to convince the appellate court that saying anything disparaging about an attorney is slander per se in this state. The appellate panel was moderately amused, particularly since the neighbor really believed it.
On the other hand, I one time forgot to Shepardize a memo, and had one of my old classmates refer to me in public as "Pocket Part" for years afterword. I wasn't upset, but I did make him pick up the bar tab.
But to correct a mis-impression, I don't think that Seid is an attorney.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
I just unpublished a comment that made personal accusations. Please see our posting guidelines at the bottom of every web page on this site of what few posts are unacceptable on this site.
As a rule, writers do not gossip about an executive or staff's personal behavior -- sexual activities, drug addictions, affairs, etc. In some states, such personal accusations affecting the sexual reputation of a woman (don't know why this part of the law doesn't apply equally to men) can be considered defamation. The person posting it opens themselves up to legal risk.
If you must write about such personal gossip because you think it affects the investment worthiness of a particular franchise chain, please link to court records or clear evidence of the personal accusation and explain why that is important to the investment worthiness of the business. (And no, we will not publish photos of lewd acts to show proof.)
This is a site to inform business investment - specifically to share insights about the investment worthiness of franchise businesses. It is not a gossip tabloid of the stars.
Mr. Blue MauMau
Community Umpire
If you are buying an existing franchise, then you can ask for the gross sales reports that the franchisee had to give the franchisor, per the franchise agreement.
If you don't get it from the franchisor, then run away.
Do you disagree with this advice?
Michael Webster PhD LLB
Misleading Advertising Law
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
You are extrapolating a lot from basically nothing. The SBA and the VA serve their respective functions, of which an affiliation or relationship with Fran/Vet may serve to assist in such functions. I think it is a stretch to attempt to link them in whatever unethical shenanigans some unscrupulous franchisors may have in mind.
The SBA will facillitate a loan for your business venture. The merits of the venture, or whether or not the franchisor meets their minimum standards with respect to contractual language and financials, does not in turn necessarily reflect an endoresment of the franchisor or that a prospect should then rely on said relationship as a barometer as to the franchisor's practices. While an argument that the SBA should make their standards more stringent may be a good one, to state that the government and franchising are in cahoots to scam veterans still reeks of paranoia.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Such a half story!
Who won the case your client or your clients neighbor?
Frank Shepard was a pretty smart fellow!
Bar Tab? State Bar or Murphy's Bar?
I caught the Seid attorney comments as well and questioned it. But there are so many non practicing attorneys in the world and thought oh well. Regardless I still understood Solomons point of Seid's responsibility to client, and agreed.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Let's talk (assuming this is not a rant infused with paranoid delusions of franchisor-government conspiracies to defraud middle-class Americans, in particular veterans).
What do you want me to say? That I do not see any merit behind concluding that the SBA and the VA, with the private for profit organizations, Vet/Fran and the Franchisors are in cahoots to swindle veterans? That I think that the very notion of the SBA and VA participating, and you infer that such participation is willful and complicit, in any efforts to specifically target and deprive veterans of their investments is plainly ludicrous?
While I agree that you have lumped them together within one sentence, I find no reason to then conclude that they are otherwise related in a common scheme as described. Correlation does not equal causation. If you have some evidence, then provide it. You make sweeping generalizations that are unsubstantiated by sufficient proof to justify such generalizations. Merely because one find a particular situation involving a number of the above organizations unfortunate does not in turn necessarily rationally lead one to conspiratorial theories. Provide substance and we shall discuss.
I disagree! The guest is not 'destroying' Bluemaumau.
I think the guest may be contributing greatly to building a large number of silent observers. The Guest may be single handedly contributing to the inability for Bluemaumau to ever be considered an honorable, respectable, credible, fair, impartial, consistent, and reliable source of franchise knowledge, information and assistance.
AGAIN, I say Bluemaumau can be a great repository of franchise knowledge, but only after GUEST has been BANNED, and a clear - consice - purpose for this venue is stated, and frank - open - honest discussion is encouraged but without all the repetitive sermons on the evils of franchising.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Bubba, you are correct as a matter of law. But "Guest" has a point in terms of how these investments are sold: anyone who's had even passing familiarity with the franchise industry knows that SBA Registry, VetFran, and even the FTC statement at the front of the UFOC (notwithstanding the explicit language!) are used to convince the prospect that there is some level of vetting by the government.
I'm not absolving prospective zees of their duty to exercise common sense and read the plain language, but this is a problem in the franchise industry and we should all be aware that clients are frequently under this (erroneous) impression.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
The neighbor has been dickering for over 10 years (even before my client moved in) and will likely be in court in perpetuity.
There are things courts aren't well suited to resolve, and that's why I do see a place for arbitration. There are also people who are simply insufferable, and/or people who are serial litigants; these folks are not limited to the franchise context. I have seen a disproportionate number of instances where litigation is actually used as a tool to bludgeon the party with less money, or to pressure the party with a public reputation at risk.
Getting sued comes with the territory nowadays for a lot of people in business, including doctors, lawyers, etc. But given the lack of traditional mechanisms (community pressure, reputational damage, religious arbiters, duels, etc) perhaps access to the courts at least gives an outlet to parties who might otherwise resort to other means. In the case of the neighbor, I actually had a colloquy in open court discussing our concerns as to how the neighbor might react if the judicial outlet was foreclosed.
Now, let's steer clear of Baber, and just note that in the franchise context a wise franchisor can benefit from permitting franchisees to:
As the "nutso neighbor" case illustrates, there will always be a limited number of instances in which people are just plain malcontents.
But I do think that when franchisors begin to see their franchisees as customers, and begin to see customer service as a core value... well, a lot of lawyers would have less business.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
may have little to do with investmeent worthiness. It is possible to behave wantonly in one's personal life and succeed anyway. Besides, it's only when somemone else is doing it that it's lewd. When you're doing it it's wonderful.--
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
Let's not forget, there was "Jerry Springer" as an opera in London. It did good box office.
Guest did have a serious point: most current (and many former) franchisees are reluctant to talk. Current ones don't want anything to get back to the zor, and former ones are often under gag clauses, or mistakenly believe that if they say anything bad the franchisor will come after them. Plus, you never know if you are really talking to a prospective purchaser or a spy. Franchisors have been known to use private detectives to spy on zees, so this isn't total paranoia on the part of Guest.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
I concede that salepeople have a tendency to use whatever tools they have available to obtain their commission, to the point of making correlations that may or may not be supportable or even logical. However, I would wager that it should be common sense to approach interactions with franchise salesperson knowing that there will be as much puffery and flowery prose as one would expect when buying a used car.
I realize that the fact that salespersons may say "Franchising is a heavily regulated industry, so we've had to comply with both state and federal laws. Not only that, but we've been registered by the SBA..." sounds good; however, if a prospect does not realize that their role in this exchange is to be sold by the salesperson and that whatever is flowing out of the salesperson's mouth is to be taken in that context, then I think that itself is a problem as well (I am not even addressing the fact that most salespeople are typically driven solely by their own personal bottom line).
If the prospect sees something in writing, the salesperson says or infers something to the contrary, and they have not retained legal counsel to sift through what is spewed...it doesn't leave me much to argue with on their behalf. I wish there was some mechanism for prospects to pass a "business" common sense class or something, but I wouldn't want the liability that surely would be associated with that. Its unfortunate, but some people do not have what it takes to go into business and a dream does not always a reality make.
Paul is correct in that a salesperson is a salesperson, who will take what they have to work with and present it in the best light. Example a car whose paint is a nice coat of dull-gray primer. One might say the car is worth less because it is in bad need of being painted. Or one might say it is worth more because it is primed and ready to be painted the buyer's "color of choice".
The SBA Registry if available to use is a plus for many a prospective buyer in that it can shorten the approval process.
I often made light of the FTC Statement, by poining out to a prospect "This makes me laugh, our government at work, where it says: To protect you, we've required your franchisor ... We have not checked it, and do not know if it is correct..."
Having spent many years working with the company founded by the same man who founded VetFran, I can say that yes, it was started for two reasons: 1st to help facilitate verterans with transitioning into civilian life; and to open up a market of prospective franchisees. Don Dwyer correctly felt that veterans could make very good franchisees, because they are use to following systematic processes and procedures for accomplishing a predetermined objective. Yes, the VetFran program is a benefit to a qualified prospective franchisee.
Some franchisors do a much better job in selecting their franchisees than others. Some truly award franchises and yet others operate under the premise that if the check for the franchise fee clears the bank, the prospect is qualified. Even if and when a franchisor is 'Awarding' the franchise to a select group of individuals, it is still a sales job to get the 'qualified individual' to buy the franchisor/franchise. Therefore, it is important that each prospective franchisee, understand that it is a sales process. Therefore anytime, anyone is advising the purchase of a particular franchise, they've got to ask what dog do you have in this race?
Back to 'The Gray Primered Car' when someone says: "I think it's a great buy" you have to say 'What dog...?" and ask: "Do you own this car? Do you receive a commission if I buy it?" If the answer is yes, the prospect must be able to say "Well thank you for your opinion, and please don't be offended when I take it to a non-biased mechanic to get his opinion.
I strongly support the personal and professional goals of anyone interested in building and growing their own business. For many there is no better way than with a good franchise. However, a candidate must approach the exploration, evaluation, investigation, selection and negotiation with Eyes & Ears wide open in a non-emotional manner. It is a business decision and should be treated as a business decision!
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I've been involved in many 1st Generation franchise transactions, both as a 'salesperson' and as an independent advisor.
I do not know of ANY where the franchise candidate DID NOT read the UFOC and the Franchise Agreement. I do know as a 'salesperson' many candidateds read it but did not seek competent counsel so that they fully understood the ramifications of what they had read. Of course in an independent advisor role it is my job to make sure that the candidate FULLY & COMPLETELY UNERSTANDS what it is that they are agreeing to.
The "WORD" must be, Read It & Understand It! The UFOC already has the disclaimer that you recommend! It would make no difference if you put it on the front page in 3" tall red letters. Candidates buy based on emotion and seek logical justification. Until candidates begin to make BUSINESS DECISIONS and not EMOTIONAL DECISIONS, there is little which can be done. Teaching PERSONAL Responsibility & Accountability is what is in order.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Guest, if you asked me I would have told you that I thought the UPS franchise was a piece of sh*t; I would have done that for no charge - look it up on the franchise-chat.com site.
But if you are honest with yourself, you would probably realize that you might not have taken that advice.
And that is not a problem with the Government, nor I am more fond of BS that you are.
Michael Webster PhD LLB
Misleading Advertising LawMichael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
I agree 100%, the guest does have a point. It's the constant and repetitive over-generalization that becomes the problem further exasperated by the closing governmental conspiracy comments.
I could support the guests actions, and admire the guests persistence if the guest were directing their comments to the FTC, to their congressman, or senator on an hourly basis. However, I'm of the opinion that Bluemaumau is a place to have meaningful dialogue about the issues and solutions to those issues and not a soapbox to constantly be spewing anti-franchising rhetoric. Just my opinion.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Paul,
Are you aware of any caselaw which suggests tha the use of franchise gag orders interferes with the right to associate qua franchisee?
Michael Webster PhD LLB
Misleading Advertising Law
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Guest, although I hesitate to further indulge you by commenting on your remarks, I do so with great reserve, and will limit my remarks to the personal issues.
In my opinion one of my many weaknesses is a lack of humor. I consider myself to be far too serious, although my wife and children find me to be very funny. I consider humor to be a great trait. Those who I like have many different traits. But those who I love, they all have one thing in common - the ability to make me laugh.
You've lumped me into the "Pro-Franchisor" category, and by contrast to you, I certainly understand why you feel that way. In reality my effort, interest, passion and focus is concentrated on helping existing and prospective franchisees achieve business success via franchising, and in assisting existing and prospective franchisors to achieve business success by helping their franchisees achieve business success as a franchisee.
The TRUTH IN FRANCHISING, is that you failed. The TRUTH IN FRANCHISING, is that your franchisor failed you. The TRUTH IN FRANCHISING is that both you and your franchisor made mistakes, pre-term, in-term, and post-term. The TRUTH IN FRANCHISING, is that you are fighting the wrong battle, in the wrong place, at the wrong time, using the wrong weapons, for the wrong reasons. If you're interested in bringing about meaningful and long lasting improvements to franchising, you must move from the position of victim to that of participant in your own demise. There is no shame in having failed in business. There are far more lessons to be learned from failure than success. I encourage you to accept the blame which is yours, identify that which belongs to others, and then clearly and concisely communicate your experiences with others so that they may learn from your experiences. If you want to lobby for regulatory change then please do so, but in the right venues. I do not believe that Bluemaumau is your soapbox for a constant cry for regulatory change or conspiracy theories.
You can also use your own experiences as a springboard into great success, but only after you begin to move away from the darkness of the past and towards the brightness of the future.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Every forum site has to deal with the trade off of allowing people to post anonymously and getting more traffic versus requiring identification and getting less traffic.
The customary practice is that, at least at first, while the site is in its growth stage and needs to build traffic in order to survive, its is less particular about anonymous postings.
That's just a fact of life. We live by traffic volume on forum sites. The same complaints about people hiding behind a rock and throwing spitballs happens on every forum site.
When you think about it, we don't have any idea whether your statement about why you are posting anonymously is true, or whether this may be a lead in to some agenda rant.
A good rule of thumb is that you don't place as much reliance/credibility in what is posted by people who lack the courage to say who they even are.
Are you Joanne Shaw? How could we tell if you were or were not Joanne Shaw?
Richard Solomon
www.FranchiseRemedies.com
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
In my experience, virtually no newbie zees read the UFOC. There are a variety of reasons for this unwise practice, and while I agree with the remainder of FranSynergy's posting, I would suggest that the failure of zees to read the UFOC is of more than academic interest and it is often suggested that the manner of presentation in the UFOC should be revamped. I remember the old mutual fund prospectus style, and I saw that when some of the funds began using a more modern style of presentation, the number of investors reading the prospectus went up.
Many (if not most) new zees make decisions which are actually emotional decisions, rationalized post hoc; the readability of the UFOC is arguably a matter which correlates to this process. In the interests of brevity, I won't go into depth on this thread, but this might well be a good topic for its own thread.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Guest, your statements are a prime example of "The Kettle calling the Pot BLACK". Although I've come to expect your personal attacks, your relentless socialistic cry, your inability to accept personal responsibility and accountability, your 'red herrings' and on and on. What surprised me the most is how you hide behind and defend anonymity, call people out for personal attacks and then in the same breath attack the franchisor for his/her anonymity.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Paul:
First let me say that I believe your comment to be false, but I'll come back to that in a bit. As for our respective observations, I wonder if, our different observations are the result of our different vantage points.
From my sales and consulting perspective whereby I'm encouraging people to read the documents, and required that they do so, I'm sure they told me that they did ---- even if they did not.
From your legal perspective I would think that it may have been self-serving in a 'stupid' kind of way for some of your clients to say "Oh I didn't even bother reading the documents, I trusted what they told me....", even if they in fact read the documents from cover to cover.
Now, let's get back to your misrepresentation. You stated, and I quote: "In my experience, virtually no newbie zees read the UFOC". Counselor - you were once a newbie zee, correct? Are you now telling me that you did not read the UFOC? Or are you going to cover yourself through having used the word 'virtually'? Sorry - could not resist, a little professional fun!
A few things you and I both know, and every prospective Zee reading this should hear LOUD AND CLEAR: All 'newbie' Zees WILL read the UFOC and more importantly the Franchise Agreement. All 'newbie' Zees WILL gain a SOUND understanding of that which is contained in the UFOC and the Franchise Agreement. The question is not WILLL they read it and understand it. The question is WILL they 'read-it' and 'understand-it' before executing the binding legal documentation or at a future point in time when it's 'VIRTUALLY' too late?
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Guest:
You flatter yourself, far too much. I will stand by my previous statements regarding Quiznos. Many of the tactics used were far more counter-productive than productive.
Campaigning is good. Voting is good. Stuffing the ballot box, is illegal.
"Great Spirits" & "Violent Opposition" what a bunch of hawg-wash!
Why must, my mind be - Mediocre? Simply because I disagree with you?
It is obvious that YOU operate under the false belief that by belittling others you will somehow improve your own self-importance and self-esteem.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Either would be interesting.
Michael Webster PhD LLB
Misleading Advertising Law
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
But just between you and me, no. I didn't read it. I looked at the Litigation, and the high/medium/low numbers. Those were the pre-Internet days (remember CompuServ, phone couplers, and the imminent death of Apple?) so there was not a lot to go on other than the happy talk (remember when we used to think Entrepreneur was a good source of info?).
Really, hardly anyone reads the UFOC. And frankly, I am not one of those people who thinks that the UFOC is that important. Now, before I get lots of emails, let me explain that I do think everyone should read the UFOC and look at such items as Litigation, Turnover, and the history of the principals. But...
Most of the horror stories I have seen did not involve Franchise Rule violations. Rather, they involved franchisor overreaching once the franchsee has plunked down the big bucks. The problem from a regulatory perspective is that a franchisor needs to have discretion, but how do we prevent the "bad" franchisor from abusing that power?
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Guest: My mind is really too 'Mediocre' to be responding to this type of post (If you're not the guest who called me "Mediocre Minded" I apologize). I've also allowed an hour to pass in the hopes that someone would respond, since no one has, I will.
What does a "Non Renewed" signify in Item 20 of the UFOC?
It means that at the end of the term or any extended term the agreement was not renewed by the parties to the Agreement. This could be either parties unwillingness to renew or by mutual consent.
Are these franchisees who have completed the term of the franchise agreement and who just close their stores and sell off their assets for what they can get?
Some may have just closed up shop, others may continue to operate without the license to use the marks, name, systems etc…
Are the Non-Renewals still subject to the Non-compete language of the contract or are they free to sell their franchised unit to a competitor when they have completed the contract.
As for being subject to the Non-Compete that would depend on the language of the Agreement and post-term covenants.
No they are not free to sell their franchised unit, because they no longer have a franchise. If you’re talking about the tangible assets of the previous franchise owner, you would need to once again refer to the post-term covenants.
Are those franchisees who complete the term of the contract and sell-transfer their business to a franchisor-approved franchisee carried in both the Transfer Column and the Non-Renewed Column----and if they are, how can we know whether these franchisees who completed their term (10 years) sold their units at a profit or a loss.
Usually they do not end up in both columns because 1 of the 2 actions terminated the relationship.
As for Profit or Loss, you don’t and must use other investigatory techniquest to discover.
What would the fact that The UPS Store had only 5 non-renewals in each 2004 and 2005 and a great increase to 54 in 06 mean to an experienced Item 20 reader?
It could mean many things. The first thing you'd look at is the sales history year - term moving forward.
What, in your mind, is the purpose of the disclosure in Item 20 of the UFOC?
It tells prospective franchisees how many franchises a franchisor has sold and how many of the franchised businesses have survived. If this Item shows there have been lots of terminations or transfers, a person might conclude that it's hard to stay in business in this business. <------ DON'T YOU JUST LOVE IT!!!!!! (from Paranoid's Guide)
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Guest,
ANONYMITY: You are mistaken. I have no problem whatsoever with anonymity on Bluemaumau. I understand why some (a very few) may want and need to maintain such. I do however, find the non-registered over-abundance of guest to be less than productive. Anonymity, also allows for less accountability, thusly weakening the argument of the anonymous guest.
ADVOCATE OF DISHONESTY IN FRANCHISING: Again you are WRONG! I just believe in the fact that Truth in Franchising is best created by educating franchise candidates to discover the Truth through proper due-diligence.
DEBATE: ATTACK THE PERSON and NOT THE IDEAS. Again wrong. That is a defensive strategy used when your position and/or preparation lacks substance, NOT the foundation of organized debate.
REDUCE YOU: Wrong Again, only you can reduce you, and you do a very good job on your own.
HAND OUT: Guest every investment I make, is to generate a profit. Yes, my time invested in this forum is expected to provide a return, both monetarily and otherwise. Perhaps a contributing factor in your own lack of success is the fact that you fail to understand one simple component to business...."If it is not making you money, it is costing you money". I do not participate in this venue for the pleasure of hearing your negativity.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Nicely Handled Counselor!
I personally find the UFOC's to be quite interesting. There is a definite 'art' to preparing a quality UFOC that meets the needs, desires and requirements of the various parties of interest i.e. state regulators, prospect, sales, principals, etc...
Being that the UFOC DOES NOT govern the relationship, but rather aids in the due-diligence I certainly understand your de-emphasis of the UFOC. This is perhaps a reason why every franchise candidate should evaluate the franchise opportunity from the following perspectives:
In a previous post you clearly stated, and I'll paraphrase because I'm too lazy to find your quote: "The number of BAD Franchise Agreements will diminish when franchisee's quit signing BAD Franchise Agreements". This is exactly right! Every franchise candidate should understand that they have the power to negotiate a favorable or at least fair and balanced Agreement 'pre-execution' or to WALK AWAY from the agreement which can not be agreed to.
So to answer your question, which may have been simply rhetorical, I believe the 'bad franchisor abuse' is minimized by:
My next statement MAY NOT be very popular with some of my collegues who earn a living as Franchise Brokers, Consultants, Referral Sources, etc.... Nevertheless, I believe that the method of distribution (selling franchisees) and the compensation for such must be changed to minimize the 'Overselling' to the "Uninformed', 'Unqualified', and 'Under-Capitalized'. I further believe that the advisors to franchisors and prospective franchisors, must provide better advice in what is and is not a viable franchise concept and how to maintain the balance between system growth and system support.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I agree and have always agreed that Quiznos allowed a strong concept to be weakened by many self-imposed issues. I have believed and continue to believe that the Quiznos concept can and most likely will return to its once strong and stable position in the QSR segment. I've said and continue to say, that there are better ways to accomplish the desired result than that which a FEW Q-Zees chose to resort. One might euthanize their pet to stop it from peeing on the floor, however I would suggest that patience, persistence and some puppy pads might be a much better alternative.
To answer your question about 'Who are you...." I'm just an individual like you who has an opinion. My opinion is that it does not make good sense to damage the brand in the process of bringing attention to a problem. The argument about money being lost, marriages being torn apart, and suicide as an acceptable methodology of garnering attention to a situation are not acceptable. Money is often lost in business, that's the 'risk' associated with starting a business. We have nearly a 50% divorce rate in this country, often in part to financial issues -- but much more to do with having picked the wrong spouse to start with. The money or lack thereof is seldom the issue, but the inability to agree about the utilization of the money. Therefore, FRANCHISE LESSON: if husband and wife are not in total agreement about investing in a franchise, the investment should not be made. Suicide is the unfortunate end result of a mental illness, and has nothing to do with the business.
And NOW....I'm a 'knucklehead' is this a promotion or demotion from 'Mediocre Minded'? It is such a pleasure to begin each day by being called some name by someone you don't even know. But that's okay. Back when I was in the 3rd grade and we as children did childish things like calling eacy other names, we had another catch little 3rd grade saying "Sticks and Stones may break my bones, but words will never hurt me." and of course there was "I'm rubber, you're glue, what you say bounces off me and sticks to you". Ahhh the memories of youth.
As for UPS and my approach. First I do not believe that the UPS situation is at all the same as the Quiznos situation. My approach would not be to 'kill them' with kindness. The actions which I'd advise an exisitng or prospective UPS franchisee to take would be very different from the actions which I'd advise UPS corporate to take. However, you are not intrested in SOLUTIONS, you are interested in FANNING THE FLAMES of controversy. Therefore, there's really no need to drill further into the discussion.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
For those who still read newspapers on Saturday, the Wall St Journal had a post-mortem by those Krispy Kreme franchisees from California (the head zee was an atty, by the way).
What I found interesting was the zee stressing that the lack of an effective Franchisee Association was a major factor in the Krispy meltdown. I am coming to be a big fan of Purvin's approach; there are a lot of benefits to the system from an effective Association.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
GUEST:
Glad to hear that it wasn't you doing the name calling so early this morning. Which is a prime example of why we should at minimum have GUEST 1, GUEST 2, GUEST 3... so that we all know who is who.
As for the non-renewed column. You're looking at a 3 year spread, which indicates a significant increase in non-renewed in the most recent year vs. the 2 previous years. This Increase in non-renewals would be considered a negative. The negative must be explained prior to making an investment. The question now becomes, "Why were non-renewals up last year?". You ask the franchisor and carefully note the answer. The answer in and of itself is not sufficient to negate the negative and must be substantiated.
Assuming that a franchisor had been in business for more than 13 years and that the term of the agreement was for 10 years we would then go back to the Item 20's for 13 years. We would look at the sales for years 1994, 1995 and 1996. We would anticipate that there was a significant increase in sales in 1996 over '94 and '95 to justify the increased non-renewal, if such non-renewal.
We would also look for significant changes in the Agreement itself between those that did renew in 2005 from 1995 vs those that did not renew in '06 from '96.
We would also be looking to see if there had been a downward trend in average store sales during the period.
We would look to see if their had been a managerial change between these periods.
We would look to explore the posibility that perhaps a franchisor was doing a little house cleaning in 2006.
We would ask about the number of 'non-renewals' between the time that the 2006 UFOC was prepared to date, and request that the franchisor provide us with their contact information.
We would plot the geo locations of those non-renewals to see if geographic location perhaps culural differences, competitiveness diferences etc are or were a cause.
I could continue on and on, but you get the idea. The first thing that one is looking for are the 'red-flags'. The second thing is acceptable and varifiable reasons/justifications for those 'red-flags'. The 2nd thing you're looking for are the trends, is this franchisor 'Always Steady', Moving from smooth seas to stormy seas, or moving from stormy seas into calm waters.
Specifically looking at the UPS/MBE situation they sold their first franchise in '82 and their 1,000th in 1990, 8-years. They sold their 2,000th in '93 just 3-years. Their 3,000th in '96, again 3-years they did not hit 4,000 unitl the year 2000..... ahhh a trend. They were acquired the next year. So as you can see 1996 was right there on the line between sustained growth and declining growth. ????
Investigating, evaluating, selecting and NEGOTIATING the right franchise deal is part art and part science. It is not something which should be done on the 'fly'. It is not something, which should be done without counsel whose done it a time or three. It's not something which should be done by someone SUPERCHARGED WITH THE EXCITEMENT OF GOING INTO BUSINESS, IN A BUSINESS THAT THEY'RE IN LOVE WITH!!!!!! It should be a calm, well thought out, BUSINESS DECISSION.
As for that glass, I don't see it half full or half empty. I see it as simply a vessel which can be contain whatever one is willing to put into it.
One more thing on 'us' normal minded people. I had to look up 'ilucidate' and found that it starts with an 'e' not an 'i'. So today I learn a new word and you learn how to spell it. Isn't Bluemaumau GREAT!
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
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JimB
JimB -
I'm always open to an discussing solutions to any situation, especially with those who have pure agendas.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
--
JimB
--
JimB
JimB:
I enjoy learning about business, and sharing my limited knowledge with others. I opperate under simple premise of: If I give you a dollar and in turn you give me a dollar, neither you nor I have increased our net worth nor benefited from the relationship. However, if you give me one good idea and I give you one good idea, the relatinship and the exchange have become most valuable.
I do not care to waste my time, with the likes of certain individuals who would rather cry about the past than prepare for new and brighter tomorrows. My interest nor the interest of my business lie solely in franchising. We work with independent business owners as well. I got my start in business as a young boy in the grocery business. I began to study franchising when I began to see the independent grocer getting his head bashed in by the chains. I am passionate about the value and benefit of GOOD FRANCHISING PRACTICES.
I am always willing to exchange any conversation with you JimB.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Not to split hairs, but when you say that someone has an "agenda" doesn't that by definition suggest a degree of "impurity"?
And this whole idea of "purity" in franchising sounds anti-capitalist and downright un-American. Go tell it to the Californians, they go for that touchy-feely stuff--they're not real Americans, even their Gubernator is a furriner.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
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JimB
More common ground than you realize. My father was in manufacturing, I simply liked retail more than manufacturing and at that time got along with my grandfather better than my father. However I was not totally blind to the manufacturing process and studied many of the principles like those taught by Dr. Deming and have applied those to franchising for franchisors, franchisees, and for franchisor/franchisee.
Theres lots of room for improvement in franchising. To a large degree the success of franchising has been its on worst enemy. I read in a separate post where if I understood correctly you are still a franchisee, is that correct? If so, have you totally given up on making your franchise work or are you continueing to try to make it work? Do you plan to close it, sell it. Or have you closed it but simply in litigation with your franchisor? What specific structural issues do you feel need to be addresed?
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
--
JimB
JimB let's continue this Here.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com