Will eAutoDrop be the Next Overly Hyped eBay Auction Franchise Disaster?

First let me say that I’m not familiar with the concept or the people behind eAutoDrop, or Rocket City.  They could be fine folks with a terrific future.  However, my first impression is that Rocket City Automotive Group and eAutoDrop have established themselves in the fine tradition of franchise spinmasters… and they’re not even franchised yet!  That’s impressive!

Franchise Pick came upon their press release an hour after it was posted (April 18, 2007 01:22 PM Eastern Daylight Time) on Business Wire.  It is posted in its entirety below (with emphasis added in spots).

A quick glance at their website led me to conclude that they sell cars on eBay Motors, and that they are going to offer car dealers an eBay auction franchise with special software (sound familiar?) that will allow them to do the same.  That was my 2-second take.

Here’s my quick take on their amazing press release, and some of the reasons alarm bells started clanging wildly before I had even finished  reading the headline. 

Red Flag #1:  A Press Release on INQUIRIES(!)

Big news:  eAutoDrop received 46 requests for information on its future franchise opportunity.  That increased the two-day inquiry total from 31 to nearly 80!  (That’s about as many comments on our post on the collapse of iSold It.)  If they can hype a few inquiries, watch out…

Red Flag #2:  The crazy financial projections begin!

The significance of these inquiries?  The press release states “With over 77 information requests received, eAutoDrop franchise locations would render nearly $2.0M immediately…”  eAutoDrop revenue projections are based on a 100% conversion rate?  The national conversion rate of franchise leads to sales is 2%.  And that includes established, proven franchise companies.

Red Flag #3:  Promoting without proper disclosure documents/registration

The conversion of the 77 information requests would render the $2.0M “nearly immediately upon its approval from the UFOC and FTC to begin franchising.”  Putting aside, for a moment, that the term “approval from the UFOC and FTC” makes absolutely no sense, would-be franchisors are prohibited from soliciting leads and marketing a franchise opportunity until they have completed their disclosure documents and necessary registration requirements.  They are prohibited from, say, sending press releases, soliciting leads, and making earnings projections.

Red Flag #4:  At least pretend you’re franchisee-oriented.  For now.

Most franchisors at least pretend that they’re concerned about helping their franchisees prosper.  Gleefully adding up the $25,000 fee, the monthly $1000 fee plus royalties is best done behind closed doors.  At least ’til the 77 are signed up.

Red Flag #5:  Shooting too low.

Jeff Roman, CEO of Rocket City Automotive Group, states “…we feel that eAutoDrop will stand as one of the most innovative concepts to ever enter the automotive sector and one in which all that follow will be compared.” Jeff, this is no time for modesty and caution.  After all, you can’t cross a chasm with two jumps!

Hmmm… Rocket City… Chasm… Why do I keep thinking Snake River Canyon might be a great place to launch their franchise program?

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Rocket City (RCAU) Receives an Additional 46 Requests for Information on eAutoDrop’s Developing Franchise Opportunity. Launch Anticipated To Bring Immediate Revenues.

ORLANDO, Fla.–(BUSINESS WIRE)–Rocket City Automotive Group, Inc. (Pink Sheets:RCAU), announced today that it has received an additional 46 requests for information on eAutoDrop’s developing franchise opportunity. Additional information requests have increased the total number of inquiries, within a two-day time period, from only 31 to nearly a total of 80 requests. To immediately learn more about eAutoDrop, please visit: (www.eautodrop.com) or take the eAutoDrop Tutorial at (www.eautodrop.com/tutorial.html).

RCAU sees this positive industry feedback as an indication of the potential out-of-gate revenue possibility of the eAutoDrop Company. With over 77 information requests received, eAutoDrop franchise locations would render nearly $2.0M immediately upon its approval from the UFOC and FTC to begin franchising. [Emphasis Ours] 

“We are extremely excited with the market feedback we are receiving from the discussions of the eAutoDrop concept. As we continue to excel in the offering of online automotive solutions, we feel that eAutoDrop will stand as one of the most innovative concepts to ever enter the automotive sector and one in which all that follow will be compared,” [Emphasis Ours] states Jeff Roman, CEO of Rocket City Automotive Group.

Upon the completion of a UFOC, developing franchise locations will be offered at $25,000, which if successful at contracting all the estimated dealers, would result in tremendous revenue capabilities. Additionally, each potential franchise location will be responsible for recurring $1,000 monthly fees for the optimization and maintenance of the CompleteAuto listing software as well as appropriate royalties. [Emphasis Ours]

About Rocket City Automotive Group, Inc.:

CompleteAuto, a subsidiary of Rocket City Automotive Group, Inc. (PINK SHEETS: RCAU) is a preferred solution provider and offers proprietary software, personnel and design solutions to hundreds of automotive dealerships around the country. CompleteAuto is a wholly owned subsidiary of RocketCity which was formed to acquire, manage, supervise and operate corporations specializing in auction services, eCommerce, software development and retail automotive operations.

CompleteAuto and RocketCity believe there are enormous growth opportunities in the $1 trillion automotive retailing industry.   The experienced management team will continue to execute strategic initiatives to maximize operations in this marketplace with their products and services. Visit them on the web at www.rocketcityauto.com to learn more.

Learn more about eAutoDrop by visiting: www.eautodrop.com

View the eAutoDrop tutorial by visiting: eAutoDrop Tutorial

Learn more about Complete Auto by visiting: www.completeauto.com

Disclaimer:

Cautionary Statement about Forward-Looking Statements

Revenue figures stated within this press release are projections and are not meant to lead the public to believe that the described figures are a certainty. It is the belief of the RCAU Company that in the event that the eAutoDrop sales campaign does in fact reach and sell franchise locations at the aforementioned prices to its entire dealer database that those projected figures will be achieved. [Emphasis Ours]

This press release contains “forward-looking statements,” which are statements related to future, not past, events. In this context, the forward-looking statements often include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks” or “will.” Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things: (a) general economic and business conditions, (b) the level of strategic partner incentives, (c) the future regulatory environment, (d) our cost of financing, (e) our ability to complete acquisitions and dispositions and the risks associated therewith, and (f) our ability to retain key personnel. These factors, as well as additional factors, could affect our forward-looking statements. We urge you to carefully consider this information. We undertake no duty to update our forward-looking statements, including our earnings outlook.

Contacts

Rocket City Automotive Group/CompleteAuto, Orlando
Investor Relations:
Charlie Garcia, 305-373-7555
invest@rocketcityauto.com