CNBC pulls franchise documentary from rotation

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• If only CNBC were dedicated to telling the truth and nothing but the truth about the exploitive business model called "franchising" that depends on the ignorance of prospective franchisees as to the inherent high risk of buying ANY franchise.

  Franchising is a legalized confidence game that is enabled by dishonest and ineffective regulation of the sale of franchises by the federal government and the 50 states whose regulatory policy is influenced by the Federal Trade Commission Rule governing the sale of franchises to the innocent public.

  The powers that be know that 50% of new franchisees will fail out of business in the first five years but these 50% are a calculated sacrifice to the goal of perpetuating the survival of franchise systems in the local economies. Churning and encroaching of franchisees is what has made franchising so durable in world economies. The cheap venture capital and the cheap labor of franchisees could not be accessed by the franchise systems if the true risk of the investment were required to be disclosed to new buyers by the owner of the franchise system.
  Cold Stone is just one of many franchisors who exploit their franchisees in their own interests because they CAN under existing regulatory policy that renders franchisees to be merely expendable resources that produce gross sales upon which the franchisors take their profits whether or not there are ever profits or breakeven status for the franchisees.
  Hopefully CNBC will have the guts to continue to air their "soft" coverage of franchising and expand the coverage of franchising to address the damage done by the subsidy of the dishonest and ineffective FTC Rule governing the sale of franchises to the public.

  http://thegreatfranchisingrobbery.blogspot.com

• Carol

  Some things never change! While Coldstone may suck as a franchise your diatribe against ALL franchising is absurd and you know it. You should be suggesting people perform deep due diligence and rational research, but you never do. You scream stay away from franchising, franchising bad, franchising evil...beware franchising. Kind of silly isn't it.

  Mr. Franchise

• Thanks for bringing up the old "due diligence" red herring, Mr Franchise. If you don't recognize the artifice and the inadequacy of Item 20 of the Franchise Disclosure Document, iit must be that you prefer to ignore the FLAW in the FTC Rule.

  It is not I who have pointed out the FLAW in the FTC Rule. The experts and academics have, in public comments, for many years pointed out the FLAW in the FTC Rlule to the FTC and the Congress. Obviously, the flaw is ignored by the majority interests who don't want to take a chance of drying up the pool of ignorant and uninformed prospective franchisees whose need for a job and income in this recession make them easy marks.

  It is obvious that the ABA Franchise Bar has no desire to see franchising cleaned up and the flaw corrected in the interests of fairness and equity for prospective franchisees.

  Legal academics, for many years, have written about the flaw in the FTC Rule that (uniquely) appears to enable franchisors to withhold material negative facts from the buyers of their franchised business plans.

  Robert Purvin's public comment #79 to the FTC concerning the FTC Rule very clearly states that franchising was regulated by the federal government primarily in 1979 to protect franchisors from charges of fraud in the sale of franchises to the public. .

  Of course, prospects would do "rational research" on franchises if they understood that the risk is intentionally obscured and understated because of this flawed regulatory rule.

  Isn't it true that no amount of rational research is going to change the hard odds of 50% failure of "founding" franchisees sometime within the first five years?

  http://thegreatfranchisingrobbery.blogspot.com

• Carol Cross

  So, I guess if a person wants to buy a franchise there is no way they can perform due diligence and no way they can be successful if they develop one or more franchise units?

  Just because your husband is a failed UPS Store franchisee doesn't mean you get to attack all of franchising as being bad. You have no credibility and I bet you can't name 10 investment worthy franchises out of over 3000?

  Mr. Franchise

• Mr. Franchise! You personally attack me to change the subject and to divert attention from the flaw in the FTC Rule. Are you denying that it exists?

  Are you denying the grim statistics concerning failure of "founding" franchisee startups or the fact that the franchisors can somewhat overcome the grim odds of startups because they can mitigate the risk of expansion by exploiting the franchisees cheap labor and cheap venture capital to grow their EBITDA's?

  Why should prospective franchisees have to do their due diligence and get their information from current or ex-franchisees instead of from the seller of the franchise who profits from the sale? Is it because true and accurate disclosure of the risk as indicated by disclosure of UNIT performance of the franchise systems by the franchisors would mean that innocent buyers of franchises wouldn't borrow money and put their life savings at risk to buy this kind of risk for so little reward?

  Would you agree that no Mom and Pop should borrow against their savings and their homes and retirement funds to invest in this kind of risk?

  Is franchising a good investment for multiple unit owners who can afford to lose their investments if things don't work out and who don't put everything at risk? Yes and No! ---depending on the franchise!

  The last time I looked, this was still a free country and I am free to exercise my right to criticize my government and warn my fellow citizens about lthis legalized confidence game called franchising. My husband may be a failed UPS Store victim but he is also an old veteran of three wars and we jealously guard our constitutional right to free speech!

  http://thegreatfranchisingrobbery.blogspot.com

• Carol Cross

  The U.S. government is not restricting your freedom of speech under the First Amendment. So your First Amendment rights seem safe.

  Let's face it you hate franchising with a passion that knows no bounds. In your view there are no quality franchises a person can buy evidenced by your inability to name even 10 investment worthy franchises out of over 3000.

  Mr. Franchise

• Mr. Franchise wrote:
  So, I guess if a person wants to buy a franchise there is no way they can perform due diligence and no way they can be successful if they develop one or more franchise units?
  Actually, Carol said 50% of franchises will fail within the first 5 years, and based on published stats, she is correct.

  As for "due diligence", well, that's a joke.
  CertaPro Painters, for example, appears to make a serious effort to ensure exiting franchisees sign a "non-disclosure" agreement (gag order) which prohibits them from ever saying anything negative about certapro. Here's a copy of one:
  http://certaprosucks.org/popup_nondisparagement.shtml
  As you can see, it even requires them to LIE to prospective franchise buyers.
  I doubt CertaPro Painters is the only franchise which uses this tactic.
  So even if a prospective buyer could FIND a former franchisee, it's quite likely that former franchisee would NOT BE ABLE TO TELL THE TRUTH.

  "Due diligence"?
  Puhleeeze, give me a break.

  Franchisors could make it extraordinarily easy and honest.
  For example:
  Number of franchises we've sold: ____
  Number still in business: _____

  There have been a few good, reputable, franchises out there but they are rapidly dwindling in number as franchise aggregators buy them in order to turn them into a cash-generating machine. Sell-Fail-Resell. Repeat as necessary.

  And let's not EVEN get into the topic of "franchise consultant".
  Or all those "franchise review" websites out there who depend on franchisees for their advertising revenue. (They're a lot like politicians and the Koch brothers.)
  Or all the shills out there who publish articles online promoting franchises yet who are personally involved in selling franchises. ("Conflict of interest" has absolutely no place in the franchise business.)
  Or even those SBA "S.C.O.R.E." people who regularly repeat the disproven lie that "franchises have a better chance of success than non-franchise startups" DESPITE THE FACT that the SBA itself has said franchise loans have a higher failure rate than non-franchise loans!

  "Due Diligence"????
  With all that propaganda, lies, obfuscation and conflict of interest?
  ROFL!!!
  You'd have better luck trying to find a hymen in a bordello.

• CertaProSucks

  Can you name 10 worthwhile franchise investments?

  I do agree that so called franchise consultants, who are in fact franchise brokers are misleading and franchise business review sites are full of crap.

  Mr. Franchise

• Mr. Franchise: You seem obsessed with the idea of me naming ten good investment worthy franchises out of 3,000. If this is your estimate of the ratio of good franchise investments to bad ones, I won't argue with you.

  I don't hate franchising with a passion. I do have a passion to uncover the conspiracy of silence as to the "known" risk of buying a franchise. If the true risk and reward is disclosed in terms of historical financial unit performance of systems before the sale is finalized, what is there to hate?

  Hopefully CNBC will look at franchise regulation and make comment on how ineffective regulation of this hybrid business model drives fraud and tort against innocent prospective franchisees!

  http://thegreatfranchisingrobbery.blogspot.com

• Carol Cross

  You are consumed with hate for franchising and you are so obsessed that you can't name even 10 worthwhile franchises. It's amazing and calls into question your credibility.

  Mr. Franchise