The Marriage: The Courtship
Franchising is much riskier than non-franchised businesses
- Banker says franchised is less risky than independent business
- Bootstrapping the assets of a corporation
- Fraud is widespread
- Futility of taking legal action
- Independent businesses much higher profit than franchised ones
- Independent businesses survive longer than franchised ones
- Internet, franchisor competes against franchisees
- Location chosen by franchisor
- Malfeasance
- No protection from monopoly
- Opportunism: contract creates powers which are used to strip investor value during relationship
- Risk much higher for franchisee than independent business
- Sympathy for the franchisor
- When the franchisor tanks, so does the franchisee
- Why franchisors sublease to franchisees
Psychology: human foibles are a fraudster's bread and butter
- American Dream
- Bargaining
- Blame the other franchisees
- Cognitive Dissonance: stress caused by holding 2 contradictory opinions at 1 time
- Collaborators
- Death wish
- Delusional thinking
- Envy
- Framing
- Franchisees who appear to have lost their mind
- Greed
- Happy serfs
- Heuristics: rule of thumb decision making that can sometimes result in catastrophe
- Hindsight Bias: tendency to view the past as more predictable than it was
- Hubris
- I did drugs because I was sad
- Inherited money targeted
- Insight into self
- Loss Aversion: people dislike losing much more than winning (the same $)
- Love money
- Narcissism
- Necessary illusions
- Neuroeconomics: the study how people make decisions (psychology, economic & neuroscience)
- Psychological denial
- Psychological testing
- Psychopathology
- Seminar selling
- Shame
- Siren song
- Social cascades
- Sold during time of psychological vulnerability, especially unemployment
- Unsophisticated buyers
- Wanted: sheep
Pre-sale information is managed by master salesmen
- 100 per cent of settlements have gag orders
- 1st generation of investors knowingly sacrificed
- 55 per cent of franchisees would not advise others to join their system
- 75 per cent of new franchise systems die within 10 years
- Anti-trust provisions not applied to franchising
- Cannon fodder
- Can't talk to politicians
- Contracts across systems are virtually the same
- Cruellest lies are often told in silence
- Current franchisees can’t talk freely
- Disclosure documents are deficient
- Franchise investors deprived of information
- Gag order (confidentiality agreement)
- Gag order muzzles self & descendants
- Gag order, court-mandated
- Imbalance of information and power
- Misleading advertising
- Overstatement of sales and profits
- Pro forma income statements questions
- Quiet settlement
- Success rate, Timothy Bates’ study
- Success rates fudged
Laws are created by those able to influence the political process
- Beyond the Tipping Point
- Can't collect on court decision
- Charade of public consultations
- Credibility
- Disclosure laws: 10 per cent solution
- Feudal relationships
- Franchise laws protect franchisors, not franchisees
- McLaw: toothless legislation designed to protect the dominant parties
- Relationship legislation
- Toothless law
- Trust
- Weak law worse than no law
- White-collar crime is widespread
Confidence game
- Bankruptcies, several
- Blame themselves
- Canada: white-collar crime haven
- Confidence
- Deceptive marketing practices
- Defrauded more than once
- Defrauding the public
- Deposit money not refunded
- Disclosure documents never given
- Easy to sell around a disclosure document
- Emboldens industry bottom-feeders
- Franchise show
- Franchisee advisory group (lap-dog)
- Franchisor owns more than one systems (subsidizes dog from cash cow)
- Franchisor was once a franchisee
- Franchisor's associate
- Government corruption
- Hefty severance packages
- House negro
- Initial public offering, IPO
- Integral part of the deception
- Lawsuit that would crush whole sector
- Lawsuits, group
- Paid informers
- Persuasion
- Ponzi (pyramid) scheme
- Pump-and-dump scheme
- Qualify as franchisee if you fog a mirror & the check clears
- Related scammers
- Relative of franchisor buys assets from Trustee
- Self-delusion
- Selling around a disclosure document
- South Sea Bubble
- Strong back and weak mind
- The game is rigged
- Trading in false hope
- Victims are highly intelligent and educated