| The Entrepreneur's Source |
| The Entrepreneur's Source FSBI; Franchise Source Brands International, FranchiseMatch.com, FranchiseSource.com Deceptive practices, Not what it appear |
| 12th of May, 2011 by User627118 |
| "All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson First of all, kudos to you for doing your due diligence. If you found this post, you are doing the right thing for yourself and your family in digging a little deeper. Getting outside of the company's controlled sales environment is the exact right thing to do. Second, this message does not apply to The Entrepreneur's Source services offered by the franchisee coaches to their clients. By and large, the franchisees are doing their best to help folks find a business that is right for them. They are humans struggling to make a living, but most TES franchisees sincerely want to help you. Terry Powell, Brian Miller and Steve Schick are some of the most charming and capable sales folks you will every meet. I will not speak to their personalities, you can read the other posts for that. I will however speak to the lack of integrity of the organization. These folks can spin every objection and help you find a reason to write a check. They will convince you that the vast history of franchisee failure will not apply to you. They will challenge you to see why the evidence does not apply to you. They will help you convince yourself that you can do better. You should have a peek behind the glossy sales brochure, "Brain Shark" videos that are so seductive, and see that behind the curtain the facts do not bear out the sales spiel. Get the facts! The company wants to control your "discovery experience" to control what you learn, and they are very, very good at doing so. However, the facts will show another story if you dig hard enough to find them. The company is selling three things; 1) Lifestyle, 2) Possibility and 3) Association. The lifestyle is very attractive. Who would not want to work from home? You can work from anywhere with a computer and a telephone. Wow, what could be more attractive? What they do not say, or challenge you with, is that typically you will need to plan on banging your head against the phone to reach leads at least six hours a day, five or more days a week. This is before you actually do the client work. Leads are becoming more and more cynical and difficult to reach. In an hour you may make 20 outbound calls and not reach a soul. When you do actually have someone answer, the rejection rate is astronomical. Very difficult. The folks in the top 5 to 10% (Gus, Bruce, Susan, Jeff, et al.) all have developed referral sources such as outplacement firms. But these folks are by far the exception and not the rule. Unless you have a track record of phone sales you have no idea how soul sucking this can be. Do not kid yourself like so many others before you and say "Yeah, I won't like it but I can do it." A decade of history shows you won't like it and won't do it for very long. Regarding possibility, this is where the franchisor is really masterful. They have mastered the art of redefining "The System" every few years which allows them to completely disavow any and all prior results. While the company has required and collected financial reports be filed from franchisees since at least 2008, and virtually every penny of revenue is distributed through the franchisor to franchisees (after taking out royalties), the company still does not produce an earnings claim in the FDD. You should ask yourself why that is? They have long held the data and it is not that much of a regulatory burden to file an Item 19 claim in the FDD. The reason is that the results are not in alignment with what they are selling. They would rather have you buy into what you "might" be able to do rather than share with you the results of the folks that are actually out there doing it. They are helping you form, and then selling you, a "vision". Unfortunately this vision is not borne out by reality. My experience showed that while the top franchisee of the last several years did $180k in 2010 ($135k net after 25% royalty?) the vast majority (80-85%) of folks are limping along on 3 paid placements or less a year. That is right, I fully expect that 80 to 85% of folks are paid three times per year or less. I would expect the median earnings are closer to $15,000 to $25,000 before expenses for folks that are working this business at, or close to, full time. The company will usually disavow poor franchisee results by blaming the franchisees for not following "The System". Does this make sense to you that 80-85% of folks are not getting results if "The System" were all that the company wants you to believe it is? Even the folks that are finding success referenced above will admit in a more candid moment that they are not working "The System" to a "T". The folks that are failing most miserably are the folks trying hardest to follow "The System" to the letter and not allowing themselves to find something that can work for them. This is because they are afraid of being brow-beaten by the franchisor. Let me be clear, there is, at best, only a vague "System". "The System" is what Terry Powell says it is on any given day, subject to change tomorrow. The company changes "The System" every few years not only so they can disavow past results but also because they are flailing to find something that can work and is replicable. Folks, this franchise has been around since 1984 and selling franchises for almost 15 years. Given that, you would expect that a successful system would have some level of stability. Yes, the system will need to respond to the changing market, but how much would a successful system need to alter the fundamentals? Beyond that, how many franchisees have actually renewed their franchise agreements? Very, very few. A few Regional Developers because their investment is too big to walk away from but very few franchisees have renewed. Bottom line, "The System" is not producing replicable, positive, verifiable results. At the end of the day, isn't that what a franchise is all about? The third thing they are brilliant at selling is association. You will find some of the most intelligent, successful folks have been taken in by this franchisor, because they want to believe. This is so very powerful and key to the seduction. You will meet franchisees who are smart and capable, folks you want to be around and be like. These are folks who will not want to admit to you that they are struggling because they are proud and the franchisor has convinced them that it is their fault. They are the trapped rats who heard the rumblings but decided it really did not apply to them. By now you are probably now thinking that this really does not apply to you. I would ask you to do one other thing for yourself and your family; make some calls to folks that are no longer part of the franchise. This is harder to do because the franchisor does not reveal in the FDD a ton of franchisees that have just quietly closed their doors. The company carries failed franchises on their books and sells them to other unsuspecting folks who are never disclosed that they are repurchasing a recycled failed unit because of the virtual nature of the franchise "units". Thus you should be very skeptical of the turnover data in the FDD. While I would supose that this is technically legal, this allows the company to grossly underreport the failure rate. Any franchisees who negotiate an exit in good faith are shaken down by the franchisor's heavy-handed legal department to extract a non-disclosure agreement so that the company can continue their disingenuous, if not downright deceptive, sales practices. If you speak with a former franchisee that is at all evasive in answering your questions you should ask them the simple question "Are you subject to a non-disclosure agreement?" If they evade, equivocate, waffle, or cannot answer that question then you can rest assured that have your answer. And just to be clear, the franchisor wields their in-house legal counsel like a bully with a club. No matter how wrong they are, the onus is upon the franchisee to go to court to make it right. Even though the franchisee will likely be proven right in arbitration or a court of law (see disclosure in FDD) the franchisee has to take on the time, expense and aggravation in order to do so. As wrong as it is, that is just the way the system works. Last, and probably most damning, the franchisor does not have the best interests of the franchisees in mind. Most of the changes in the last 5 years or so are really focused on what is best for the franchisor. For instance, the company will tell you that the Franchise Match system is for the benefit of franchises. And there is some modicum of benefit. However, one should consider a couple things. First, the leads generated by Franchise Match are of suspect quality. There will be some nuggets which the company will celebrate until the cows come home, but any lead who just wants a "virtual experience" is really less likely to take a phone call from a franchisee, not more likely. So, more banging your head against the phone. Second, these leads are paid for out of the ad fund so this is the franchisor's way to siphon money out of the pool and into his pocket. Three, the franchisors who advertise on Franchise Match pay $800 or so a month to participate. This money goes right into that same pocket and does nothing to help franchisees. Many franchisors have told me that they could not increase their placement fee, which would go to franchisees, because of this fee. Worse, because so few franchisors signed up to participate, the company decided to make participation mandatory and any franchisor that did not sign up for the $800 per month were dropped from the system and not allowed to be shown to clients by franchisees. This clearly was not in the benefit of the TES client nor the franchisee and was for the sole benefit of the franchisor. If none of this sobers you, I wish you the very best because you have a very difficult road in front of you with a very difficult franchisor who does not have your back and will attempt to monetize your business to their benefit in any way they can. At least you should know what type of partner you are getting in bed with. This is all the bigger travesty because so many good folks are having their dreams of business ownership stolen by a franchisor that uses such sophisticated sales techniques the buyer hardly has a chance. Most folks do not realize the folly of their investment until they go to conference for the first time and it is too late. This company could and should be so much more given the good people it attracts, but the company has no integrity at the top. |
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| have you written to the FTC: https://www.ftccomplaintassistant.gov/ |
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