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Franny answers franchisee questions

Ask FrannyThis forum was created so that readers and members of Blue MauMau can post questions to Franny about issues of interest to small business and franchise owners. Franny sometimes invites world-class subject matter experts to answer tough questions

If your post is answered by Franny, it will be featured on the front page of this journal under the "Ask Franny" column.

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Discovery Point is better at hiding, Legacy Academy has been ...

Ichter Thomas, LLC Obtains $1.155 Million Verdict For Former Franchisees of Legacy Academy, Inc.

http://www.ichterthomas.com/2013/04/ichter-thomas-llc-obtains-1-155-million-verdict-for-former-franchisees-of-legacy-academy-inc/

Currently, Legacy is involved in five (5) other lawsuits with former Legacy franchisees, all of whom are represented by Ichter Thomas, LLC, and all of who have similar claims alleging fraud and/or a pattern of racketeering activity.

Unfortunately Discovery Point's Clark had been more slippery and destroyed all evidence and pretends to be sick while thinking of more ways to escape. Cary Ichter once saved Clark from a franchisee named Miller. So, even if he knows how to get him, cannot do it.

Two more bankruptcies for Discovery Point

Discovery Point #50 at Dawsonville and #55 at Fayetteville, GA went out of business last week. These were multi-million dollar loans guaranteed by SBA but SBA logs did not show that the loans were franchise related. The franchise corporate injected imaginary money from the profit to make the loans happen. There were perhaps overseas money transfers from these transactions. Each closing of these centers also had a parallel cash transfer among business entities owned by the Franchise owners and it happened in the closing attorneys office at the same time as the closing. Hopefully these discussions come up in search results so that future franchisees can make an informed decision. Bluemaumau has been blocked in primary search by this franchise.For example, if you Google "Discovery Point", these discussions will not show up.

If you are looking for a franchised childcare and you are a family with children, be careful because you are targeted for destruction. The owners of Discovery Point Franchise are childless but are in child related business (go figure!). They have no clue what it takes to raise a child but understand that the effort makes these families vulnerable and easy to prey upon. Past records indicate that they were after happy families with children - Craigs, Padins, Vahids, Duttas, Schuchmanns to name a few. All these franchisees were personally bankrupt under the supervision of the Discovery Point corporate. An exception: One franchisee was a Police Officer, who bought the Mall of GA location, and promptly rescinded the contract but did not bring these near criminals to court. The police officer should have done that to stop the destruction of so many franchisee families. Franchisees lost home, got divorced, lost retirement savings, could not support kids' colleges because all was sucked in by the franchise and the bank. Most of these loans were made possible by Jackie Hart, who worked with the franchise to increase the center price by a Million in a few years and simultaneously helped to increased the sale volume. She also allowed false cash injection from the franchise's profits.

These center failures are not reported in the Disclosure document and one cannot do a thing if there are lies in the FDD. FTC does not monitor each of these FDDs, GA does not have any regulations, and one cannot sue a franchise for lies in FDD. Rogue people like these use Franchise as a license to commit financial fraud with government protection.

Jackie Hart, Vice President, worked with reputed banks

Those of you do not know, Ms. Jackie Hart was a respectable vice president of a publicly traded company with stock ticker "LION". There was no reason to suspect a fraud by the franchisees in these deals. She is now jobless but still free to roam the streets and owns a mansion bought with Discovery Point transactions.

Approved SBA Lender? Again?

Jackie Hart is listed as approved SBA lender by SBA
http://www.sba.gov/content/community-advantage-approved-lenders#Georgia

Jackie Hart
Phone: (770)880-1032
Email: Hart@aceloans.org

There are so many bankers working with SBA program but Jackie manages to list her contacts as an approved SBA community advantage approved lender. Though aceloans.org does not list her as a significant member.

Cliff Clark's picture

Someone was looking for a picture of Cliff Clark. Earlier they were deleted but now it is reappearing. Pictures are available at their website. Happy hunting!

Tim hortons

How do you feel about Tim hortons? I am in central Ohio and am considering investing in one.

Franny's picture

Dear Franny, How about Tim Hortons for me?

The answer to your question will appear in an Ask Franny column soon. I've asked a leading quick service restaurant analyst to answer this question.

Pat your own back

This is how you pat your own back-
First create an award and reward yourself with that award. That is exactly what happened here.
http://www.discoverypoint.com/news/gcca-award-given-to-cliff-clark/

The Clark-Vinson Leadership Award was established by the Georgia Child Care Association (GCCA) to honor the contributions and dedication to the child care industry made by Cliff and Diane Clark of Discovery Point Franchising and by Pat and Janice Vinson of Kids ‘R’ Kids International. Many of GCCA’s legislative accomplishments over the past several years have been made possible through the generous support of the Vinsons and the Clarks.

The first recipient of the award is Cliff Clark, who sponsored the award from zees money. No one should be surprised if Vinson gets the award next year.

Charity in their name too

These people have created a charity in their name too. Dirty money is being used for buying fame! Was their any foul play? No one will know- the burial was quick.

Diane's Devotion - posts get erased

There were a few posts on the truth behind Diane's Demotion here. But those were quickly removed. Is someone complaining about the truth and using the legal muscle power acquired from Franchisees hard labor to erase them?

Publicly traded franchisor info

 

Hi-

Can you point me to the best resource to get a listing of publicly traded franchisors? I am doing research on segments and valuation to guide my hunt for opportunities.

Thanks!

Kevin Cushing 

801-560-2448

Yum

Why do you not list any information or conversations from Long John Silver's or A&W on you site?

Voluntary Insurance Offerings

Thank you! Is voluntary insurance such as auto, home and life typically offered by insurance carriers to:

1. Corporate personnel (only)?
2. Franchise owners?
3. Franchise employees.

Is there an online resource I can go to with all the insurance info?

Franchisors for sale

Are you familiar with any franchisors that are financially strapped looking to possible sell?

fdd's

i am having a hard time finding fdd's on your site.

Serial Killers strike again

The latest victims of Discovery Point Franchising are the Vahids of DP #36 and the Duttas of DP #57. They were preceded by DP #11 and DP #22. All these Discovery Point franchises were located in North East suburbs of Atlanta, GA. All of these franchisees were families with children and lost everything they had. They now have the stigma of bankruptcy on their records, but the people responsible to make that bankruptcy are enjoying vacations in their private jet. These are hard working people, who saved to open their own businesses but fell prey to the perfected fraud of franchising.

Vahids and Duttas are willing to share their story to prospective franchisees, if they desire to contact them. Their contact information are available with the existing franchisees of that area.

Granville - do not miss this opportunity. This is a perfect time to pounce on these bankrupt franchisees.

More Discovery Point centers going down

Heard two more DP centers will be closing in the Atlanta area this month. Each is nearly $3M SBA guaranteed loan. These were not marked as Franchised loans and hope SBA can connect the dots. These loans were made by Jackie Hart with Fidelity Bank and Jack Gutkin was involved along with the Clarks. These will perhaps not be reported in the FDD - that is how DP operated in the past.

Discovery Point at Canton

Add another to the fallen franchisee list. Discovery point at Canton, No. 48, is now broke. The $2.5 M property will be sold in bankruptcy court this month.

SBA loans not marked as franchised loans

Several years ago, a graduate students asked,
I am a grad student and I am doing research on "Failure Rate of Franchised Versus Non-Franchised Restaurants".

The perception is, SBA loans were marked with franchised brands. But recent Discovery Point loans issued by Fidelity Bank (stock symbol: LION) indicated that the loans were intentionally marked as non- franchise. It is possible that loans issued by other banks also had similar records. Intentionally because, the good locations were marked as franchised loan and bad locations, which the franchiser knew would potentially go south, were marked as not franchised. Interesting, isn't it? Again no one gets caught in the act because investigators are busy catching the small players. These big players have big contributions and big influences. They can influence judges and arbitrators, if needed.

It is not clear if Discovery Point at Post Road had a formal business appraisal as needed by SBA. Bank could not produce one. We are talking about near $3M loans for each franchised location. Lots of tax payer's money involved- these loans would not have been approved without SBA guarantees. It is happening here, no need to look at other countries and get surprised by their corruptions.

SBA keeps historical record of bad loans related to franchises. Since the bad locations of this franchise were not tied to the Discovery Point Franchising, their SBA loan record stays clean and healthy.

SBA lax regulations are exploited by these people

http://foolingsomepeople.com/main/Einhorn%20Testimony%20Before%20Small%20Business%20Committee.pdf

"By manipulating the structure of the § 7(a) lending programs and capitalizing
upon the SBA’s lax enforcement efforts, I have found that BLX has been able to engage
in rampant, systematic fraud causing the SBA to purchase guarantees on hundreds of
millions of dollars of reckless and fraudulent loans made by BLX. The Office of
Inspector General’s (“OIG’s”) July 2007 audit that generated today’s hearing says,
“[L]enders can essentially ignore SBA’s delegated lending authority requirements
without suffering any material consequences.” As a result, lenders, “may not take SBA’s
oversight seriously.” Further, BLX understood how essential it was to helping the SBA
achieve its volume goals. BLX exploited the SBA as an ineffective regulator to commit
the largest fraud against U.S. taxpayers in SBA history.
These kinds of abuses have gone on for years and I fear that they will continue
well into the future in the absence of vigilant oversight and follow-up action by this
Committee and Congress. As I will discuss, I believe it is vital for Congress to insist that
the SBA make public all of the relevant facts and not be permitted to continue to cover
them up. I also have concluded that the SBA needs more funding specifically allocated
for its oversight and investigative function to guard against future abuses. My other
policy recommendations are provided at the conclusion of my testimony. "

I am David Einhorn. I am the President and co-founder of Greenlight Capital,
Inc. (“Greenlight”), a private investment management firm. Since 2002, I have identified
numerous instances of fraudulent lending practices under the auspices of the SBA,

It is now matter of time that SBA responds

Franchisees were used as straw buyers. These loans were much bigger than commonly reported and involved Millions. From OIG report:

Former Utah Business Owner and Mortgage Loan Officer Sentenced

On September 13, 2012, a Utah business owner and former mortgage loan officer, was sentenced to 10 days incarceration, 6 months of home confinement, 30 months supervised release, 200 hours of community service, and restitution of $165,960.49, to be paid jointly with his co-defendant. The subject had previously pled guilty to one count of money laundering. The investigation revealed that both men recruited “straw borrowers” to obtain $335,000 in loans. The straw borrowers were promised compensation for allowing the men to use their personal information to fabricate application documents in order to induce the banks to approve the loans. They also enticed the straw borrowers to submit documents indicating that they owned thriving businesses when, in fact, the businesses only existed on paper. The men fraudulently obtained a total of four SBA loans and two regular bank loans. This case was initiated as a result of a referral from the SBA Utah District Office. This is a joint investigation with the IRS-CI.

Legacy Academy is worse than Discovery Point in SBA records

There is another childcare franchise in GA that operates similar to Discovery Point. It is the Legacy Academy. Discovery Point had some centers marked as SBA guaranteed franchise loan, but Legacy Academy does not show any. All their loans are marked as non-franchise and so failures do not get in their records.
http://www.loancensus.com/Loans-to-Cover-Franchise-Costs-By-Franchise

Old Sword's picture

Legacy Academy, Discovery Point and David Einhorn

Glad to see more and more franchisees waking up to how SBA loans were used in the franchise fraud - I've been stating this since 2009.  Don't know if the 'David Einhorn' above is the real one but I can assure him that the scandal he unraveled will soon become the Second biggest fraud in SBA history.  Having spoken to several groups very interested in this subject, the word that frequently comes out starts with a "b" not an "m" as what David worked on.  And unlike his case where the franchisees knew they were providing false information, here the franchisors are providing false information to get their hands on the SBA loan money knowing their newfound franchisees and their families will soon be bankrupt.

The question is will they be caught alive?

These family owned franchisors have enjoyed lavish life styles for years based on lies and fraud and franchisees hard work. When are they going to be caught? They are in their retirement ages and have started to drop off. For example Diane Clark of Discovery Point mysteriously passed away! Similarly Turners of Legacy Academy are also getting old and the lavish life style is not going to help with longevity. If SBA keeps delaying, these people will escape justice! Melissa Turner worked with Governor Sonny Purdue- who knows how deep their connections are.

SBA Chief- Karen Mills stepping down

Is Karen Mills stepping down to escape this large-scale SBA scandal? If so, it will be an opportunistic move. She wants to take the credit for the economy but does not want the burden to address fraudulent activities. Is there any progress being made to resolve these reported frauds or administration is trying to sweep it under the rug?

Dreaming

What scandal? Are you referring to a forum on the Internet where posters have it in their head that there is the potential for a federal scandal? Get real guys.

There is substance for SBA scandal by franchises

Is there no scandal? The presented material indicates otherwise. These franchises used their name to get the loan and customers but did not put their names on high risk loans guaranteed by SBA. They used many different business entities to hide the tracks. That is manipulation and may be RICO.

Biggest fraud

Will you please elaborate on the biggest SBA frauds? If this is second, what is the first? Is it also under consideration? Will appreciate if you give us the link to the frauds found to date.

Old Sword's picture

Re: SBA Biggest Frauds

There have been numerous scandals involving the SBA over the years.  The largest single fraud to date is the BLX scandal that David Einhorn uncovered and had to force the SBA to admit.  From what I gather it involved loans in the $70 million + region under one company committing the fraud.  As for SBA scandals, you can look into the HUBZone scandal - involving SBA loans to be used to redevelop businesses in poorer communities.  Also, the Wedtech Scandal involving the Reagan Administration and the Department of Defense.  Then there was Congressman Wilbur Mills was an expert at 'diverting' SBA money to his 'favored' constituents.  I have been told by people in Washington that Abscam also involved SBA money but I don't know enough about it.  Lastly, ever hear of 'Whitewater'? - yes, an SBA scandal.

The SBA earned the moniker 'Small Scandal Administration' due to its numerous travails.  In terms of providing links - you can do your own digging.

Good details on Franchise fraud

http://buy-best-veterans-franchises-business-opportunities-law.com/what-franchise-fraud-does-to-you-when-you-are-the-victim/

This website provides details on what is going on with bad franchise systems and there are many. I have worked hard, saved every penny, and then lost everything and can relate to the details provided here. The franchisor is a college drop out and perhaps was kicked out of college. Other bankrupt franchisees are silent and want to forget and continue with their lives. Perhaps that is typical American way and that is why these franchisors are still not in prison. Unlike other developed countries, an average American does not know much outside the country and many have not travelled beyond their own state. They do not protest bad things because basic amenities (drinking water, gas, phone, electricity) are available without hard work. Since there is no penalty in performing franchise fraud and is acceptable to the society, perhaps our kids should follow that path.

Above referenced website is awesome and describes exactly what happens. It is a must read for new franchisees and for corrupt franchisors.

register

Hi - Trying to register but the page returns a " you are not authorized" message"
Think it's a web design issue.

Let me know

N Boudet

Please recognize the SBA loan officer

SBA loan officers work hard to make your franchise successful. Please reward them if you have not already done so.

http://www.prbuzz.com/family-a-parenting/45022-discovery-point.html

Discovery Point Welcomes Jackie Hart

January 15, 2010 -- Discovery Point Franchising is pleased to announce that Jackie Hart has joined the company as Director of Finance, effective December 1, 2009. Jackie, a professional banker with 14 years of experience at top financial institutions across the southeast, has most recently served as Senior Vice President of Fidelity Bank and Senior Vice President of Park Avenue Bank. Jackie has been instrumental in assisting numerous Discovery Point franchisees in acquiring Small Business Administration (SBA) financing. Based in Discovery Point's Atlanta offices, Jackie will head Discovery Point’s financing activities and will develop strategic banking relationships in the market.

Commenting on Jackie’s joining the Discovery Point team, Diane Clark, Discovery Point’s co-founder and Vice President, said, “Jackie has done an excellent job of working with our franchisees over the past several years. She is extremely well suited to this role as she has the right combination of leadership skills and experience to help us realize our future growth plans.”

kick back

This is a clever way to payback the accomplish.

Dutta and Former Discovery Point #57, Coal Mountain, Cumming, GA

As you may recall, on Friday, September 30th, 2011 Discovery Point Franchising received a letter from an attorney representing Sandip Dutta, Urmi Dutta, and Dutta Enterprise, Inc. (the company then operating Discovery Point #57, collectively “Dutta”). The letter stated that Dutta intended to “rescind” (terminate) the franchise agreement between Dutta and Discovery Point Franchising.

DPFI responded that Dutta had breached the franchise agreement and owed all fees as stated in the franchise agreement. In accordance with the terms of the franchise agreement signed by Dutta, DPFI demanded that the matter be settled by binding arbitration. On August 13 and 14, 2012 an arbitration hearing was held in Atlanta before an arbitrator assigned by the American Arbitration Association. On September 28, 2012, the arbitrator issued his Award of Arbitrator wherein the arbitrator found in favor of DPFI on every count. Dutta had made numerous claims, all of which were rejected by the arbitrator. DPFI was awarded monetary damages including Services Fees, National Advertising Fees, interest on all past due fees, all attorneys’ fees, arbitration administrative fees, witness fees, and fees for the arbitrator. Dutta was ordered to pay all monetary damages to DPFI within 20 days (from September 28, 2012).

Over the past twenty years, Discovery Point has assembled a highly experienced and competent team of legal counsel. Discovery Point has seen challenges to our franchise agreement contract in the past. The franchise agreement has been upheld and Discovery Point has prevailed in every instance. We have been awarded our legal expenses and other related expenses. This latest matter simply reinforces the validity of the Discovery Point franchise agreement. Discovery Point will always defend its position and the franchise agreement very aggressively.

Cliff Clark
Discovery Point Atlanta

Beware - Salary Garnishment

The history of Discovery Point shows that they are not ashamed to ruin you financially. Moreover, they will come to garnish your salary if you are gainfully employed. Discovery Point will sell you an unproven not sustainable business so that they can get it back at a cheaper price to churn the franchise. Their greed will not stop there. Your salary from your or your spouse's regular job will also be attacked. Be careful about getting in this franchise.

Granville_Bean's picture

If they have a judgement against you....

If they have a judgement again you, they would be dumb NOT to go after ALL your assets and income. They're not running a charity. You got in bed with sharks and now you're surprised they want to eat all of you???

From Ripoff Report on Discovery Point at TN

Discovery Point Franchising took my franchisee fee, built the building but didn't check the TN regulations. The net result was I could only have 1/2 the number of students in 7 out of the 8 classrooms. They charged me Atlanta prices to buy the land and build the building in a rural area of Chattanooga. Then when I got my license from the state, they advised me that I could only have 120 students in 7 out of the 8 classfooms. Their other centers hold approximately 240.(This is maximum capacity, most centers have less than 100 full time equivalents)

I advised them of this and they completely ignored me. When I filed for arbitration (which was required under the franchise agreement), I found out why they ignored me. At the closing, I signed a document which transfered the franchise from me personally to my newly formed business. Burried in that document was a comprehensive release of all liability for anything (and everything) Discovery Point Franchising had done. This even got by my attorney.

To make a long story short, when I filed for arbitration, their attorney said "sorry, but you signed a release of all liability" and the arbitrator said "ok, your claims can't be considered, only the franchise claims".
The net, net was that even if I was at capacity from day one, there was no way I could make my bank payment. The bank repossesed the propert and sold it on the courthouse steps. Guess who bought it??? Discovery Point Franchising! So the propery I paid 1.8 million for, they bought from the bank for 1 million. (along with a running business, bus, and equipment)

I have lost everything I own. I had to file bankruptcy. They even tried to take my home since I probably have 15 to $20,000 in equity in my home.

How, in this country, can a company screw up, and then ruin the person that they screwed? Where is justice for the little guy that trusted these people only to have them ruin me?

Granville_Bean's picture

Aww heck...

Hurt Zee Guest says: "How, in this country, can a company screw up, and then ruin the person that they screwed? Where is justice for the little guy that trusted these people only to have them ruin me?"

You said you could have 120 students, and also that the average location has 100.  So seems like you were covered. If they were charging you big city prices for a rural location, why did you agree to pay those prices? Eh, some Franchisors are predatory, but then they couldn't so easily prey on newbie Franchisees if the franchisees wouldn't buy into an industry they knew nothing about.  Sheesh, $1.8 mill invested in something he didn't know much about?  A lamb to the slaughter!

Not enough to sustain bill payments

100 enrollment not enough to pay bills of new centers. the project price was increased by $700K (all profit to DP?) from 2005 to this 2007 center. This increase was not sustainable with 120 enrollments. SBA, are you reading this?

$10 shoplifting is crime but $1M fraud is legal

How many qualify for $2M SBA loan? These franchisees are professionals and they can manage money, otherwise they could not have paid the needed down payment. If a franchise spends 20 years to perfect its legal documents, frauds and cons become legal. New franchisees cannot figure out the complex business model and fall for it. The franchise disclosure does not show the problems or failures or corporate owned centers because they are owned personally by the corporate owners. There is no controller for FDD in GA, so one can write whatever they want.

For this particular franchise system, the business model was developed in the 80's and perhaps it was good then. But now all the forms and regulations are available on the internet and therefore the franchise has nothing special to deliver. The troubled franchisees try to get out of the franchise and praise the system because they are trying to sell. Discovery Point at Sanders Road and Laurel Springs were resales and they could not stay open for 2 years! The owners were educated professionals, They were given false numbers and made to sign (there were no guns on their heads but a con artist does not need that) the 20 years perfected forms. Discovery Point at TN was not an isolated event. There are more like that. There were two centers in Covington, GA. Both were sold about the same time and reacquired by DP about the same time. One of the failed owners Mr. Burgess went to prison after the bankruptcy (name/address match with arrest announcements). The other was an anonymous corporation from Florida named MMET, whose owners could not be found. What if this was associated with the franchiser? Since it was SBA guaranteed loan, this should be looked at. Perhaps the bank did, but when corporation owners hide, that may indicate problems.

About five more centers in GA either cannot make payments or filed for bankruptcy. About 7 centers in South Carolina disappeared. If you argue that all these were lambs but somehow could make the $200K down payments for each center, you will not sound smart either.

Shoplifting a Crime and Granville

Guest,

Don't worry about Granville. He and others on this site purposely belittle franchisees that have been defrauded in order to shut them up. The idea is to ridicule you enough so that you no longer are willing to speak out. The other problem is that most franchisees, including those that have gone belly up, are a-holes and are unwilling to speak up and defend you - but they are reading your posts, believe me.

Granville_Bean's picture

And what good does that do?

Guest notes: "The other problem is that most franchisees, including those that have gone belly up, are a-holes and are unwilling to speak up and defend you - but they are reading your posts, believe me. "

What good does it do if a lot of people whose businesses also failed, merely read his posts?

People should not sink millions of dolars into operating businesses that they have no experience or knowledge in. If they want to invest, buy shares in a mutual fund.But if they want to OPEN THEIR OWN BUSINESS that is something else entirely and the biggest bulldinky in franchising is that ALL you have to do is "follow the proven system".

Franchise Royalty

The royalty is the fee franchisees pay for the proven system. What it seems here is that there is no system for this franchise, proven or unproven. But they take the Royalty money anyway and come after the franchisees' personal assets if the franchised business does not have enough income. It is arguable but wonder how different is it from Mafia setups. Mafia flashes the compromised picture if not paid. Here the franchiser flashes the contract (compromised picture) and threaten to sue if not paid. It is not that franchisee taking home money instead of paying Royalty.

Proven systems

These discussions reveal the irregularities in proven systems. For example The center at Spout Springs has been bankrupt for some time but still presented as open http://www.spoutspringsroad.discoverypoint.com/. The agents and loan officers were paid well to keep these going. An executive at this franchise made $214K in 2007 by selling many centers at more than $700K than 2005 prices. Several of these failed to sustain. Knowingly repeated that in 2008 and made $174K. He made $26K in 2009 and then went bankrupt in 2010 with $500 in assets with no house and with no car. He was a salaried employee. The loan officer bought a half Million Dollar 4,332 sq ft. palace in Feb 2008. Whoa!

Granville_Bean's picture

Uhh your point being what?

That it's better to be a loan officer than a Zee? What IS your point anyway?

Granville, The Point Is:

Granville, if you saw all the information that Guest references, an intriguing picture of the bank is revealed (this is all just our opinion of course, we are still in the process of proving the allegations). We have reviewed the SBA OIG report issued against Banco Popular. The banks are required to perform specific functions when reviewing a loan application (discussed in 2nd paragraph below). What it looks like here is: the franchisor is providing (forwarding) to most franchisees a SBA loan application from one specific bank. That bank and the franchisor are providing revenue numbers for the proforma. The bank then approves the loan. The bank then takes over the franchise when the loan is defaulted upon. The bank then shifts this asset (the business) to another company that it (the bank) controls. The ( bank owned) company then sells it back to the franchisor (or a company that the franchisor corporate leaders control) at a significant discount. The franchisor then sells it to a new franchisee who, again, receives a SBA loan from that same bank (again, all of this is "allegedly")

Don't forget the proven requirements from the OIG Banco report: the bank is required to use historical data when approving a SBA loan. The bank is required to perform a reasonability analysis of the proforma. It is our opinion (and only our opinion at this point), the bank, given they are actively involved in taking over the failed franchises, is fully aware of the revenues being generated by this franchise system and that they don't meet SBA guidelines (hell, the bank is taking them over after the default so they know damn well the franchisees are not meeting the proforma numbers). Yet, the bank continues to underwrite SBA loans even though the historical data in their possession clearly shows the franchise system does not meet SBA minimum requirements.

Granville_Bean's picture

so you think that how much money you have = how smart you are?

Guest still doesn't get it when he says:

"If you argue that all these were lambs but somehow could make the $200K down payments for each center, you will not sound smart either."

Maybe he had so much money that he was used to people (who wanted some of it) telling him how smart he was.

He was so smart that he found all this out over the interwebs AFTER he lost his money. Too bad he sunk $2 million into opening a business he knew nothing about.  He was so smart that he thought that since he had a load of money from one thing, that therefore he must be smart about EVERY thing. Why didn't he just keep doing what got him all that money to start with?

How best to franchise our uniques business?

Letter to Franny at “Blue MauMau” http://www.bluemaumau.org
I have invented a water-proofing process for exterior wood. I launched our "beta-test" this summer using social media marketing and sales have been tremendous. We have more work than we can do. Our biz has the potential to do over 1 million bucks the first year...if we could iron out some technical problems with our business model in terms of how we are doing it locally. I just talked to "Harry" a sales rep for Francorp this afternoon. they want me to get on a webinar this Friday, then segue me into a face-to-face meeting in Chicago. Like most small entrepreneurs, we are strapped for cash. When i asked Harry to cut to the chase..."how much upfront do you want from me?" He batted the question away with a comment of "we are not investors, we are not your business partners". That made no sense to me until after i did a search for "Fancorp complaints" and found the 2003 lawsuit South Beach Franchising V. Francorp.

What do you think of Francorp? Do you have any suggestions for my wife and myself as we are just starting to research franchising. My first thought was NOT to franchise, Just offer the "business opportunity" as a "licensing agreement" for buyers to purchase our water-=proofing product on a continuing basis, along with equipment (pressure washers, etc.) and attending a live-in-person "boot camp" training here in Indianapolis next spring/summer. We were thinking to make our big money in upfront sales of an "affiliate-ship" not a franchise. I am aware of state laws governing "business opportunities" and potential trouble with the Feds if i don’t use proper legal disclosures, etc. Would an affiliate ship work in our case instead of a Franchising? Harry told me our first year "up-front" costs would be $100K to $150K to launch our franchise. Ha! Unless we win the lottery....THAT AIN'T HAPPENING!
Truly, Larry Strawbridge (317) 281-3731 smart phone voice & text. Lstraw@comcast.net www.masterfinish.biz

Granville_Bean's picture

Waterproofing: wanting to run before you can walk...

You claim you have the "potential" to do over $1 million. BUT YOU HAVE NOT DONE IT YET.  You admit you have some problems with your business model yet you want to franchise; what do you think you will be franchising? (It would be the problematic business model.) Until you have a stable business with a tested business model you should not be dreaming of where you will make your "big money".

Oh yeah, and you can't even come up with $150k yet you dream of "big money". (I am perfectly okay however with not wanting to pay $150k to francorp.)  If you want to sell a waterproofing product and training classes on how to use it, go ahead.  But that's neither franchising nor even a business opportunity, it is product sales and training classes. But if you try to tie this to "big money" from upfront sales of an "affiliate-ship", that is no longer product sales, it is franchising or a business opportunity.

You can't have it both ways. Get your own house in order first.  Get multiple locations going, each doing $1M plus in sales.  THEN sell your franchise or business opportunity.  Right now you don't have jack to sell.

OS&E treatment

As per USALI 10th Edition, operating equipment should be expensed within one year from the date of purchase. My question to the experts is

1. what is the process of accounting small operating equipment.
2. how is excess breakage or discards recorded. Incase, on a particular month breakage is more than the allocated expenses. how to treat the same.
3. Is there a mimimum standard for breakage/discard?

Thank you

Ganeshan.

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About Franny

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Franny is a columnist for Blue MauMau who answers questions about running and owning a franchised business establishment. Those who have questions can post them under the Ask Franny forum. Readers may comment on the questions there. If the post is answered by Franny, it will be featured on the frontpage of Blue MauMau under the "Ask Franny" column. Franny sometimes invites Subject Matter Experts to answer. Please do not mention your franchisor, vendor or your own firm's name in your question.