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This Makes CNBC Documentary Look Like a Love Story

January 17th, 2011

I have seen the future of negative franchisee validation and franchisors aren�t ready. I�m not ready. My jaw hit the floor. I forwarded a recent link to FPG Consultants of damning video created by a disgruntled, failed franchisee of a large home service franchisor and posted on YouTube. I received back a steady stream of one word responses like, �Wow!� �Geez!� and �OMG!�

The two-minute video computer animation shows a running dialogue between two characters, one representing the franchisee and the other the franchisor. The story starts with the franchisor promising the franchisee a better life and includes other franchise sales techniques used by the franchisor during the franchise sales process. The video continues with the now operating and struggling franchisee telling the franchisor, �I am following the system and the system isn�t working� and begging the franchisor for more ideas and assistance. The franchisor responds with �you need to spend more money� and �you are not following the system.� When the franchisee eventually goes out of business, the franchisor character forces the franchisee to sign to what amounts to a �gag order� in consideration to get out of future financial obligations and pasts debts. Lastly, the video directs viewers to the franchisees� website www.(the franchisor�s name)sucks.com.

Once there, visitors can read threatening emails and mail correspondence between the franchisee and franchisor. In addition, the franchisee posted the actual confidentiality agreement the franchisor requires failed franchisees to sign where franchisees promise to never make another negative comment to any franchise candidate about anyone within the organization or the opportunity itself in exchange for forgiveness of debt.

If you are a franchise candidate looking to invest your entire life savings, and you know these agreements between the franchisees and the franchisor exist, why would you trust any positive feedback any franchisee gives you?

If that isn�t damaging enough, this disgruntled franchisee posts past franchisee testimonials the franchisor used in print advertising to promote their franchise opportunity. Next to the testimonial, the franchisee posted the date that the franchisee poster child went out of business. This sends the message to all franchise candidates, �Even if you hear positive feedback today, don�t assume these franchisees are going to be around tomorrow.�

Franchisors have labored under the false notion that if their franchise agreements are strong enough, they will protect their investment and maintain control over their own destiny. While the scales of justice often tip in the franchisor�s favor, the scales of public opinion will usually tip towards the franchisees. The internet and social media are great leveling forces. One single failed franchisee with nothing more to lose and a lot more to say has a world-wide audience and at any moment can put a heavy thumb on the scale. Ultimately, these forces will work together to entice franchisors and franchisees to work together and problem solve rather than damage the brand they both represent. But they may need to learn a hard lesson first. The greatest protection a franchisor has lies within how consistently the franchisees produce strong financial returns, how readily franchisors own their role in the results franchisees produce, and how well they listen to each other’s concerns and engage in win-win solutions.

Comments(7)

  • 01/18/2011, 2:22 pm  Reply

    Joe, thanks for the informative post. It seems very well-balanced and fair.

  • 02/22/2011, 1:25 pm  Reply

    I don’t know about anyone else but I’d love to see this animation! Searching on YouTube for anything franchise-related gets totally swamped by other things so I wonder how much of an impact this video would have really had with other potential franchisees…

    The most effective franchisee invalidation I’ve ever seen was from franchisees of a commercial cleaning company that bombarded a popular and easily found forum on franchising that gained so much momentum, that typing the company name into Google brought up the forum on the first page and was almost definitely found.

  • 02/23/2011, 12:57 pm  Reply

    Joe, I always appreciate your well thought out pieces. Thank you.

    To Evik’s point, your response does seem balanced.

    To be fair, just as the franchisor used a “case building process” that included subjective analysis and affirmation y current franchisees and, the now-failed franchisee had accepted and embraced it as a valid component of their investigation, it is unfair to simply post the positive and the negative without the backstory.

    However, as damning is one subjective video might be to a whole industry (disproportionately perhaps) and tens of thousands of quality, satisfied and financially accomplished franchisees, something has to be done, as you suggest, to create an even playing field for this form of unprofessional grandstanding.

    • Joe Mathews
      02/23/2011, 11:45 pm

      Hi John. I am not at all agreeing with what the franchisee posted and I am not particularly concerned with the backstory as the backstory wasn’t relevant to my point. I am merely pointing out what I believe to be the potential impact of how one franchise perceives they are being treated. My intention was to report but not condone the franchisees actions. Social media is fair only in the sense that it is democratic. Everyone starts with the same platform. But just as the franchise agreement is unfairly weighted to protect the franchisor, social media offers franchisees a counter weight. Not right or wrong, good or bad. Simply the way it is.

  • 02/23/2011, 1:33 pm  Reply

    Joe,
    You have hit the nail on the head with how many franchisors labor under the false notion of how a strong agreement will protect them. It is the franchisors that help struggling franchisees and take ownership of their role in each unit’s financial success that will be the strong brands of tomorrow. This might sound funny coming from an attorney, but the relationship is a lot more important then the contract.
    -Tom

  • 02/23/2011, 5:34 pm  Reply

    This scares me, one individual can do an awful lot of damage, right or wrong. That is why you have to do your “home work” on the front end, but there is still no guarantee.

  • Rich
    02/25/2011, 7:42 am  Reply

    Wow, that is exactly what happened to me in my last franchise. If we tried to challenge the system while operating a franchise, we were ostracized and threatened. I got out without a “gag order” because the franchisor purchased my franchise back at market price…but not an easy process, they were more anxious to get me out of the system because I was on to them. After all, I was the first franchisee in their system. However, I always wondered why their staff members, and ex-franchisees, would just disappear without a trace. Now I understand why when I confronted an ex-staff member of the franchisor, he did not say a word.

    I agree with Tom, the attorney, in that the relationship with a franchisor is way more important up front than the agreement. Would-be franchisees do not go deep enough to find out exactly who is behind any given franchise. In my last franchise, the red flags were there, but I ignored them. My wife even mentioned something early on, and that is exactly what came around in the end. Those comments still echo in my mind.

    Do your homework (intensely) before signing any agreement. Not many do. They need you just as much as you need them.

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