Thank you for the opportunity to respond to your blog post. With your permission, we would like to have a sign made quoting the first line of your post to hang above our door. Very amusing.

To be perfectly candid, yes, we have been very active in acquiring the franchise contracts of struggling franchisors. In today’s market, franchise sales have become a difficult prospect in all franchise industries, leaving many franchisors in the unenviable position of being forced to cut back on support to cover their own overhead. This leaves many otherwise innocent franchisees in the lurch with little or no support from the system into which they made a significant investment. These people deserve better.

This is where we step in. We, like the franchisees before us, make a significant investment of our own and acquire the assets and the franchise contracts of the struggling system. We use the know-how of our teams of marketing, operations, real estate, and financial experts to do everything in our power to work with the acquired franchisees to strengthen their business operations. Our motto is “your success is our success,” meaning that the better our franchisees perform, the better we will perform as a company.

Our philosophy is that, in order to be a good franchisor, we need to be a good parent. In being a good parent, we strive to provide our franchisees with the tools it takes to be successful business people. While it is unfortunate that some of our acquired franchises are in the process of winding down when we take over, we still do everything we can to resuscitate them. Though it may not be reflected on your site and others like it, we have reams of letters and e-mails from our franchisees praising our efforts.

I can assure you that there is no “role playing” when it comes to our acquisitions. All of our transactions have been at arms length and have been very thoughtfully, if not contentiously, negotiated. I believe anyone who has had the pleasure of dealing with our acquisition team can attest to that.

Lastly, we certainly do not see ourselves as donning a billowing cloak and scythe with DHF stenciled across our back. Rather, we prefer to see ourselves as the “savior,” to use your words, breathing life back into systems that have seen hard times. If we can be successful at this, we see a great opportunity when the economy rebounds as the parents of twelve fitness chains soundly planted in freshly potted soil.

I hope this gives you and your readers some insight into our business. Thank you again for this opportunity.

I believe you won your lawsuit against Quiznos for wrongful termination because of the arbitrary actions of their inhouse legal person who believed he had absolute power under the contract do do anything he wanted to do.

You were a good strong man who fought back because you knew what they were doing to you was “Wrong” and you were lucky to have a judge who ruled for you because he could under the provisions of the law governing “wrongful” terminations.

I believe, however, that franchisors, because of the contract terms, can sell their portfolio of contracts, etc.. or use them as collateral, and even go into bankruptcy and the franchisees are still held to paying royalties as provided in the signed contract to the new owner or to the bankruptcy court or to the interim manager in the event the franchisor borrowed under a securitization and is going to be reorganized in bankruptcy. Securitizations, of course, are desirable and possible for franchisors because they can borrow at a lower rate of interest, but, in securitizations, the true owner of the receivables of the franchisor is protected from the creditors of the franchisor when the franchisor is thrown into or declares voluntary bankruptcy.

When a franchisor sells his assets to a new buyer, the terms of all of the franchisee contracts that have been sold will be honored by the courts and, of course, Diversified bought these two failing fitness franchises because they theought there was money to be made.

Whether or not this will be good or bad for the still “surviving” franchisees is yet to be seen. Doesn’t look good for the franchisees who have already failed out of business and are hoping for some recourse against their franchisor unless the corporate shields can be pentrated and the principals are found guilty of fraud.

Perhaps there are some legal minds out there that can answer this.

Could this be the scam artist Schaden’s escape route? If so, what can be done to stop him from getting away with it?