Sona MedSpa Has Aversion for Standard Accounting Practices
Sona Advocated Cash Accounting in Lieu of GAAP
Writer's Note: A previous Sona article in Blue MauMau sparked a considerable number of questions regarding Sona MedSpa's accounting methods as shown in its Uniform Franchise Offering Circular. By way of further clarification, I'm contributing to the ongoing discussion by providing Sona's 2003 UFOC and a franchisee interview regarding it. The pdf file that was mostly image was converted by Mr. Blue MauMau to a pdf text file by an OCE text reader to shrink the memory space used. As a result, some of the text has typographical errors, e.g., franchisee can sometimes read franchmee.
FRANKLIN, Tenn. (Blue MauMau) - The UFOC of Sona MedSpa (pdf, 203 pgs) shows how its financial statements were not based on General Accepted Accounting Principles (GAAP), says a franchisee. The franchisee explained that the reason people became enticed by the business concept was that when they looked at the UFOC, they saw financials that were cash based. GAAP observes accrual accounting, in which revenues must be matched in a timely fashion to expenses associated with the delivery of services. He said Sona tells you that 93 to 95 percent of the time it would take five treatments for the hair removal process, which is a very complex medical issue. So when franchisees sell packages of five treatments, they don't fully recognize that it takes 12 to 19 months to deliver those services. He said, "They showed cash-based numbers, so it was very deceiving to even those who had high-level executive backgrounds." He said he knows of two franchisees who were CPAs and they didn't figure it out until they were well into the franchise.
The franchisee explained that Sona tells franchisees that they have to continually promote to get new clients, which is another huge expense, and by doing so you are then able to fund future treatments. But he said you soon realize you are going to run out of money if you continue to operate the way they want you to. Even though Sona knows you will have the expense of supplying the treatment later, he said it takes out its royalties from your upfront money.
| Attachment | Size |
|---|---|
| Sona UFOC'03.pdf | 1.55 MB |
- Franchise topic:


At first glance I don't see Sona Medspa trickery in regards to accounting practice.
The accountant, James Hammond, says on pdf file page 192, "I conducted my audit in accordance with auditing standards generally accepted in the United States of America." The financials of Sona Medspa head office look like they are accrual-based.
Sales, cost and earnings statement for the stores start on pdf page 192. Page 203 specifically says about these center earnings statements, "You should note that the statements are cash flow statements, not accrual statements."
Frankman
[Note:I don't see the attachment (the UFOC) which you reference. Could you please post link to the attachment? Thx.]
How could they not "fully recognize" the time frame. Your doctor says "You will have to come back 5 times to get the procedure completed" and you don't inquire about a time frame??
If you are a CPA and you don't know the difference between cash and accrual, you shouldn't be a CPA in the first place. And if you know you should be using accrual, but use cash instead, then you reap what you sow.
So, since Client A didn't pay enough to cover the expense of the 5-treatment program, you get Client B and take that money to fund your expense to provide treatments to Client A, and of course Client C pays money to fund the treatments for client B... The franchisor tells you this at the outset, and you still buy?
Not to be mean, but as one who is supportive of franchisees, even I must say these people are some of the dumbest folks I have seen. I am deeply suspicious of Jim Amos, and of the whole concept of medical franchises, and I am not surprised to hear that Jim has bagged a a few more suckers, but... I've got a 3 year-old niece smarter than these franchisees.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
that this SAME issue has been addressed in the past with many of the internet companies having to 'restate' their financials because they posted 'future earnings' as revenues. And yet, the financial giants of wall street and all their experts in the field didn't address this issue with their investors until it hit the fan. It was the SEC that roped this practice in and although it aided in the inevitable deflation of the internet stock bubble, it sent the message loud and clear. A sale isn't a sale until it is EARNED..................to say otherwise is fraud.
I just wanted to remind everyone how easy this very sticky issue can be overlooked by the best of them so we can stop throwing the Sona franchisees under the bus with the blame and name-calling.
Rhino Super Center
Lisha
Rhino Super Center
After reviewing the 2003 Sona MedSpa UFOC --- it becomes pretty easy to understand why franchisees of that 'generation' were unable to understand their accounting needs ---
Anyone who read that UFOC and then signed that agreement (as is) obviously had far MORE MONEY THAN SENSE. My grandaddy always said:
This would certainly seem to be applicable in the case of SONA & its early franchisees.
Personally I am not opposed to franchising concepts like Sona, and they can be very lucrative opportunities for the right Zee, IF proper guidelines, franchisee selection, training etc... are in place and strictly enforced. Nor do I believe that Jim Amos or Heather Rose are as bad as they have been made out to be. I will say that ANYONE who signed the above referenced agreement may honest - may be nice - may be a lot of things, but definately NOT the brightest bulb in the chandelier (at least when it comes to understanding a franchise agreement).
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
There is a big difference between a publicly traded internet company and a small locally owned and operated franchise business.
You have a background in Accounting!
It's really simple ... here at FranSynergy client can pay us by the month or they can save a little and pre-pay for the year. When they prepay - the pre-payment goes into a a 'reserve' account totally seperate from our operating account. On the first of each month we write ourselves a check from the 'reserve' acount equal to 1/12 of the amount paid times the number of active clients who have pre-paid which is then deposited into the genral account.
You would think that most anyone could figure out that if you get paid $500 in advance for 5 treatments spread over 12 months, and you expect to do this in large volumes --- it might be a good idea to do something similiar. This however is 'poor management' by the franchisee and I'd guess much more of an 'excuse' than anything. If a franchisee had an accountant who let them do otherwise shame on them. If SONA taught otherwise shame on them. Ultimately it is shame on the franchisee for not tending to this aspect of owning and operating a business more effectively.
However the MUCH BIGGER question to me is how anyone could agree to the overall 2003 agreement! So I agree don't throw people under the bus for being a bad accountant, but don't feel too sorry for people who get run over by the bus when they fail to read and understand agreements which they are signing and fail to obtain competent financial guidance.
It should also be noted that in 2003 Jim Amos and Heather Rose were not running Sona MedSpa.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
The Sona Medspa franchise agreement is on pdf page 71. Of note is the royalty payments on page 78. It says, "You must pay us [franchisor] a laser placement, servicing, marketing and consulting fee equal to 27.5% of LCP Sales". The lower the revenues of the franchisee, the higher it must pay in royalty - up to 27.5%. If you are a franchisee pulling in consistently over $100k/mo ($1.2 million per year), you can pay as low as 17.5%.
Then, of course, the agreements lists all the other franchisor fees to be paid.
How could a prospective franchisee sign such an agreement? And how could a franchisor in good conscience ask it?
Frankman
I agree with Frankman...a bit of tough love is in order. Franchisees must assume some responsibility here; your state regulator is not your momma.
Sona franchisees were (with some exceptions) fairly well-educated, financially successful people. There are a lot of instances of franchisors fleecing vulnerable people, but that doesn't appear to be the case with Sona MedSpa.
To date, the publicly-disclosed documents leave zee-side advocates to wonder how these folks managed to tie their shoelaces, let alone buy an expensive franchise.
As to your thoughts:
It reminds me of Times Square (pre-Disney) where the 3 card monte dealers and "Rolex" salesmen would part gullible tourists from their cash. Much as Jim Amos would cringe at the analogy: a biologist would find such behavior evolutionary adaptive; a fool and his money being parted does have some upside for the species.
If anything, these Sona zees are an argument against franchise legislation insofar as one finds validity in the moral hazard considerations in legislation and jurisprudence.
You can't entirely fault Amos for plucking the ripe fruit.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Yes, one wonders why anyone would sign the agreement.
No, it is not the bigger question. You find it to be so because you don't practice voodo accounting the way the Sona franchisees did. As a result, if you don't provide product to your customers, you can give them a pro-rata refund. On the other hand, the Sona franchisees spent money that they hadn't earned, and then complain that they don't have the money to refund to the customers who paid for these medically-worthless procedures.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Written warnings in big blocks ignored. An intelligent buyer (along with his financial advisor?) accepting that accrual accounting is only meant for tax purposes??
Wow!!
Talk about selectively seeing what one wants to see - stars in our eyes over a franchise concept. I understand how doctors might buy into someone with probably a liberal arts background erroneously explaining accounting principles in order to sell a store. But what is amazing is that bright MBAs like the Coadys bit off on such stuff. And according to a guest, CPAs too.
What kind of dispassionate advisor would let this stuff get by them? Over-worked? Ill-informed?
Frankman
The dubious medical claims are potentially of use to zee litigants. The problem is that to draw attention to the matter is to go from the frying pan into the fire.
If zees admit in pleadings that Sona is retailing snake oil, the customers will demand their money back and likely commence a blizzard of lawsuits. Since the zees already spent the customer's money, it is in the interest of the zees just to continue giving these "treatments". In addition, highlighting the medical question will make it impossible to sell their outlets.
Dale Nabors says he hasn't seen franchise laws used to hide or deceive. As happens with disturbing regularity on this site, Dale is wrong and I am right ;) (information overload, the FTC disclaimer page pitched as an implicit endorsement at sales meetings, etc), but regardless of whether Dale or I is correct in the abstract, in this specific case there doesn't seem to be an issue of deception on the main point of Sona franchisee discontent.
There are good reasons for the passage of franchise relationship legislation. But nobody on the franchisee-side is going to man the barricades defending these Sona franchisees, because folks like Flanagan, French, or Seid would quite effectively seize upon such defense and ridicule it-- rightfully so.
There are a lot of horror stories that support zee-side advocates. But, much as I would like nothing better than highlighting another example of how Amos suckered hapless franchisees... Sona ain't one of 'em.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
really has no bearring on which accounting method to use. Accrual is the most widely used and accepted method because it is the most 'realistic' when financials are used to demonstrate the health and trends of any business. I too am at a loss as to why SONA's accountants would even set up the business under the cash method especially given the fact that the business model requires prepayment for services that won't be 'earned' for such a length of time. However, I can see the method being used so as to give a false image of profitability which gives me a very low opinion of both the company and their accountants who were involved in this. They have done their profession and the franchisees a great disservice.
Rhino Super Center
Lisha
Rhino Super Center
The reason that I suggest that the signing of THE AGREEMENT is the BIGGER QUESTION comes down to if one does not sign the LAME agreement one is not concerned with the accounting issues.
Bad Agreement = Shame on Franchisor for creating & Shame on Franchisee for signing.
Bad Accounting, spending money not yet earned, not maintaining reserves for future services etc... bad business management by franchisee. Shame on Zor if this is what they taught Zor -- but CASH FLOW is the responsibility of the ZEE.
NOTE: If you're in business Cash Flow is KING. A business can operate way to long with poor profitability, but CASH FLOW WILL GETTCHA QUICK.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
It should be noted that:
It would seem to me that the Arbitrator simply awarded the cost incurred by Coady in performing the extra procedures required to remove the hair, because SONA had not disclosed the fact that they'd discovered the information to be false.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I agree with you entirely. My reference to the difference between a Public Comany and a small franchised company had to do with your comparison between the Sona situation and the Internet Companies.
I may be mistaken but aren't public companies now required to use accrual as their method of accounting?
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
"You can't entirely fault Amos for plucking the ripe fruit"
If a man stands in front of you with his wallet sticking out his back pocket, some may call him careless, naive or even stupid.................but the man who STEALS that wallet is still a THIEF. The victims naivete or lack of due dilligence does not make his crime any less a CRIME.
Rhino Super Center
Lisha
Rhino Super Center
Stop blaming the victims as if fraud is somehow minimized if the victim can be portrayed as an idiot. It's just ridiculous how some try to set the bar of responsibility so low for the perpetrators of these frauds. Why are you defending these people at the same time you keep shouting that the franchise industry doesn't need regulations. Don't you realize that these are exactly the people and companies that give the industry a blackeye?
Rhino Super Center
Lisha
Rhino Super Center
There is no indication from the Sona UFOC that the zor was not compliant with GAAP. However:
Even assuming the zor and all of the other franchisees were doing bogus accounting doesn't mean you had to. I don't doubt that the Sona folks were full of bs, but...
Businesses which spend unearned revenue can hardly claim that "the franchise laws as they exist" forced them to spend the money. Businesses who use CPAs that don't know when cash basis accounting is not appropriate (!!!) can not claim that "the franchise laws" excuse them.
There are 2 separate issues here.
- the presentation of pro forma data in the UFOC and other sales literature.
- the failure of the franchisees to follow proper accounting procedures.
Had the franchisees only spent customer money as they provided each treatment, they would still have gone out of business. True.But, they spent money which they had not yet earned. Any way you slice it, they took money which was not theirs to take. Even if Sona was cooking the books (and that does not appear to be one of Sona's many shortcomings) that does not mean the franchisees had to follow suit.
Why can't the franchisee victims of the franchisor admit that the public customers who placed their trust (and money) in the hands of the franchisees were victimized in turn.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
I do not see, nor have I heard where any franchise laws were used to mask the truth.
It does sound as if misinformation was provided initially out of either a lack of varified knowledge or intentionally and that this same false information continued to be spread after it was definately known to be false. This is would be a 'human' act and have nothing to do with the truth being masked. Around here we call it lying, fraud, deceit, and misrepresentation.
I think a lot of franchisors, web designers and even young in-house legal counsel make statements similiar to this one, which I lifted right off of a major food franchisors site just now:
Of course most of us here at Bluemaumau knows that this is not "exactly the truth. Any franchise candidate could search on the question and quickly come to that same conclusion.
I personally do not buy into 'Accrual' not being shown in the UFOC or elsewhere. CASH FLOW, ACCOUNTING, BOOKKEEPING these are all the responsibility of the Franchisee .... based on the investment into a SONA and the payment structures I'd think anyone would quickly realize that they need to keep an eye on the money.
You may have been lied to -- the truth may have been distorted --- by people with seemingly great credibility -- HOWEVER TAKE NOTE:
IF YOU ARE GOING TO MARRY SOMEONE OR GO INTO BUSINESS WITH SOMEONE OR ENTER INTO A LONG TERM RELATIONSHIP WHERE YOU ARE GOING TO GIVE THEM A GREAT DEAL OF YOUR MONEY ---- YOU NEED TO MAKE DAMN SURE YOU KNOW THEM -- WELL!
I'm sorry if you were lied to, and if you believed those lies and bought based on those lies. Perhaps you have some recourse, perhaps you do not. However, each franchisee must be personally accountable for their part, and anyone who read the 2003 SONA UFOC and Agreement and then signed that agreement simply was not THINKING. We all learn from our mistakes, some are costly.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
"If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed."
~ Mark Twain
Suppose you were an idiot. And suppose you were a member of Congress.... But then I repeat myself.
~ Mark Twain
I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
~ Winston Churchill
A government which robs Peter to pay Paul can always depend on the support of Paul.
~ George Bernard Shaw
A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.
~ G Gordon Liddy
Democracy must be something more than two wolves and a sheep voting on what to have for dinner.
~ James Bovard, Civil Libertarian (1994)
Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.
~ Douglas Casey, Classmate of Bill Clinton at Georgetown University
Giving money and power to government is like giving whiskey and car keys to teenage boys.
~ P.J. O'Rourke, Civil Libertarian
Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.
~ Frederic Bastiat, French Economist (1801-1850)
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
~ Ronald Reagan (1986)
I don't make jokes. I just watch the government and report the facts.
~ Will Rogers
If you think health care is expensive now, wait until you see what it costs when it's free!
~ P.J. O'Rourke
In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
~ Voltaire (1764)
Just because you do not take an interest in politics doesn't mean politics won't take an interest in you!
~ Pericles (430 B.C.)
No man's life, liberty, or property is safe while the legislature is in session.
~ Mark Twain (1866)
Talk is cheap...except when Congress does it.
~ Unknown
The government is like a baby's alimentary canal, with a happy appetite at one end and no responsibility at the other.
~ Ronald Reagan
Inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.
~ Winston Churchill
The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.
~ Mark Twain
The ultimate result of shielding men from the effects of folly is to fill the world with fools.
~ Herbert Spencer, English Philosopher (1820-1903)
There is no distinctly Native American criminal class...save Congress.
~ Mark Twain
What this country needs are more unemployed politicians.
~ Edward Langley, Artist (1928 - 1995)
A government big enough to give you everything you want, is strong enough to take everything you have.
~ Thomas Jefferson
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
had to do with the manipulation of revenue figures to defraud those investors who use the information to make decisions; be it investors or franchisees
There is only one reason for a franchisor to use the cash accounting method................and that is to manipulate and thus defraud.
Rhino Super Center
Lisha
Rhino Super Center
I disagree with you as to Paul Getting it. I think Paul gets it. There were a thousand and one reasons (little red flags) contained in the UFOC that should have caused one to pause - think & question.
In performance of due-diligence one should have said "Okay 12 to 19 months of treatment hmmmm who has been open for 12 - 19 months and provided the full range of treatment to ensure that it works? If it had been my investment my wife would have been posing as a client and asking to talk with Satisfied Customers who had received the full range of treatment.
You do not invest a $1.5 million into a McDonalds if you've never tasted a Big Mac --- or at least least spoken with a non-interested party who has.
It's one thing to invest a million dollars in the goose which lays golden eggs ..... it's entirely different to invest a million dollars in a goose-egg which upon hatching (in a year and a half) is supposed to lay golden eggs.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I don't defend Sona, and I criticized both Jim Amos and the lack of relationship legislation at some length back in 2004; I also discussed and criticized the use of religion and fictive kinship in the sale of franchises.
The "Sona a Very Complex Story" post is about the best case I have heard for some actionable conduct, but on the medical claims-- not the accounting matters.
I would like to ask Tinker to consider all the victims here.
Nobody has spoken of the public customers who plunked down thousands of dollars for services to be rendered in the future. Some of the Sona franchisees took that money and spent it without rendering all the services promised. Moreover, I would guess that it was spent for the benefit of the franchisee-fiduciaries of those customer monies; on things ranging from the franchisee "draw" to purchasing new franchises.
I hear that Sona told zees to use cash and not accrual accounting. But I can't find any evidence of that in the UFOC, nor can I find any indication that the Sona franchisees (or their CPAs) protested this violation of GAAP (not to mention possible violation of state consumer protection laws).
Few observers would bother to defend Sona, Amos, or Heather Rose. But the franchisees need to step up to the plate and be held accountable.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Guest, although Tinker's analogy was a good effort --- it's not apples to apples.
There is a difference between a man who takes your wallet, against your will, without you knowing, and
a man who takes your money because you're chomping at the bit to give it to him, even after he's given you a big thick document (that to many said "you might not want to do this") and then made you wait 10 days before accepting your money.
I'm not defending BAD FRANCHISORS, but simply pointing out that there is a different set of precautions which must be taken, and in the eyes of the law it is very different as it should be.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Oh come on ...
Even the most MUNDANE of Agreements include language similiar to:
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I am sorry that you lost money - and it's even worse if you were in fact 'conned'. If you did all that I suggest, why when talking to consumers who'd had all 5 treatments performed over a 12 to 18 month period was it not discovered that the program did not work, as promoted?
When you read that you had to purchase 'office supplies' from SONA and that they'd be shipped to you AND that you'd pay a 20% mark-up what did you think? Did you not think, hmmm I can buy these items at my local Office Depot/Office Max/Staples for less? FranSynergy Subscribers buy office supplies for 30 to 50% off list price NOT for plus 20%
There's no need for you to feel 'foolish'. If you made bad business decissions, learn and move on. If civil or criminal crimes were committed take the appropriate actions. You say that 'brilliant business people' became involved and lost money, to which I'll remind you "We are all Geniuses, We are all Idiots --- just on different subjects". If one does not have sufficient knowledge to perform their own due diligence (and few do) they should find someone to help them. Never think that you are smart enough to play someone elses game, unless it is your game too.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Personally I believe we need less government and less rules & regulations and more enforcement of that which already exists, but we've been through this before.
You can take wrap a few pages of disclosure documents around your business plan call it a PPM, pay a fee, claim an exemption and start selling stock (with certain limitations).
The SEC has many of the same caveats. You say what you want to say, and then you throw in a disclaimer that says "well this may or may not happen". If we were having this discussion about the SEC the positions would be the same as they are here.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I am rather surprised that the FTC doesn't require the same across the board accounting methods within the franchise industry. It's such a simple think to implement and would close a forseeable loophole.
Rhino Super Center
Lisha
Rhino Super Center
SONA - May or may not be a good franchise concept - However it needs to be sold under the right terms, to the right franchisee who is properly funded, and has access to the right staff.
The UPS Store - is a concept with many built in challenges, and the business model itself must be improved to create a sustainable concept.
Quiznos is a VIABLE concept, that has had a troubled past. Quizno's is working to correct the problems of the past. Although some past decisions made on the corporate level may not have been in the 'best interest' of the ZEE, it does appear as though Quizno's is working to correct those issues.
It is not the 'JOB' of the FTC to ELIMINATE bad investment options and terms from the market.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
First the UFOC has no 'negotiable' qualities to it. It's a disclosure document.
Secondly, if as you say NO ONE bothers to read it --- WHY would it matter what is or isn't in it?
I've handed out lots of UFOC's and I've told every single person to - take it - read it - highlight it - and call me with any questions they have about it. I've NEVER had anyone buy a franchise who did not read the UFOC and ask questions about that which is included in it.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
GUEST:
None of the "regulars" are trying to 'scare' any SONA POSTERS away. Personally I appreciate that they've shared their experiences. For the most part their posts have been thorough and without over-generalization. I've read nothing posted by "regulars" or anyone else that called a SONA FRANCHISE a 'fool' or that 'chastised' them. There's a big difference between being a FOOL and doing something which might be considered FOOLISH. Reading the 2003 UFOC and signing the 2003 agreement (as is) was FOOLISH.
Government Regulation or lack thereof had nothing to do with SONA Franchisees signing what was a BAD AGREEMENT. As for the 2003 UFOC and Agreement it was 'franchising as usual' and the UFOC and Agreement should have been MORE THAN ENOUGH to cause one to pause.
Yes, I do agree that the "insiders" here on BlueMaumau do believe that Franchise Candidates should seek knowledgable counsel. Nothing is wrong with this, many of us here are in the business of HELPING francchisees and franchise candidates. I can only speak for myself, but I'm sure that there are others who would also say "If you are interested in retaining the services of me and my company/firm please feel free to contact me, otherwise contact SOMEONE".
The 'status quo' is what we have, and one must work with what one has to work with. There is room for improvement, however the ultimate decision of becoming a franchisee, and of what system is up to the franchisee. Each and every franchisee must take personal responsibility for the success or failure of his or her business. When you own a business it is up to YOU. I'm sure you've heard the saying, "the buck stops here". "Financial Ruin" is not caused by any "Franchisor, but rather by the individual business owner who: 1.) Invests more than s/he can afford to lose. 2.) Fails to perform, or cause to be performed proper due diligence. 3.) Fails to properly manage his or her business. 4.) Has unrealistic expectations.
GUEST, you fail to understand that the way to prevent others from making the mistakes made by the SONA posters is to discuss what caused the failure. In safety training you learn that every accident is preceeded by an unsafe act and/or condition. If you want to eliminate accidents, you must first eliminate the unsafe acts and/or conditions. The same is true in business, if you wish to eliminate the potential for failure you must first eliminate the acts and/or conditions which contribute to business failure.
Guest, you are correct - hindsight is 20/20. The very reason why a franchise candidate should seek experienced and qualified counsel is because experienced counsel has seen it all before. It's real simple, it's called learning from the mistakes of others.
The UFOC is not as you suggest a license to steal, but rather the best form of disclosure we have at this time. Predator and predatory is not terms which accurately represent the vast majority of franchising. Franchisors do not succeed (live) by killing and 'eating' franchisees. Franchisors succeed by helping their franchisees to succeed. Is every franchisor equally qualified to do this ---- NO! How do you determine which franchisors are best qualified to help you achieve your personal and professional goals and aspirations? By performing proper due-diligence!
Again the UFOC is disclosure, is it as 'good' as you think it should be? Obviously not, but by reading it, understanding it and investigating the information contained in it - most anyone can gain the insight they need to make an informed educated decision about a particular franchise system. And again, the "proven business model" means the 'business model' has been proven it does not mean that it has been proven that you can be successful with that model.
I do not go through all of this with you again and again, to try and change your mind, because we both know that will not happen, but for those who may be reading this the guest who wrote the above post claims to have lost money in a franchise and seems to be very bitter toward not only that franchisor but of ALL FRANCHISORS.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I disagree.
It is one thing to require 'Honesty in Accounting' it disclosure of the accounting methods and assumptions used.
It is a horse of a differnt color to for the Government to dictate the accounting methodology to be used.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Which accounting method would you recommend that everyone use then?
In my mind, cash basis is the easiest for most franchisees that don't have a business background, but then you would have a situation like Sona where financials look better than they really are. Plus, it's probably more advantageous for tax purposes to use this method.
With accrual basis, you run into the case where franchisees don't understand the rules, and then their accounting books are all messed up, and they don't know if they are making money or not.
Thank you!
In the case of SONA, all one must do is read the 2003 UFOC to quickly see that the revenue earned by SONA is not in the best interest of the franchisee.
SONA was attempting to make a profit on EVERYTHING much of which had little if anything to do with the success of the franchisee.
Ray Kroc had made it a policy that McDonalds ONLY made money based on the retail sale of FOOD by the franchisee. GOOD POLICY.
Franchisors have the right to make money even on a franchisee who fails to make money. However, that money should be made off of the royalty AND every franchisor should use the buying power of the network to reduce cost to the franchisee, not to generate additional profit centers at the expense of the franhchisee.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
The reason folks buy frnachises is that they are lead to believe that the franchisor has a PROVEN BUSINESS MODEL. You can read these 3 little words over and over in every Entrepaneur magazine and franchisor sales pitch.
At a minumum, the FTC should have the responsibility for setting a standard for "proven". Over and over you point out that the FTC has no approval authority. Well, who does? If I want to develop a franchise system that I know will be based on phoney numbers, misleading medical claims, unsubstantiated medical research and lies about having 'exclusive, trademarked' procedures, shouldn't I be stopped? If not the FTC, then who? Due diligence is NOT possible when the material in the FOC cannot be substantiated. If you think that the lack of substantiation should be a red flag to potential franchisees, then you are back to blaming the victim. The FOC, espically in the case of Sona, should require that the research proving the treatment is successful be clearly references and avail. If there is a patent, the #'s should be listed. See where I'm going? Franchisors hide behind the veil of the FTC as proof that their concept is viable. Thus there is NO protection. Perhaps we do agree, but for very different reasons.
The analogy has been made repeatedly that this kind of smoke and mirrors would never be allowed if they were selling stock instead of franchises. I don't buy a stock with a 10 year contract that keeps me in debt and unable to sell. If I don't find the stock to be what it was purported to be I can sell it. Yes, I risk my investment while I hold the stock. A fradulant franchise concept ( whether based on phoney medical claims or phoney financials) is just that:a fraud. If my franchise's business model is fraudulant, and I cannot make any money, how can I sell it?
There has to be accountability for fraud. No, it is not in the court system. That is a playing field controlled by the sharks with the big bucks. So, if not the FTC, then who?
for requiring the acrural method be used?????
I'm afraid you are misinformed if you don't think government agencies dictate accounting methodology. Just check out your tax forms and you will see that any business with inventory is REQUIRED to report earnings, etc with the acrural method.
Rhino Super Center
Lisha
Rhino Super Center
If the business has product inventory, there is no choice but to use the acrural method. Once a method is established, the acrural method is no more burdensome than cash. In fact, it actually makes year-end adjustments, future projections, etc......much easier. While years ago, it could be argued that cash basis was easier for novice business owners, that just isn't the case anymore. With the low cost software programs out there (such as QuickBooks) all the work is pretty much done for you. If those programs are still too intimidating for you, it's probably best that your CPA do your accounting for you and I'll bet 99% of them will use the acrural method anyway.
Rhino Super Center
Lisha
Rhino Super Center
What this means in accounting standards is clear......................when choosing between two solutions, the one that will be least likely to overstate assets and income should be picked.
Sona's 'intent' is obvious and all the arguments about methodology choice are moot.
Rhino Super Center
Lisha
Rhino Super Center
I would NOT, but you didn't ask me. However, let me ask you
Do think that the average Franchise Candidate is better off receiving a UFOC (as it is today) OR do you think they'd be better off receiving nothing at all?
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I can not comment on their experiences, but simply on mine. I have 'sold' many franchises. I have consulted with many people 'buying' a franchise. I've NEVER known anyone to NOT read the UFOC, --- reading vs. understanding are two very different issues.
I would also guess that because I instruct people to READ IT could skew the numbers - I'd also guess attorneys run accross people who say "I don't know I didn't read it, I JUST SIGNED IT".
AND THEN THERE'S COMMON SENSE! Do you really think people invest SIGNIFICANT PERCENTAGES of their personal assets, SIGN long term agreements, PERSONALLY GUARANTEE loans, without reading what is perhaps the 2nd most Important document in the transaction AND which contains the MOST important document THE AGREEMENT? I don't think so!!!
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Proven Business Model: MEANS that Business Systems, Operational Systems, Marketing Sytems, the Marks, the Concept have been created and proven to work to some degree of success by someone, somewhere.
Proven Business Model: DOES NOT MEAN that the business has been proven that it will work for you, in your market there are no guarantees.
If you want to be a FRANCHISOR all you need is a UFOC and a franchise agreement, nothing else!
If a FRANCHISOR commits FRAUD it is FRAUD. If a franchisor creates a BAD concept and then wraps that BAD concept into a legal and properly prepared UFOC and franchise agreement and then finds someone to BUY that bad concept ... the franchisor may be unethical, and immoral, but that does not mean that they've committed a CRIME. Therefore it is important very important that the buyer make informed, educated decisions.
The analogy of Franchcisees to Securities does not hold water. Much of the regulation regarding stocks does little more than make it harder and more costly for the small business owner to raise capital through the sale of stock. It does little to prevent an investor from being conned.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Yes, I think the SEC and many other governmental agencies over regulate a lot of different things -- making consumer goods more expensive, taxes higher, and progress difficult.
For clarification I did not say that don't dictate, I said that in my opinion they should require 'honesty in accounting' and disclosure, but SHOULD NOT dictate the methodology used.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Have you ever looked at other franchisee financial statements other than your own? I have and sometimes it's not very pretty, because items are everywhere within the trial balance. On a good amount of them, the franchisee thought they were using accrual, but from year to year the inventory numbers stayed the same.
While I understand that Quickbooks can do a lot of things, I doubt many franchise owners understand how to value inventory on an accrual basis (lower of cost or market). In the franchise system I was a part of, only about 20% of the franchisees were doing inventories throughout the year. We stressed the importance of doing inventories, but most of them wouldn't listen.
And I understand that you should use your CPA to help you in these matters, but to do a clear full blown yearly audit would probably be in the range of $3-4k/year, and I doubt too many franchisees would like to pay that cost to get their books right on an accrual basis each year.
A friend of mine used to drive like a maniac, and explain to ashen passengers that "the car has front and side airbags."
To the extent that people can shift risk of loss to a third party, rational insureds will engage in riskier behavior. Viz franchise regulation, there is a balance between preventing zor overreaching versus encouraging zee overexuberance.
There was a serious debate back in the 90s where Sam Crawford (then legislative director of the AFA) made a case for the abolition of franchise regulation on the basis that it was not only ineffective but counterproductive in that it encouraged a false sense of government imprimatur and continuing oversight where none existed. As such, it created the worst of both worlds: akin to someone believing their Mercedes had airbags when it did not.
Crawford brought up the argument not because he entirely believed the argument, but because it does illuminate some of the issues which society must address when implementing any statute purporting to be prophylatic.
BTW: Don't pay attention to Steinberg's arguments. I've known him a while, and half the time he doesn't know what he's talking about.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Half a Dozen of the other..........
You're arguing semantics there.
If one method allows for manipulation and dishonesty, and the other one provides the most accurate and honest report than the regulating authority has the right and responsibility to dictate the HONEST method, thus requiring 'honesty in accounting'
Rhino Super Center
Lisha
Rhino Super Center
Inventory is based on COST............NOT market value. Second, it isn't necessary to do a physical inventory throughout the year, because if your inventory is set up, when you sell it, it is expensed through COG sold..............again, Quickbooks and similar software programs will do this for you. And last, having a CPA do your year end financials does NOT require a full blown audit at $3-4,000. But rather making year end adjustments to inventories, asset amort/depreciation, prepaid accounts etc.
Again, I believe you are trying to make a mountain out of a molehill here.
Rhino Super Center
Lisha
Rhino Super Center
I do not believe that. Most people are at first cautious and skeptical - up until they sign the agreement, and then it's like this big weight has been taken off of their shoulders - they become very relaxed and open - AFTER ALL THEY'RE PART OF THE FAMILY NOW! Which is all well and fine and the way it should be.
You are not going to convince me that MOST PEOPLE invest 100's of thousands of dollars or more into a franchise without reading the UFOC and the Franchise Agreement. If anything I think they read it and 'think they understand it' and therefore falsley believe that they DO NOT need to utilize the services of an Attorney, Accountant, Banker or Franchise Consultant.
But just in case: ATTENTION! MAY I HAVE YOUR ATTENTION PLEASE! PEOPLE DO NOT I REPEAT DO NOT INVEST IN A FRANCHISE WITHOUT READING & UNDERSTANDING THE UFOC & MOST IMPORTANTLY THE FRANCHISE AGREEMENT. AS SOON AS YOU'VE READ IT, SO MANY TIMES THAT YOU KNOW YOU UNDERSTAND IT, TAKE IT TO THE APPROPRIATE EXPERTS AND HAVE THEM CONFIRM WHAT IT IS THAT YOU UNDERSTAND!
Just for the record, the above advice is just as valid toward a lease, purchase, sale, or any other legally binding agreement, that's why MAMA, ALWAYS SAID "Don't sign anything without having your attorney read it FIRST".
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
'Patent Pending' is a term used by a manufacturer or seller of an article to inform the public that an application for patent on that article is on file in the United States Patent and Trademark Office. The law imposes a fine on those who use these terms falsely to deceive the public.
If what you say is correct, and if you can convincingly say that you based your decision on the 'Pending Patent' you might have a case. Being that I'm not an attorney I'll leave that for our Legal Eagles & Beagles to determine.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
I am not trying to be argumentative, however ...
With the exception of a very small amount of road in Montana the maximum speed limit in the U.S. is 75MPH; slower speeds have been proven to be safer and to conserve fuel ---- HOWEVER I do not think that the government should now require automakers limit the speed of a vehicle to 75MPH.
Nor would I want the govenrment to require automakers to install a breathalizer system into every vehicle to prevent driving under the influence.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
You understand accounting. There are a lot of people that don't.
Isn't inventory based on the lower of cost or market (so that company financial statements are overstated)? Not too mention LIFO, FIFO, average cost basis. There are lots of different ways to value items correctly.
Some franchisees don't have inventory set-up in their computers and they have no intention to. Again, I'm going based on my experiences and when you see inventory values the same year in year out, they obviously don't care about their books.
Personally, I'd love to see how franchisees in the Sona system recorded their procedures under accrual accounting (it's probably something Quickbooks would've been able to handle). Obviously they had deferred revenue associated with each of their clients, with revenue recognized each time their clients came in for a procedure. Also, I would assume that a valuation would also have had to have been set-up to account for people that took more than 5 visits. Just like I'm sure you had a warranty accrual set-up in your line of business.
Once again, the conversation reverts back to faulting the franchisee for signing the agreement. This is just ridiculous.
It goes without saying..........people need to read what they sign..............people need to get professional opinions on legal and financial documents
Now with that said, if reading the document and obtaining professional opinions does not prevent the more savy franchisor from ripping someone off...............than for GOD's sake, stop blaming the victim. It's either a warped justification or diversionary tactic.
Rhino Super Center
Lisha
Rhino Super Center
These and other ambiguities present due diligence issues for which methods are developed by the competent to prevent being misled. When you think of who works for the government, and to whom they suck up in hopes of post government service employment, you have to be rather thick to expect regulation that is effective. It is the competent resources of the private sector that develop the tactics for countering the deceptions. Anyone who has ever been a student of regulation knows that the regulated are always regulated by their "friends" who hope and expect to be rewarded for keeping the level of regulation to merely theatre.
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 more ways that I have the patience to address..................however the most obvious is that in a car, WE are the drivers and our choices, good or bad, are our choices. In a franchise, we are not the only driver.
Rhino Super Center
Lisha
Rhino Super Center
I think you make the point, IF you read the document, understand the document, obtain COMPETENT professional counsel AND follow the advice of that cometent advisor - AND then FOLLOW the system AND use good business practices AND FAIL --- YOU MIGHT BE A VICTIM.
If you sign a 10-year agreement and invest several hundred grand, and DON'T DO THE ABOVE ---- YOU MIGHT BE A __________________ and "Here's your sign!"
If you do the above and the information contained in the UFOC and/or the Franchise Agreement are FALSE or IF, the franchisor fails to perform their obligations as outlined in the AGREEMENT --- YOU'RE A VICTIM.
Tinker: Madness is failing to accept personal responsibility for our own failures.
SPECIFIC TO the 2003 SONA UFOC & Agreement: If you got what you bought (per agreement) you are not a victim!
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
It's been said that many people do not read the UFOCs and FAs - which is admittedly stupid. For those that do read them and receive competent legal and financial counsel, yet still get screwed...well that's a separate ball of wax. I would seriously look at the quality of the counsel I received and see if I was not warned about these issues. The problem with the Sona concept is that it is predicated on extremes: extremely high royalties, extremely expensive equipment, extremely nebulous long-term viability and medical efficacy (was there any success for anyone with these treatments?), extreme concept (seemed to be some sort of amalgam between a dermatological concept and spa of some sort that should have had some sort of required regulatory oversight, especially given the medical context it was hyped in). A competent attorney or financial advisor should have told them these dangers and advised them against it; HOWEVER, if they then chose to proceed forward, knowing full well these risks, its hard to shift the blame to the franchisor, regardless of how ridiculous the concept. My impression is that these franchisees had too much of an emotional component involved - they wanted it to work out, they wanted this "dream" to come true, despite evidence to the contrary plainly in front of them. It's not that I don't feel for them, because it is sad, and I can understand the gray ethical cloud that surrounds Amos and company certainly played a part, but I either don't see adequate due diligence or due diligence that was ignored simply because it was the franchisee's "dream." Here it seems to fall back on the franchisee.
I don't 'pin the blame' for everything on the SONA franchisee. I do say that ULTIMATE RESPONSIBILITY falls to the franchisee.
I would certainly hope that most franchisees are far smarter than I am, because I'm not very smart. I am however pretty good at what I do, and if more franchise candidates would eliminate emotion, and make sound business decisions they'd do a lot better. Anyone can 'get burned'. I have seen no evidence that anyone got 'burned' in the case of the 2003 Sona UFOC. I've seen evidence that many were given FALSE or INACCURATE information, and that some people may have made their investment decisions based on that False or Inaccurate information - UNFORTUNATELY they signed an agreement waiving their right to depend on that information. Regardless of misleading information the 2003 SONA UFOC a BAD DEAL all the way around, but just how bad it was - was fully disclosed in the disclosure document.
I do not know the terms of their investment, however we can all see that their deal has worked out for them very differently than has the deals being discussed here on BlueMaumau. No I do not think they are idiots. No I am not protecting them.
Because one is a 'professional' does not mean that they are a professional at acquiring a Lasar Hair Removal Franchise. As for the use of other profesionals - I usually prefence professional with the term competent professional. There are many attorney's who inaccurately believe that because they attended a 2-day franchise workshop that they're now qualified to advise clients on franchise related issues. Furthermore, reviewing the UFOC is but one piece of the necessary due-diligence required to make an informed, educated decision regarding the purchase of a franchise.
Investing in a 'business model that is so unique tha no one knows what to expect' is CRAZY. I'm quite sure you've heard of this guy named Warren Buffet, head of Berkshire Hathaway, an investment guru and one of the world's richest men. Buffet has many pieces of advice for investors but the top two which would serve all franchise candidates well are:
Thank you for your comments, and I'm sorry that you're obviously offended by the fact that I believe in personal responsibility.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Guest specifies Maryland, which would be Dale Cantone, who has been in his job a long time and shows no indication of being one of those "revolving door" public officials such as are often seen at SEC or Justice. Moreover, Cantone has a long track record of being a regulator who bases his actions on the narrowest possible basis. Such a philosophy is, in my opinion, not only the best practice but is in keeping with a democratic (small "d") state.
As to Toporoff at the FTC, while he is perhaps a bit friendly with the franchisor lobby, his arguments as to the limitations on Section 5 authority are plausible and while I disagree with the position that the FTC took during the GAO audits, I don't see that there is anything fishy about his pro-zor bias; he believes that if the zees don't read the UFOC that is the zees problem, and if Congress wants to give the FTC a broader mandate, Congress should speak directly as to what that mandate should be.
Certainly one might argue that Toporoff could take a more active stance under Chevron. But under both Republican and Democratic administrations and legislatures, there has been no consensus as to expansion of franchise regulation. If franchisees actually got up off their butts and contacted their Senators and Congressman, this might change.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
I'm extremely outraged by any CRIMINAL who commits a CRIME, especially a CRIMINAL who disguises their criminal activity as 'legitimate franchising'.
I also recognize I can have a much larger impact in educating buyers, than trying to prevent criminals from selling franchise opportunities. Criminals follow the easy money. If you reduce the easy money, you dramatically reduce the amount of criminal activity in franchising. I also recognize that the selling of a flawed business model is BAD but NOT necessarily criminal.
Having been involved with many franchisors and franchisees I recognize that most 'failed' franchisees blame their franchisor for their failure. I could count on my fingers the number of failed franchisees with whom I've spoken who said "I blew it, I messed up, I failed to follow the system, I failed to manage my finances, etc...". Therefore in the absence of any 'real' evidence that a franchisor has committed a crime, it is 'statistically' more probable that the franchisee failed in either: the performance of due diligence or in running the business.
If a franchise candidate is reading a Franchise Agreement and they read 'X', but were told 'Y' they need to say 'Whoa wait a minute'. If they were told 'A-B & C' but only 'A & C' are addressed in the franchise agreement they must say "Whoa, what about 'B'."
FranSynergy is in the business of helping existing franchisees to Thrive - Grow & Prosper in their franchise. We also offer some services to the franchise candidate. Our work with ex-franchisees is limited to those who are looking to 'Do-It-Again'. Some of these past franchisees left their previous franchise under favorable terms and others left under less than favorable terms. The one thing they all have in common is a strong desire to Do-It better this time around.
I hold every franchisor responsible for the failure of every franchisee -- I hold every franchisee responsible for his or her own success or failure.
Specifically in the case of Sona vintage 2003, franchisees were provided with false information relative to the number of treatments required to achieve 93 to 97% hair removal. This was bad. Sona should not have speculated on the number of treatments required, and should have withheld such statements until they had the facts. This would be considered a flawed system. The franchisor should have proven the technology before trying to sell the franchise using the technology. Proper due diligence would have prevented a franchise from buying into this flawed system.
Once the facts were known, those involved should have immediately retracted their previous statements, and immediately provided true and accurate information to existing and prospective franchisees. Not doing so would appear to be criminal.
One could easily read and interpret from the 2003 UFOC that SONA was charging far to much on totally unnecessary items. This is not illegal. It is however a very good reason for saying NO to the deal.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com