Are Brokers (Coach/Consultant) Perpetuating Franchise Myths?
A franchise business coaching company, The Entrepreneur's Source (TES), adds itself to the list of franchisors/consultants perpetuating the myth that franchising is safer than opening your own business. According to TES, " investing in a proven process and system can be the difference between success and failure for a business". In their PR release, TES appears to ignore the multiple government studies unanimously concluding that franchising has no more greater chance of success than going it alone - with some of those studies showing franchising to fail more frequently.
A prospective franchisee weighing the benefits of starting their own business or investing in a franchise will often see how franchising has a far greater chance of success in the long term. PR-USA.net
Should an industry, knowing the information it puts forth cannot be substantiated, be allowed to continue to use deceptive information to sell its wares?
Re: brokers, myths and "offshoring"
Boudica, you are partially correct. It appears that more and more the franchise consultants are using this wording. Much like the franchise loan consultants are "correcting" the financial projections.
Franchisors are now "offshoring" the manipulation. By having it done "at arms length" they are no longer liable and cannot be sued. These 'consultants' are usually LLC's which means they have no assets to their name. If the franchisee sues them, the LLC's declare bankruptcy and then open up under a different name the next day.
Also, I am noticing more and more on franchisor websites (as well as consultant websites) the sentence that 'franchising is no guarantee of financial success'. Funny, how in one breadth they claim that franchising is the only way to go (just look at the wording in the above article and on the link) yet it appears that they are now incorporating this wording much more frequently to cover their collective asses.
As for the Guest above, perhaps he should read each and every government study. They have no dog in the fight - if anything they should be fighting FOR franchising due to "job creation" (forget about wealth destruction). Yet, all of them unanimously conclude that franchising is not safer.
LLC does not protect a broker or franchise executive
from a lawsuit over the sale of a franchise. They can be sued as individuals. The only protection they can get is from Errors and Omissions (E&O) insurance.
Oldsaw you are wrong again.
Guest as usual you speak from your butt. When discussing my case with numerous lawfirms around the country - all of whom are considered top franchise attorneys - I was told the case is definitely there against the loan consultant (who we were all conveniently referred to by our franchisor). Unfortunately, all the company had to do was declare bankruptcy and there would be little way of me collecting. Every lawyer said the same thing, I would spend about $100,000, most likely win the case (I have great evidence) but would never collect. As individuals, they could assign their assets to spouses, etc. to make sure they don't pay.
Consultants are not required to carry E&O insurance AND the insurance companies would never pay up because they would claim it was fraud (given that it was widespread) and not 'Errors and Ommissions' and would fight for years - and most likely win.
How stupid are you?
Your article is about "Franchise business coaching company, The Entrepreneur's Source (TES)." and I can't for the life of me figure out what your above comment "I was told the case is definitely there against the loan consultant" has to do with your own article? Was your loan consultant a "Franchise Seller"?
The difference between you and me is I actually know what I'm talking about and you don't.
Mr. BMM: there is a line somewhere?
An ad hominem attack?
Les my question of Oldsaw is reasonable
given that he can't seem to distinguish between a "Franchise Seller" and a loan consultant. Oldsaw is wrong and misinforming people.
Oldsaw claims he was mightily defrauded even after performing overwhelming feats of pre-sale due diligence. And if his due diligence is in any fashion similar to this very thread which Oldsaw started I think his credibility is suspect.
oldsaw had his mind made up to purchase a learning
center franchise, the performed due diligence which was predisposed to this bias . While he has convinced himself of this massive fraud, it was his predisposed bias which blinded him from the negatives . Now his masterful used of cognitive dissonance protects his ego from recognizing that the warning signs were there all along.
privatize profit while socializing risk
Don't forget OldSword also deliberately and knowingly falsified his loan application in order to get loan. Normally that is called fraud except when OldSword does it,then it is somehow predatory lending. OldSword like so many modern socialist wants to privatize profit while socializing risk.
Guest has a good point. The
Guest has a good point. The only remedy in which franchisees are pushed into falsifying loan applications in order to get loans is to shut down the franchise lending system and fix it. Franchise loans will need to stop for a time until it can be done without falsification. Guest is right. Let's keep capitalism. Privatize profit and keep risk private too.</p>
Dear Guest - you are so right
Dear Guest - you are so right - the other guest - LOL
oldsword thinks he is smarter than he is.
That is the main problem. What benefit does a learning center franchise give you anyway. Totally dumb thing to buy. Second, there were only a hundred or so Huntington learning centers out there;so the franchise benefit was zero for name recognition . Dumb buy. Then he lied on his loan application to get a loan, and whether or not he admits it ,he knew he was puffing the numbers. Now that he lost it all he becomes a genius victim of some elaborate and sophisticated fraud. What a putz.
Cultivating emotional decisions in signing up to franchises has become a highly sophisticated mass marketing art form.
Education may save many but that won't stop the ongoing reliance on emotional decisions by shonky franchise systems or the industry's dedication to further perfecting that element of IFA driven misinformation marketing strategies.
Education - Lots of nos, few yeses
Ray writes: "Education may save many but that won't stop the ongoing reliance on emotional decisions by shonky franchise systems or the industry's dedication to further perfecting that element of IFA driven misinformation marketing strategies."
Anything that slows down the decision process also needs not to tamp down the required wild optimism needed to succeed at any start up. I would be happier if the cost of being wrong when buying a franchise wasn't awfully high.
bad franchise choices can be very expensive
Michael, I give credit to Michael Schaper from the Australia Competition and Consumer Commission when, for the first time by anyone in Australia and amongst the downplaying by our so called franchise educators, he states that making the wrong decision when choosing a franchise could cost a franchisee their entire savings.
I would prefer it if he took it a little further and included that the family unit can also be in jeopardy.
Loss of Family and Savings
Ray correctly notes: " the downplaying by our so called franchise educators, he states that making the wrong decision when choosing a franchise could cost a franchisee their entire savings."
This is ofcourse why apologists continually resort to the bad operator myth. Nobody wants to look this one straight in the eye: heads you lose everything, talis you bought a job.
Ladies and gentlemen's club
I'm going to allow the comment. Calling someone stupid based on an argument that they are making doesn't fit the spirit and culture of our franchise club, but it also doesn't breach the letter of Blue MauMau's comment posting guidelines. (See quote below)
As much as we appreciate free speech, this is a forum for discussion about franchising, and not about personalities. Please do not use words such as Mr. or Ms. X is a crook, felon, drunk, drug addict, adulteress, etc. to describe an individual without the strongest of collaborating evidence. This is not a gossip site about franchise leaders.
The person posting the comment provided corraborating evidence, using the other individual's own words on why they were being stupid. Whether you agree with the evidence or not is another matter.
I would advise the guest to be more civil in discussion though. Rather than call others stupid, we like to remember the line, "stupid is as stupid does (posts)." In other words, all that is necessary is to point out an inconsistency of an argument. The reader can judge for themselves whether the person posting is stupid or not.
Here is an example of how NOT to argue on Blue MauMau, care of Jane Curtin and Dan Akroyd on Saturday Night Live (not viewable to those outside of the United States).
Please focus on attacking the argument and not the argumenter.
While it may be difficult to find ladies at the gentleman's club
I will endeavor to try.
There are "ladies" at every gentleman's club, but they are
not allowed on the main floor. They are for upstairs and they enter through a rear door.
Guest, read the article
It was YOU who brought up the LLC argument not me.
As for your 'brilliance', the story is not just about TES but consultants, or 3rd parties, and how they appear to be doing the dirty work for franchising. Using the old "arms length" method of skewing information and then claiming they had nothing to do with it enables the franchising industry to "perpetuate the myth".
skewing information as a continual wave of seduction
YoungSword, of course skewing franchise information has developed into an industry art form. Here is an Aussie example. What are the main benefits of becoming a franchisee? Of note is the author; Graeme McCormack is founder and CEO of Faction, a SME and franchise operations firm. He is also a director of Prontier, a food manufacturing business, and previously spent five years as a Gloria Jean’s Coffees franchisee.
As a franchisee and while building his ‘operations firm’ [a franchisor], consultancy and ‘supply chain’ business, he was also proudly touted by the Franchise Council of Australia, little sister to IFA, as their sitting franchisee board member.
There was a time when this crap made me angry but now in my dotterage I simply enjoy hunting it down and neutering it for fun.
You brought up LLCs...read your own words
Oldsaw wrote "Franchisors are now "offshoring" the manipulation. By having it done "at arms length" they are no longer liable and cannot be sued. These 'consultants' are usually LLC's which means they have no assets to their name. If the franchisee sues them, the LLC's declare bankruptcy and then open up under a different name the next day."
You made the claim that LLC's
You made the claim that LLC's do not protect the assets in a lawsuit. I merely was giving a true to life example regarding LLC's - while the LLC in question was a Loan Consultant, it wouldn't have mattered had it been a Franchise Consultant. The LLC makes it much more difficult to collect. The franchise corporation, on the other hand, has real assets and cash flow from which to obtain a judgment.
The loan/franchise consultant usually has a phone, a desk and maybe a rented storefront.
Re: You made the claim that LLC's
No I said -
" LLC does not protect a broker or franchise executive from a lawsuit over the sale of a franchise. They can be sued as individuals. The only protection they can get is from Errors and Omissions (E&O) insurance.
Oldsaw you are wrong again."
Obviously, you are parsing words. Anyone can sue anyone. It is the collectibility of the claim that matters. Why pay $100,000 to sue when the chances of collecting are almost 0. (I am blinded by your brilliance.)
Perhaps an attorney on this site could comment rather than a guest who has yet to use evidence or proof in anything ever stated and has lost every argument? (Although he excels at name calling. He must have been a terror in second grade.)
While you may be a blind hero to the franchise failure community here on BMM, you don't seem credible to me. You complain about how a loan consultant duped you and then write an article about franchise brokers/consultants conflating the two.
You can't comprehend that a "Franchise Seller" the actual salesperson or salespersons could be held personally liable for non-compliance and/or a fraudulent franchise sale.
Regarding your franchise failure and potential for recovery you say you spoke with numerous franchise attorney's but you don't say whether you actually hired one to thoroughly review your matter?
Let's face it you hate franchising and franchisors with great zeal.
Almost every cog is a party
Guest I’ll type this slowly and hope you can keep up. Oldsword was duped but that isn’t what he writes about although, as we all do, he writes from his experience and his research. I will admit that I don’t research how bloody wonderful franchising is. I’ll leave that to you and genuinely appreciate your contribution to BMM.
Oldsword writes about industry practices that dupe people. I doubt anyone can argue that such practices don’t exist. Oldsword doesn’t write about Oldsword. You do. Your difference in opinion with Oldsword goes to the level of duping that occurs in franchising. I would suggest that most would mostly agree with him and reality is out of step with you.
The original suggestion in this blog related to whether people that financially benefit from the sale of a faulty product misrepresent that product with particular reference to the misinformation bombardment of the market place.
I think the answer is obvious. I’ve never seen a used car yard stating it stocks and sells junk. Franchising has evolved from banana skin solutions for junk. Bearing in mind you typically get some form of warranty and consumer laws offer some protection for people foolishly saddled with junk by used car salespeople.
The question might have been different. Perhaps we should be asking whether we understand fully how many layers of misinformation bombard the market from the unsophisticated ‘franchises are safer for sure’ to the sophisticated ‘free market’ crap that gives free rein to all junk. Massive advertising from relatively few franchises creates a belief that franchising means advertising and brand awareness for Fred’s Freckle Franchise …
We have the crude sales pitch all the way down to the soft sell subliminal deception played out by industry academics and so on …. Most Court decisions support one myth in particular; ‘the problem was the franchisee and not the junk’.
And sellers get a springboard to sales and regulators live happily ever after.
That's nonsense. Franchises
That's nonsense. Franchises are safer for sure. The stats bear this out. Forget your bogus stats that probably don't support your assertion.
What stats exist that show that franchising is safer than going it on your own? Be specific and quote your sources. I don't think you can because I don't think they exist.
Franchisee vs independent business success rates
Just how effective is franchise spin really?
Steve and Valerie Mallard, one of the first accepted applicants, opened their Quiznos store in Denver last month and have hired 15 employees. Mr. Mallard, who has a history of working with Subway and Ruby Tuesday restaurants, says he wouldn't have been able to finance such a store on his own. Wall Street Journal
Some franchises are safer some are not
It is supremely foolish to compare and contrast all types franchises with all types business and derive a useful conclusion on which path might offer greater chance of success. First of all the data is faulty and even if it weren't faulty the conclusion would still be useless.
Not all franchises are investment worthy, but I dare you to open up an independent taco QSR vs.a Taco Bell or a fried chicken joint vs. a KFC. On the other hand could you open a crepe shop and be as successful as a franchised crepe shop? Probably! It all boils down to finding value with what you are buying with a specific franchise.
In conclusion I'd never trust some idiot from the TES or any "no fee franchise consultant" to help me choose how I should have my eggs in the morning let alone what franchise I should buy. The problem with buying a franchise is really that buyers are too casual about the process and don't perform meaningful due diligence. Heck many people think that using someone like TES is due diligence.
[Except for Oldsaw who was duped after performing astoundingly masterful due diligence. Oldsaw's nescience knows no bounds.]
I understand perfectly your intent, Guest
What you say has some truthiness to it. However, on balance it is false.
This is how:
And then she understood the devilish cunning of the enemies' plan. By mixing a little truth with it they had made their lie far stronger. -- C.S. Lewis
If you'd like to talk about business risks seen in 100% of interm franchise relations...well:
- I'm your man, Guest.
3rd Party Sales Agents: An automatic Red Card
If someone other than the franchisor's employees are listing/selling, RUN, PASS.
A rule-of-thumb valid 95% of the time.
I apologize, in advance, for all the honest "consultants" out there.
Truth in Advertising
Oh, it's a big pretty white plane with red stripes, curtains in the windows and wheels and it looks like a big Tylenol.
I know a major franchise that dropped them.
The COO told me that their commissions were ridiculous and the conventions were a bullsiht money pit. They also are high pressure multi purchase salespeople; who sell multiple territories to people who can't even get financing to open one unit. They could not care less about their customers.
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Are Brokers perpetuating franchise myths?
It is a constant source of both irritation and amusement to me that the franchise industry claims regularly that the biggest source of conflict within franchising is unrealistic expectations, yet perpetuates these expectations in its industry propaganda and sales pitches.
While I would expect brokers to do or say whatever makes them the sale, franchise myths are perpetuated by just about every franchisor type body on earth with wild abandon and supposedly independent bodies enable them by spewing forth the same propaganda. (see the ACCC's latest guide to franchising or Griffith Universities latest education pre entry education program)
Take this little gem from the Franchise Council of Australia's Website about the advantages of franchising.
This can be true and it can also be as far from the truth as Pluto is from Earth.
So the franchisees expectations are set up by the zor sales pitch and then reinforced by these spurious lists of "advantages of franchising."
People start to beleive that if something is a franchise IT MUST offer better purchasing power because that is what franchising DOES, as if it was some default occurrence- they think If it is a franchise and franchising offers better buying power then that must mean that my franchise will offer better buying power- QED.
Much like the "franchising is safer than non franchised business" myth.
No wonder franchisees cry foul when they don't get what they think they have paid for.
The franchise propaganda machine works so well that it sets up even good systems for failure.
These "advantages" are often presented as absolutes when really a franchisee needs to look at these so called advantages and figure out if the system they are considering actually will offer these benefits. Or if they purport to offer them but the Contract or Ops manual actually voids these advangtages.
The industry spin giveth but the model/contract taketh away.