1-800-DRYCLEAN: Failed Franchisee Taken to Cleaners?
February 17, 2009 by Sean Kelly
Filed under Business
A commenter named James claims he was taken to the cleaners by Service Brands, Int’l. He recently closed his 1-800-DRYCLEAN franchise. What do you think?
My name is James, I owned a 1-800-Dryclean franchise. 1-800-DryClean is a national franchise operation. The franchisor’s U.S. home office is in Ann Arbor, MI. 1-800-DryClean is part of Service Brands International whose brands include MOLLY MAID and Mr. Handyman. We deliver dry cleaning door-to-door. I feel that I have been wronged from Service Brands International, which has 600 Franchises under its name. I believe that they are selling territories that they know will not be successful. I have invested around $75,000, $45,000 for the franchise initial start up, and the rest, expenses of trying to get this route up and running, this is an estimate, the money could be more. On October 24th , 2008, I went out of business. The home office sent out a letter to all of my customers that stated that I am out of business and if you would like to own a business in Leominster, MA please let them know. They are trying to sell this territory, knowing full well that it will never reach the goals that they have set. I believe they are just trying to get the initial franchise fee, which is around $45,000.
Here are some of the many complaints I have against Service Brands. I have been fighting with them through emails on almost all of these points through the last couple of years and have kept all of the emails. At one point, it seemed liked they were going to change some of their policies, but never did.
READ ON @ UNHAPPY FRANCHISEE.
ARE YOU FAMILIAR WITH SERVICE BRANDS FRANCHISES? THE 1-800-DRYCLEAN FRANCHISE? SHARE A COMMENT BELOW.
I read this whole article on unhappyfranchisee.com and am amazed at this James’ complaints.
He complains about all the terms of the franchise agreement that HE signed. He complains about the territory that he chose.
I don’t think he even read the agreement because he was surprised by the fees and the way they were calculated.
Franchisees should take responsibility for reading the agreements that they agree to, and not complain afterward about the deal they themselves entered.
Nobody held a gun to his head, did they? Where’s the fraud?
The constructive fraud is in the package of a binding, boilerplate, non-negotiable contract that is packaged with a mandated government disclosure document.
You can’t buy the franchise unless you sign the unbargained contract that is underlain by the UFOC/FDD —and all of the misrepresentations outside of the contract are excused once the franchisee is “induced” into signing the contract by the representations made outside of the contract.
Because franchisors are protected under cover of regulation from charges of fraudulent inducement and concealment in the sales process, they are free to commit intentional torts against their franchisees under cover of government regulation, in my opinion.
The constructive fraud of the franchise agreement packaged with the government disclosure document acts as the gun.
This is another example of a franchisee not reading, executing, or following “the system”. What franchisor would recommend totally stopping advertising efforts? It was Mr. Eberlin’s responsibility to show the document to an attorney and accountant before turning it in. That is just smart business.
I would love to see a post on here where someone just admits to not doing what it takes to be successful.
Since you have followed the system, Rita, and you have six units and your six units appear to be all that is left of your franchisor, Liberty Fitness (according to a post on this site) you must be right!
Must be nice to have the right stuff at the right time in the right place. Good for you.
$75k? That’s it? Consider yourself lucky.
“You can’t buy the franchise unless you sign the unbargained contract that is underlain by the UFOC/FDD…”
You make it sound like it’s illegal to negotiate a franchise agreement. That’s a blatant falsehood. franchise companies negotiate the terms of their agreements all the time.
This guy paid tens of thousands of dollars to a company so he could pick up and deliver people’s dirty underwear? And it’s the government’s fault?
There ain’t no federal regulations against STUPID because the whole country would be on lock down. This guy would be in Supermaxx.
When you get some more money call me at 1-800-whiteytidey for a franchise.
Come on Kilgore! You know that franchisors present these contracts as UNIFORM and NON-Negotiable when they “AWARD” the good faith franchisees their American Dream. You probably know that the scamchisors are working on VETS and their families because of the SBA Patriot Express Loan Initiative passed in June of 2007.
You know that there is cooperation in the status quo to obscure and hide the very great risk of an investment in a franchise, and especially from those naive and inexperienced franchisees who buy in good faith that the franchisor is selling the franchise in good faith.
Maybe you are one of those multi-unit franchisees who lives on the flesh of first-owner franchisees who are taken to the cleaner’s and you don’t want any honest regulation of franchising. Or, maybe you are a franchisor or a banker who sells the guaranteed portion of SBA loans in the secondary market?
You, Kilgore, can only feel that you are smart and successful because James was Stupid and taken in by the constructive fraud of the package of the government disclosure circular and the binding non-negotiable contract.
Obviously, you, who were born knowing about fraud or learning the hard way, know that franchisors, because of government regulation, have a license to lie, cheat, and steal as needed and that everyone should know this!
The only reason I quit marketing was because the expense of it was $250-$300 a week, you can only sustain that so long when you are getting very few customers and not making any profit. A lot of the owners stop marketing because they can’t afford it any longer. Actually, the home office now forces new owners to automatically get delivered marketing bags and you can’t stop them coming. As far as dry cleaning being a legitimate business Kilgore, many dry cleaners make over $100,000 a year, but they work long hours and earn every penny of it, and by the way, we don’t clean underwear, only suits, dresses and shirts, etc, we also repair all of them. When I let my customers know that I was closing the business, I got over forty customer emails, calls and notes telling me that I provided a great service to them and they will miss me, I always treated my customers great, my customers never had a hint of the fighting that was going on between the home office and I. A handful of my customers suggested that I just operate under a different name, and they would not tell the franchise, I told them that I could not legally do that, because I wanted to do the right thing. But I certainly could have made a descent amount of money, without the cost of franchise insurance and royalty penalty fees.
“You know that franchisors present these contracts as UNIFORM and NON-Negotiable…”
What is this, kindergarten?
Of course they’re negotiable, like any business deal. Who cares how the OTHER side presents it? You hire a lawyer to explain the deal from your point of view, advise you on what’s in your best interest, and negotiate the best deal possible. If the deal’s not acceptable, you walk away.
Anyone who can’t figger that out is not meant to have $75K.
What do you want to bet James was too cheap to pay an attorney a few hundred bucks to review the contract before plunking down $75K.
Carol, this is America. Free enterprise. Capitalism.
The guy made a deal and should be held responsible for keeping his end of the bargain.
Unfortunately, the franchise company will get stuck with a territory he screwed up, our tax dollars will probably repay genius’s SBA loan to the bank, and I’m stuck with no one to drive my dirty undies to the cleaners.
How can you defend the artifice of the FTC Rule and the inadequate and misleading mandated disclosure as free enterprise under Capitalism?
You must be an attorney or a franchisor or do you work for the FTC? Understandably, the government justifies the weak and misleading regulation as serving the greater good of all of those who benefit from the industry.
Unfortunately, prospective franchisees don’t understand that franchisors can profit by selling territories over and over again because they make their profits on the franchise fees and on the gross sales of the franchisee, regardless of whether or not that franchisee ever makes a dime and ALL OF THE TIME the prospective franchisee is working to break even.
Kind of a legalized pyramid sales vehicle where franchnisees on the bottom of the pyramid are considered expendable and can be replaced in the interests of the franchisor’s EBITDA at the top of the pyramid.
Maybe this will all change when some of these paper pyramid empires go into free fall because their franchisees have been operating right on the line and with no and little profits, and are vulnerable now to complete failure in a deep recession that looks like a depression.
Franchising may not grow during this recession because the franchisors will have to prove to the banks or the lenders that there is a possibility of success for the borrower franchisee in order to qualify for the loan.
Just agitating for more transparency of unit performance for franchisees and for the innocent investors in franchise systems.
James:
I apologize if I sounded insensitive to your situation. I know how hard it is to lose a business you’ve worked hard at. I’ve just found that blaming others makes it harder to recover and to move on.
It sounds like once you learned the business 1-800 couldn’t justify their fees with value. Sounds like you should have just done it as an independent instead of buying a franchise.
Carol:
you have a talent for being incorrect. Here are a few more
“You must be an attorney” Wrong
“…or a franchisor” Wrong again. And i don’t work for the FTC.
“a legalized pyramid sales vehicle” Wrong again. Pyramid schemes use new investor money to pay previous investors. 1-800 is not paying franchisees at all, so this doesn’t remotely resemble a pyramid scheme.
You are consistent I’ll give you that.
Carol:
Again, you don’t have your facts straight. I am not in the exercise business with a franchise that has 6 locations—I have never claimed to be…..In fact, I am not in the exercise biz, period. My point is you must work the system for the system to work. Please research claims before you post.
Rita
What business are you in, Rita?
Medical Health and Wellness Franchise. I am curious, Carol– Since you do not own a franchise yourself,do you work for someone or not at all?
If your point is that you must work the system for the system to work and you are sharing this with posters who have lost their investments in franchise systems that didn’t work for them, even when they worked the system, what is your point you are trying to make? Or, are you merely gloating and enjoying it?
I’m sure James appreciates your counsel that he failed because he didn’t work the system!
Certainly, Medical Health and Wellness Franchisees are positioned nicely if there is an effort to bring health care coverage for all Americans by President Obama. I congratulate you on your foresight!
I am not discounting your success, Rita, but I am trying to warn that franchising is not what it seems to be and that there is cooperation in the status quo and in government regulation to obscure the real risk of the purchase from new buyers, who then buy high-risk franchises with high risk of failure and low or no profits.
You say, Rita, that you enjoy the debate but just what is it that we are debating? Are you indicating that all franchisors who work the system in all franchise systems will be successful? Are you indicating that is is perfectly okay for franchisors to sell franchises that they know have a high chance of failure and low or no profitability because they CAN?
Or, is your goal in this debate really an effort to discredit me personally while not responding to “my truth” with your greater truth?
I would truly enjoy debating with you about the issues I am talking about, but why would I share personal information with you that you intend to try to use to discredit me! If you want to discuss issiues and ideas, this is fine with me.
Otherwise, have a good life!
Carol:
I have read your posts on other threads. You coninually discredit yourself with factual errors and broad pronouncements. You think using terms like EBITDA and constructive fraud makes your argument credible.
You defend any failed franchisee no matter the circumstance or their failings and condemn every franchise as evil. rita doesn’t need to discredit you. You do it yourself when you defend a guy who didn’t even read his contract before forking over $75K and didn’t even have a lawyer review it.
You say that most franchisors know that franchisees don’t read their agreements before signing, which is blatantly stupid. Stop defending stupidity and you might have more credibility.
Carol-
I am not trying to discredit you, but you sound like someone with waaaaay to much time on your hands. A wanna be attorney. Many people reviewing these sites are owners of franchises. Not spectators at the sports.
It is my goal to persuade non-compliant people with their franchise system to really review their operations manual, contact their franchise support manager, and REALLY follow the system.
It is easy for someone to get drowned in all the bad press out there and transfer blame. To me, that is unacceptable. How do you say if you are 1 out of 300 franchise units that can’t stay afloat that it is the franchisor’s fault? Especially when you admit stopping advertising, not following corporate recommendations etc. Many of the Curves owners report they did not buy the Curves Smart System. That is not following the lead of your franchisor–you have to trust that they will lead you to success, visualize it, and achieve it.
I am not asking you to personally divulge any specifics about yourself- I just truly wonder if you even have a foot in the game? Do you have skin in it? Have you yourself personally taken a risk or are you shielded behind a paycheck at a large corporation—or not even a “worker” at all?
Kilgore and Rita: I have skin in the game.
You are both posting on a site that Sean Kelly has set up for “Unhappy Franchisees” that sometimes spill over into Sean Kelly’s main site, Franchise Pick.
You appear to be pro-franchise advocates and you obviously enjoy coming on and insulting a good man like James who intelligently used his first amendment rights to tell his story and to warn others about this franchise on the “Unhappy Franchisee” site.
Sean Kelly is the ONLY franchise expert who has given failed franchisees a real voice with his “Unhappy Franchisees” and because of the Internet, the matter of managed “churning” and “encroachment” is finally being exposed, hopefully, to new prospects who are sold franchnises without the material risk factors being disclosed by the franchisor before they put their signature to the contract.
Sean, himself, has honestly written about the problem of “churning” and because he doesn’t have attorneys who regularly post on Franchise Pick, he doesn’t push litigation of franchnise matters to failed franchisees because he knows that it is a “stacked deck.” He doesn’t deny that federal regulatory policy protects franchisors and thriving franchisees from failed franchisees, and that franchisors don’t disclose the risk factors in the presale disclosure process.
Once franchisees put their signature to the contract, their fate is sealed. Those who succeed are happy and regulation of franchising is all about protecting the franchisors and those franchisees who have succeeded from those who would fail.
The “evil” is in the government not mandating that franchnisors disclose the risk factors in their possession, i.e. the unit historical financial performance data, before the sale of the franchise. The “evil” is in the enabling of franchisors to fraudulently conceal material risk factors that should be disclosed to new buyers in the pre-sale process.
If 30% of startups fail and if only 30% of the units in the franchise system actually earn profits, this is material information that should be disclosed to new buyers of the franchise by the seller of the franchise, the owner of the system, who controls and owns the production of gross sales of the franchisees.
I would have no objection to franchising if the material risk factors of the investment were disclosed prior to purchase.
These material risk factors are not disclosed to new buyers of franchises because of ineffective and “captured” regulatory policy that mandates 22 items of 23 items of disclosure by a franchisor before he can sell his franchise in a State but doesn’t mandate the most important item of disclosure, i.e. Item 19 Earnings Claims.
Andy Selden, a respected franchise attorney who Chaired the ABA Franchise Group, says this is “silly.” But, of course, for the franchisees who bought unprofitable and highly risky franchises that failed, it is “malicious.”
After 30 years of franchise law, only a small percentage of franchisors disclose “earnings” because they don’t want to lose their safe harbor against fraud in arbitration or the
courts. Item 19 is optional and franchisors opt not to disclose.
Do a little research yourselves. Google up NOLO’s TEN GOOD REASONS NOT TO BUY A FRANCHISE that appeared in Forbes Magazine. Google up the testimony of Susan Keazios to the US Congress re Franchise Regulation. Google up Robert Purvin’s Comment #79 to the FTC in 1997 re the FTC Rule.
I believe it was attorneys Paul Steinberg and Michael Webster who opined that most prospective franchisees do not read and understand their contracts, as well as some reporters for big business media, because prospective prospects believe, and are led to believe, that they are non-negotiable, anyway!
Carol, thanks for getting my back. I truly believe you are a good person trying to help out other people, so whatever they think doesn’t matter. Nothing you or I say will change their opinions, so I am going to just leave it at that.
Carol- Again, you are wrong. This is not the “unhappy franchisee” website you are posting on. The name of this site is FRANCHISE PICK and the tagline is: Discover the Franchise for You.
Maybe some of the reason you are getting the feedback you are getting is that this site is not topical to what you comments are in reference to.
Again, you never answered my question– Do you own a franchise? Have you personally ever signed an agreement and worked a system?
Rita
Rita! Understand that Sean Kelly, an honest franchise advocate and talented writer and marketer, runs both the Franchise Pick and the “Unhappy Franchise” websites, as a service to readers.
I understand that, but again, this is not the “Unhappy” site. You are posting on the Franchise Pick site. Why shatter dreams of running a business? You keep avoding the question from my last response, and I quote:
Carol- Do you own a franchise? Have you personally ever signed an agreement and worked a system? Please enlighten us on your credability for your opinions on the subject matter.
It was Sean Kelly who put the “Unhappy Franchisee Comment” of James on the Franchise Pick Site for comments by readers.
As for your other comment, I would suggest that I am just as credible as you, Rita, and lets discuss or debate the opinions and not resort to personal attacks on my credibility to comment on this website. Though, I know I am not the best speller, I know that I am a better speller than you, my dear!
I’m afraid that the “us” — including you — who waiting to be enlightened will wait a long time before the lights are turned on!
Rita, you are wasting your time with Carol. She has been banned from two other franchise websites, because she always went on her rants no matter what the topic was.
She says Sean is the ‘ONLY’ franchise expert that allows upset franchisees to post. Other franchise websites allow that group to post, she just doesn’t know, because she can’t access them from her computer.
Her husband and son were UPS Store franchisees and closed their store, now she feels that all franchises are bad. She states that all of these companies should have to have an earnings claim for store performance, yet she even stated that her family never provided one for their franchise, so her family is part of that problem.
Trying to debate with her is like talking to a wall. she will very rarely answer any questions that you ask her (hence she won’t answer your question about her franchise experience).
Oh, and when she mentions Paul Steinberg and Michael Webster, my understanding is that they have little sympathy to a person that doesn’t the proper due diligence.
Poor JD –The unemployed? accountant who follows me around. JD is a standard on Blue Mau Mau and always follows the “crowd.” But, JD does tell his truth, as he sees it. He says that it would be just too difficult for franchisors to disclose unit performance statistics to new buyers and to those who invest in their systems.
JD worked for a franchisor for a time. I don’t know what he is talking about. We provided our tax statements and P&L statements to the new buyer, in the fire sale of our assets when we terminated our relationship with our franchisor.
I believe I was banned from Blue Mau Mau because the attorneys and JD didn’t like me to expose the constructive fraud of the Franchise Rule, and offend the IFA and the Franchise Community and the ABA. Only the attorneys are allowed to do this, and everybody has to make a living.
The ABA and the CPA’s and the Accountants as well as the banks and lenders and the Landlords all like the current status quo of the law that enables so much fraud. It is certainly good for business, and it is only the franchisees who are being fleeced and sheared and silenced.
Those who post on Blue Mau Mau tell the truth to a point but not to a point that it will interfer with their financial interests. Blue Mau Mau is an excellent newspaper with reporters like Don and Janet Sparks, and exiting gossip and interesting items posted on its comments section. Don lets me read now and I am still learning from “no BS Richard Solomon” and esteemed attorneys, Paul Steinberg and Michael Webster. (The conversation re: “impairment of good will” was very interesting) I see my hero, Les Stewart, of Franchise Fool still posts and tells the truth on Blue Mau Mau and on his website.
Don lets me read NOW, recently, but I am still barred from posting. I actually miss all of you guys, even you, JD.
Carol
So, the question was… Is anyone familiar with Service Brands and/or the 1-800-DRYCLEAN concept?
I’ve reread James’ complaints on Unhappy Franchisee and extracted his main points. James contends:
1) At training, FR said it would be easy to make money and it wasn’t
2) They sent materials that weren’t necessary or useful
3) Got 2.5 days training instead of 5
4) $999 reminder call card never worked
5) Was surprised by method of royalty calculations
6) Marketing programs heavy on discounting
7) Handing out free bags expensive, ineffective
8) Initial territory not working so they replaced with other
9) Tech problems with CC processing
10) No accounting of ad fund provided
11) FR appears to falsify marketing performance numbers
12) Many franchisees not profitable
While some of these points indicate that the concept might not be working or that the franchisor is not providing stellar marketing programs, these complaints don’t seem to indicate Service Brands was misleading, nonresponsive or indifferent. In fact, they seemed to be pretty flexible in allowing James to adapt territories in response to competition.
Service Brands also seemed remarkably generous in refunding the software upgrade fees to James. There’s also no mention of whether SB is holding him accountable for the future royalties due on the remainder of the contract.
Sounds to me like an unfortunate situation with an embattled concept that might be fine when the economy is good, but not when times get hard.
What the hell sean, trying to bring the discussion back on topic? Rita, this is the reason Carol was banned from BMM, no matter what she had to turn the conversation into something off topic.
And to point out a couple of lies that Carol states. I’ve been posting on this website before she was ever banned on BMM, so I don’t know how that translates into following her around. I’m just trying to save Rita and anyone else time.
I never mentioned their P&L’s to the buyer, I said to the UPS Store. Nice try to spin that.
She thinks she was banned from BMM because of the attorneys and myself. The thing she forgets to point out are those attorneys are pro-franchisee, but they realize her argument is pointless. You can’t claim fraud when you don’t read the contract or do due diligence. It’s not like someone held a gun to your head when you sign the franchise agreement.
She now brings in accountants into the ‘fraud’ claims which are baseless.
Oh and lastly, I’m gainfully employed. Now, how about bringing this back on topic.
Sean, as to the 1-800-Dryclean story, the 2004 UFOC is on the CA website. The royalties are not hidden. It clearly states that minimum royalties are defined in the franchise agreement as well as a footnote to the chart they provided.
I don’t see how this is a good service, unless you cater to businesses. The firm I worked at had a dry cleaning delivery service. Never used it. There were plenty of cleaners in my area (close to grocery stores) that it was convenient and cheaper. I think this type of service really only caters to the big city where people don’t have cars, or to territories that have big office buildings. Even then, more companies are now ‘business casual’, which means less dry cleaning bills. I think I go to the dry cleaners about once a year now, compared to once every two weeks 10 years ago.
Someone used the term “middleman” franchises, which seems relevant.
eBay drop-off stores, Mail Box stores, drycleaning delivery and the like are really enhancements of – and dependent on – someone else’s service.
I think they might be especially vulnerable to economic downturns or being cut out of the mix when people just go direct. Just a thought…
[Glad to hear you're gainfully employed, jd. Haven't heard from you in a while. I was worried you were now a multimillionaire multiunit Cuppy's Coffee franchisee!]
Carol:
Reviewing this somewhat contentious thread, I am once again faced with the Carol Cross Dilemma.
On the one hand, you are a steadfast, passionate commenter who is truly committed to warning others about what you perceive to be the risks of franchising and the uneven playing field some find themselves upon. The purpose of this site is to allow people to voice the otherwise unspoken, even unpopular, opinions.
On the other hand, you tend to inject the same points about the FTC, constructive fraud, unit performance statistics, etc. into every conversation, which gets repetitious for regular readers.
I think I’ve come up with a solution. I’ve given you your own page on UnhappyFranchisee.com. It contains two comments of yours that I think represent your message and philosophy. Feel free to copy & edit and email it to me if you’d like changes or revisions.
Whenever you leave a comment, you can include this link in the field for “website” and your name will link to it. You can also paste the link right into the comment like this:
http://www.unhappyfranchisee.com/2009/02/carolcross/
I think posting this link (rather than posting the explanation each time) will make it easier for you to spread your message without catching flak from those who are familiar with it, or being worried about being banned.
Thanks, Sean Kelly! for my own special link!
I will try to use it as often as I can.
As for JD’s comments! He indicates that the attorneys on Blue Mau Mau are pro-franchisee but I think the attorneys themselves would deny this —-especially Richard Solomon of Franchise Remedies, who admits that he works and has always worked both sides of the fence and tells it like it is with no BS.
In the Cuppy’s scandal, we see where when push came to shove and financial interests were involved, the Blue Mau Mau posters tried to protect the position of the AAFD and lashed out at you, implying that you were biased because of some financial interest in a coffee franchise. They couldn’t deny, however, that an AAFD accreditation does imply that the franchisor is legitimate and honest and this accreditation did mislead innocent investors.
As for JD’s defense of the royalties explanation in the UFOC. Isn’t this just a cleverly designed “earnings statement” that is misleading to new buyers, as James indicated in his statement. If not, why not? http://www.unhappyfranchisee.com/2009/02/carolcross/
Carol:
One of your main contentions is that franchisors should disclose the financial performance of their existing units to prospective franchise owners, including sales and profitability. You believe that franchise owners should also provide information for previous units that were resold or transfered, along with the selling price of those resales (to prevent hidden “churning” of units).
You will be delighted to learn that 1-800-Dryclean voluntarily provided all of this information and more in their UFOC disclosure document, which is available on the California state Caleasi website. Here’s the link to the section of the disclosure doc containing this info:
http://134.186.208.228/caleasi/PDFDocs/004749548.PDF
The Item 19 earnings claim contains the average split between dry cleaners and franchisees, average weekly gross sales, operational costs, and the selling prices of resold franchises. It includes contact info for all past & current franchise owners, including email addresses.
I’m sure you applaud 1-800-Dryclean for disclosing all the information you believe should be part of mandatory disclosure, and for not participating in your vast gov’t conspiracy. You do, don’t you?
Oh! Come on Sean Kelly. You know that these “averages” are not helpful to prospective buyers and can be very misleading —especially when they cover only 53 of 97 franchisees who own a total of 117 units.
Read NOLO’s Ten Good Reasons NOT to Buy a Franchise on a Google Search, and Nolo says that most franchisors don’t disclose earnings claims and those that DO only disclose average earnings, etc… are not really helping the prospective buyer of the franchise.
I agree that 1-800-Dryclean has a very good looking UFOC and they disclose more than most franchisors and they are compliant with the FTC Rule and State FDD’s but “averages” are still not true disclosure of unit performance statistics for buyers of the franchise or investors in the franchisor.
I believe it is perfectly obvious that the government regulated franchising to protect the franchisors and the franchisees who thrive and to prevent those who lose from winning law suits in the courts or arbitrations for fraudulent inducement to contract. I don’t think the government thinks of it as a “conspiracy” but more as “public policy” that serves the greater good of stimulating the economy!
http://w.w.w.unhappyfanchise.com/2009/02/carolcross/
Sean, Carol can’t be helped. Now she says that averages in a UFOC aren’t good enough. It’s funny that she states this when she has stated before that UPS Store didn’t get their financial information until they sold their store. So, the best they could’ve done was report averages.
I think the only thing that would make her happy is an audited financial statement from each franchisee (but then she wouldn’t understand it probably). Hell while we’re at it, how about giving all of the variables about each store like number of employees, what they are paid, what the owners are paid out of salary, what rent and rent terms are, who they market to, how much time they put into it, etc. I’m sure that franchise owners would really like to provide all of this stuff in writing to the franchisors, so that it could be relayed to prospective franchisees.
At this point Sean, I think it’s pretty evident that she’ll continue to go on her Item 19 rants just as much as the rest of the s*** she throws out there. You might as well ask her to provide everything she wants in the UFOC and make a link for it. I’m sure I could use a good laugh about the practicality of what she wants.
Carol:
If providing access to the names, phone numbers, email addresses of franchisees past & present, gross sales for operating units, operational cost estimates, & resale prices for franchise units is not enough, it looks like you will be satisfied with nothing short of abolishing franchising altogether. And that’s not going to happen.
What prospective franchisees need to take away from these lessons is the importance of personal responsibility. No one is going to hold your hand and make sure you are making the best decision, so you need to take responsibility for it up front. There is no governmental agency waiting in the wings to swoop to your defense in the event you feel you were duped, so you should do your homework and think through your investment decision.
JD —-I would settle for a “reason” to be given for the “terminations” and the “transfers” in the FDD and under the FTC Rule –as well as a private right of action for violation of the FTC Rule.
The FTC, when they first promulgated the rule, suggested that the reason for terminations should be indicated, and suggested “lack of sales” could be indicated in the termination column of Item 20. Apparently, the States in the UFOC/FDD’s decided that this wasn’t necessary and might lead to a question as to why the reason for the transfer shouldn’t be listed in the transfer column of Item 20, as well.
I know that Sean Kelly won’t deny that franchisors use the Item 20 transfer columns to hide failures of franchisees because he wrote about this under another thread.
This would go a long way in preventing the fraud that is a result of government regulation that permits franchisors to sell unprofitable and highly risky franchises to the public under cover of government regulation.
Apparently, both of you would have advised James not to buy this franchise, even though they have a compliant FDD. Don’t you make my point for me?
Who ever said that I would have advised him not to buy it. Every situation is different. If he had the skills, territory,business plan, etc. to be successful, then I would have advised him to do it. It’s about planning and knowing what has to go into it. Not everyone is cut out to be a business owner.
people are selling their territory for $300k+. If their initial investment was $75k, then I bet they are happy with their ROI.
Obviously, JD, you are backing off of your statements above that indicates the concept would only be viable in very special circumstances, and ignoring the real issue which is, I repeat! Franchisors, under cover of government regulation, can KNOWINGLY sell franchises to the public that are unprofitable and will result in failure —-and the franchisors are protected from any recourse from failed franchisees because of the “package” and constructivle fraud of the malicious one-sided contract wrapped in a government disclosure document. Franchisors do with premeditation “churn and turn” territories of failures because they CAN and because they make money on the churn.
I think James is just smarter than the average 1-800-Dry Clean franchisee and cut his losses. In retrospect, he, of course, could see where he was misled by the representations in the UFOC, but, of course, the UFOC was in compliance with the law and he did sign the contract underlain by the government mandated UFOC so they “got him.”
Because James is a decent human being, he wanted to warn the next franchisee who would buy his territory. Hopefully! Sean Kelly warned him that he could be subject to a SLAPP suit or a lawsuit for back royalties when he published his comments and his name on Franchise Pick.
Of course, those who thrive and make money in a franchise are happy but this has nothing to do with the “churning” and ineffective franchise regulation that permits churning as a management tool outside of the view of prospective franchisees.
The government tells the prospective franchisees that they have made the franchisor disclose the information “to protect” the franchisee. Isn’t this a big lie because the prospective franchisee doesn’t get the material pre-sale information in disclosure that he/she needs to determine the risk and rewards of the investment that has been hyped to them outside of the contract?
I sure hope some attorneys and their CPA consultants do some jail time after all of the fraud is disclosed by our Justice Department.