Janitorial & Cleaning Franchise Scams

…there was actually a clause that said, “We can terminate our contract with you, at anytime, for any reason and for no reason at all” I thought “Are you kidding me?” Who on God’s earth would enter into a contract with a clause like that?”  Robert, former franchise prospect

A surprising number of prospective franchise owners abandon logic and common sense when they are bitten by the entrepreneurial bug.  These are people who have amassed a certain savings from not only years of hard work, but scrupulous budgeting and planning, and rational financial practices.  But for some reason, many are willing to abandon the logic and practicality that guided them for years and risk it all by entering win-lose binding franchise contracts that basically puts their financial futures completely in someone else’s hands.

Lured by the (relatively) low investment, bogus franchise rankings and awards and aggressive franchise sales forces, many otherwise smart individuals get enamored with the idea of owning a janitorial cleaning franchise.  Robert was one such franchise prospect.  However, Robert actually took the time to read the contract he was being asked to sign, to think about the potential ramifications, and to actually “do the numbers.”

Here’s what Robert discovered about “franchise cleaning scams.”  Anyone considering a janitorial or cleaning franchise would do well to consider the ponts he raises:

“I almost bought into one of these cleaning franchise scams, Think about the insanity of this business, I actually considered handing over $10,000 to an outfit for them to allow me to clean an office building that was totally under their control, and not only pay them that huge amount of money so I could do all the cleaning, but pay them 21 percent of what they were promising to pay me, after i gave them $10,000.

“I always pictured having a conversation with the office manager and saying, ‘You know, I paid $10,000 to have the opportunity to clean this for you and earn an hourly wage’ I just imagined them saying ‘You fool, the sales person was on the phone with me maybe 10 minutes to set up the walk-through, we agreed on the contract within an hour, I gave him the ok after thinking about it for 24 hours, and you got suckered into handing over $10,000 when I could have let you have it for free and you would not be paying 21 percent off the top.’ 

“Just food for thought of the insanity of this business.

“After interviewing with the scam artist (Master Franchiser) I read over the contract, Totally in their favor, there was actually a clause that said, ‘We can terminate our contract with you, at anytime, for any reason and for no reason at all’ I thought ‘Are you kidding me?  Who on God’s earth would enter into a contract with a clause like that?’

I questioned him on this, the answer I got back was, ‘As long as you are doing your job, there is no reason to terminate you’

“I said, ‘its sounds as if I am your employee And regardless of what you are saying to me hear, what is in that contract book is what will count in a court of law, if you terminate me for no reason what so ever, I have no grounds to fight back because I signed your agreement’

“I told them to amend that clause, they would not.

“Also, if the office manager of the building you are cleaning wants to cancel their contract for any reason, they allow that, even though they tell you they have a one year or two year contract with them, It was told to me, ‘We don’t want them unhappy and we are not going to hold them against their will’ But you will keep my money, I cannot get my money back if they cancel,

“But what it came down to for me was the math, I was told $17.00 to $21.00 an hour they get out of the contract, OK, subtract, the 21 percent right of the top for the Master Franchise Owner, now factor in the $10,000 I was going to pay for the account, it would have taken me i figured, 7 months to just earn my money back, If the contract was for two years, I have one year and three months left on this contract where i have to see a profit, I will have basically worked for 7 months for free on a two year contract, so far, not adding up. $17.00 minus the 21 percent, leave me $13.43, now subtract about 20 percent in taxes you pay, uncle sam wants his cut, now i am in the $10.00 an hour range, still need supplies, gas for the car to get to the site,

“And all of this is hanging in the balance of if the contract stays for a whole two years, if it cancels in one year and they often do, or you are terminated because the Master Franchiser knows where his bread is buttered, on the resale of those accounts bebore they cancel completely.

“Between the contract being totally in favor of the Master Franchise owner and the wages dropping below $9.00 an hour, I thought, why on earth would i make an investment in a businesss that sits on shakey ground, actually this business adventure sits on water, as soon as you hand over your hard earned savings, you will sink like a rock. I spared myself the headache and tossed the contract book where it belongs, in the trash, I hope for all of you people that got ripped off, you get your money back.

“The people running these scams should do some jail time for this fraud.”

WHAT DO YOU THINK?  ARE JANITORIAL CLEANING FRANCHISES SCAMS OR GOOD OPPORTUNITIES?  SHARE A COMMENT BELOW.

Has CURVES Become the “Trailer Park of Gyms”?

Ex-Curves franchise owner Deborah blames “corporate greed, lack of quality control and a very poorly run infrastructure” for the once-proud Curves for Women fitness concept becoming (what some have called) the “trailer park of gyms.”

In a recent Curves franchise discussion (CURVES: Robert Lay’s Story), Deborah recounted what she describes as the unscrupulous overselling of the Curves franchise opportunity, and the resulting damage to the Curves for Women brand image:

When we bought a franchise in 2003, there were a few thousand clubs and the closest club was over 5 miles away. You had to have 30,000 or more in population to constitute a “territory”. It does not take many brain cells to realize that when Curves started selling “territories” with as few as 5,000 total population, that a) such territories were not large enough to support a club or b) that existing clubs would suffer member and revenue losses.

We went from a purist apporach to selling everything Curves could throw at us (even an overpriced travel service) in order to shore up corporate and club revenues. What was “contemplated by the parties” in contract terms at the time we signed our franchise agreement and what transpired thereafter, were at odds. Also, there was absolutely no quality control and some clubs were little more than slums. This caused a tarnishing of the Curves brand and I had some people tell me that Curves was the “trailer park of gyms”.

According to Deborah, Curves clubs cannibalized each other’s sales, spreading too-few members across too-many clubs.  Add in lack of support and infrequent-to-nonexistent field visits and you have a recipe for widespread failure:

As the person who sold me the franchise said, they don’t care anything about you or what your are like or what your skills are if you have the money to buy. I was four years into my franchise before I even saw an area director. By that time, we had gone from having one or two other clubs in the area to having six. My membership numbers had peaked at around 600 and, by 2006, were at 300 and falling.

According to Deborah, Curves International would sell a franchise to anyone whose check would clear, including many who were neither qualified nor prepared for business ownership:

My experience with other owners was that some were reasonable business people, but many were naive and had no experience in business. I will never forget my training in Waco. The guy sitting next to me was a chicken farmer whose mother in law had bought him a franchise. As my salesman had said, Curves did not care if you had the money. This guy was a train wreck waiting to happen. By the time I got out of the franchise, three of the six clubs in the area had closed.

The Curves closures in Deborah’s area are consistent with national averages (Read: CURVES Franchise Owners React to Comments That They’re Being “Pruned”) .  It’s been reported that 1000 domestic Curves locations closed in 2009 alone, and that in the past three years 1/3 of all domestic Curves clubs went dark.  Yet despite the devastating losses suffered by Curves franchise owners, franchisor Curves International is enjoying healthy profits.  Curves International actually increased earnings as a percentage of sales, with 2009 earnings of $16.4 million on revenue of $84.1 million.

According to Deborah, the demise of the Curves brand is the result of corporate greed and substandard franchisees:

The Curves disaster is down to corporate greed, lack of quality control and a very poorly run infrastructure…. Lack of care in chosing franchisees impacted the brand. I have no moved back to the Southeast. My local Curves has tacky and cheap paneling that is peeling off the walls, ancient and poorly maintained equipment and (horror of horrors) plastic flowers in plastic vases. The owner is fat, complaining and has the energy of a slug. Am I a member? You answer that one.

WHAT DO YOU THINK?  HAS CURVES BECOME THE “TRAILER PARK OF GYMS”?  SHARE A COMMENT BELOW.

Is FIESTA AUTO INSURANCE & TAX SERVICE a Great Franchise?

The “Tax Only” franchise is dead!

Yes, the Tax Prep franchise was given last rites and declared dead a few days ago right here on Unhappy Franchisee by John Rost, President & CEO of Fiesta Auto Insurance & Tax Service.

Mr. Rost was commenting on a post about JACKSON HEWITT Franchise Complaints when he broke the sad news.

(Technically, he said that the “Tax Only” franchise concept is a “dinosaur,” and since dinosaurs are dead we deduced that he was declaring “Tax Only” franchises dead as well.)

Luckily, there just happens to be a replacement concept for those of you facing extinction.  It’s a franchise two-fer, a veritable service business combo meal called Fiesta Auto Insurance & Tax Service.

Mr. Rost was gracious enough to provide his unbiased insights in the comment section of the Jackson Hewitt post. 

Writes Mr. Rost:

The business environment is constantly changing. Those that believe they have the best system and do not adapt will be swallowed by those that constantly innovate. Consumers get tired of boring brands and poor management along with politicians including the IRS who can damage a system or put it out of business. It is my belief that the “Tax Only” franchise model is a dinosaur. This was a great idea in the past as many franchisees were able to create wealth working only in the tax season. Unfortunately as more tax companies were created along with software available for the independent tax shop the population has more choices. The increased choices ultimately diluted the market and locations originally preparing hundreds or thousands of returns continued to see their market share decrease.

Fiesta Auto Insurance and Tax Service is the only national franchise system that incorporates both a full service insurance agency and tax service. Our franchise owners have a year business opportunity that provides more options for success. Most Fiesta Auto Insurance customers visit the office to make their monthly insurance payments. Having a customer visit monthly improves our customer loyalty and builds customer rapport. This loyalty translates into creating tax customers and places our franchisees in a position of building a business instead of searching for clients every December.

Consider the tax only model where they have a customer visit once or twice to complete the tax process. Then they do not see their client for another year. If the client does appear again they will most likely have the tax return prepared by a new face as most hire seasonal help. How much loyalty will that customer have to the brand based on one or two visits and then twelve months of nothing? Having RAL’s is not the issue. The tax only models cannot brand year round to the consumer and therefore are forgotten. The tax only franchise system is a dinosaur and will continue to see declining results until they ultimately fail or innovate.

If you are interested in a solution to the current tax only opportunity please visit http://www.FiestaFranchise.com and contact our offices for more information.

John Rost
President
Fiesta Insurance Franchise Corporation”

While we do not always welcome blatant self-promotion, Unhappy Franchisee is a great admirer of chutzpah.  It’s a pretty ballsy move to self-promote a franchise in the comment section of a site called Unhappy Franchisee… so we’ll open the floor to comments.

Is the “Tax Only” franchise concept really dead in the water (or tar pit)?

Is the idea of bundling auto insurance and tax services as brilliant as Mr. Rost contends?

Why do “most Fiesta Auto Insurance customers visit the office to make their monthly insurance payments.”? 

Are they actually hosting monthly fiestas?  Are there pinatas involved? 

Because why else would customers pay their insurance in person unless there were pinatas involved?

ARE YOU FAMILIAR WITH FIESTA AUTO INSURANCE & TAX SERVICE?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Is RONI DEUTCH TAX CENTER a Great Franchise Opportunity?

Is RONI DEUTCH TAX CENTER a Great Franchise Opportunity?  Or is it the next great franchise scam?

Depends on whom you ask.

The Roni Deutch Tax Center franchise website boasts franchise industry awards and growth rankings:

Roni Deutch Tax Center is ranked #4 on Franchise Times list of "the Fast 55", a listing of the fastest growing franchises less than 5 years old. Roni Deutch Tax Center was also recently named as an AllStar Franchise by AllBusiness.com, Inc., a Dun and Bradstreet leading online resource for businesses. This award recognizes Roni Deutch Tax Center as being one of the “best of the best” top 300 franchises in the country for 2010 as chosen by the AllBusiness.com, Inc. editors and experts. Roni Deutch Tax Center was also selected by Franchise Business Review as one of the top 50 franchises for 2010.

Roni Deutch Tax Center franchise claims “instant name recognition and brand awareness” as a key benefit

According to the Roni Deutch Tax Center franchise website, “Becoming a franchise owner minimizes your risks and gives you the best possible chance at success.”

A key part of that success, they claim, is positive brand recognition. “Instant brand awareness and the credibility behind that brand are some reasons for why a franchise business may have a higher rate of success than an independent business owner.”

“The name “Roni Deutch” has a 51% brand name recognition,” claims the sales copy. “As a Roni Deutch Tax Center franchise owner, you will benefit from instant name recognition and brand awareness.”

That name recognition and brand awareness is partially a result of the aggressive Roni Deutch broadcast media strategy.  The site boasts:  “During tax season, Roni Deutch also attracts additional clients to tax centers by regularly appearing on CNN, The Today Show, Fox Business, and more.”

How positive will the Roni Deutch brand image remain?

There is no doubt that Roni Deutch has built strong name recognition in the past decade through heavy media advertising.  However, BP also has tremendous name recognition.  It’s doubtful that there’s a single BP franchise owner who sees that as a business benefit.

BP is a great example of how a particular franchise brand can be a blessing that quickly becomes a curse.  Could Roni Deutch be another?

Earlier this year, Roni Deutch was hit with a $34 million law suit by California Attorney General Jerry Brown.

According to the California Attorney General’s web site, “Tax Lady Roni Deutch is engaged in a heartless scheme that swindled people with tax problems. She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills.”

According to Attorney General Brown’s office, Deutch promises to reduce customer’s tax bills while actually increasing the taxpayer’s debt by putting them in “in an endless loop of requests.” Brown claims Roni Deutch pads her bottom line at the expense of the taxpayer.

And that heavy media exposure?  Brown claims that Deutch’s TV ads are “misleading,” featuring fictional testimonials that promise impressive results.  The claim states that “most clients never obtain a tax debt resolution” from Deutch.

WHAT DO YOU THINK?  ARE YOU FAMILIAR WITH THE RONI DEUTCH TAX CENTER FRANCHISE?  IS IT THE NEXT BIG FRANCHISE OPPORTUNITY… OR NEXT FRANCHISE DISASTER? 

SHARE A COMMENT BELOW.

BEST BLINDS: Lissa Wall-McMahel Fires Back re Franchise Lawsuit

Unhappy Franchisee – Best Blinds franchise owners Eric & Laurie Wilson claim that they bought a Best Blinds franchise, but then found out the franchisor had already sold the exclusive territory rights to someone else. 

The Wilson’s sued and won. 

However, the Wilson’s claim the blind company ducked out of paying the judgement by declaring bankruptcy.

When UnhappyFranchisee.com posted the outcome of the lawsuit (read BEST BLINDS Franchise Complaints), Eric Wilson added a warning in the comments section:

…Lisa Wall-McMahel is continuing to do business as usual under the premise that her husband Darren McMahel is the president.

They have also started a “new” business doing the same thing as before, but not offering territories. Buyers BEWARE!!! The “new” scam business can be found at bestblinds.biz The training she is offering can be obtained free by vendors and the wholesale pricing is better directly negotiated with the vendor. She is hoping to create a buying group through her, at higher prices, so that she can receive vendor incentives and rebates. By the way, this is her second filing of bankruptcy. She has played this game before.

Lissa Wall-McMahel responded with a long comment alleging that there was no fraud involved, and that the Wilsons’ took advantage of the court system and, basically, destroyed the Best Blinds franchise program.  Rather than being franchise victims, Lissa McMahel alleges, their actions actually did damage to the dealers who benefitted from the now-dismantled Best Blinds franchise program.

Lissa Wall-McMahel wrote:

“Mr. & Mrs. Wilson were the FIRST franchisees for Best Blinds – prior to that territories were awarded through Business Training Agreements that were not in compliance (unknowingly) with FTC rule on franchising. Best Blinds was converting to a franchise program when the Wilsons made their original contact.

“Mr. Wilson left out a few KEY details in his complaint, as listed below:

“1-Mr. Wilson was FULLY aware of the other person (not a franchise) who had the rights to PART of the territory in which he purchased, since that person referred him to Best Blinds while on a sales call at the Wilsons’ home, with what Mr. Wilson said was “rave” reviews of Best Blinds and me as a person. He even supposedly told Mr. Wilson that he no longer wished to provide service within that territory.

“2-Mr. Wilson was notified PRIOR to training that the agreement had been submitted to the other party, but not signed, and Mr. Wilson chose to go through with the training anyway.

”3-Mr. Wilson was offered his money back plus $6k in attorneys fees prior to filing his lawsuit, but turned it down (supposedly due to the non competition clause in the termination agreement, that protected Best Blinds against other possible litigation).

“4-Mr. Wilsons allegation of FRAUD AND DECEIT is untrue and unfounded since neither judge found FRAUD, and the Wilsons were aware at all times of the other territory owner and were speaking with him (doing “due diligence”) AT ALL TIMES.

“5-Mr. Wilsons claim that the territory was “never repurchased” is FALSE, it was repurchased FOR MORE THAN 6 TIMES THE ORIGINAL AGREED UPON AMOUNT, so that the Wilsons could then operate unencumbered. But, and before the ink could dry, Mr. Wilson filed his lawsuit anyway.

“6-The Wilsons HAPPILY operated as a Best Blinds for over 5 months prior to filing their lawsuit.

“7-Mr. Wlson had numerous conversations with the territory owners during contract negotiations with Best Blinds, and after they became franchisees, right up until they filed their lawsuit.

“8-The Wilsons were party to another business distributorship involvement with family members of theirs within months of contacting Best Blinds, which they only participated in for a few months and from which they received a rather large settlement.

“9-I filed bankruptcy because there was NO money left after buying out the original territory owner for more than 6x what the original oral agreement with them was, and paying the attorney fees from 8 months of negotating with their ever changing and unreasonable demands. We were a very new company just getting launched and just did not have the capital to withstand the lawsuit. I certainly did not enjoy filing bankruptcy, or derive any pleasure from it, or ANY part of this litigation. It cost me a business that I had worked years to build.

“10-This is not a game for me. Once the judgement was awarded in the first case, Mr. Wilson thru his attorney filed a proceeding against me personally asking me to bring to court ANY AND ALL of my personal possessions, including my wedding rings, silver, etc. It was evident that things were going to go from bad to worse, and that the Wilsons would be relentless in collection efforts, and would go as far as trying to take our personal belongings., cars and home.

“11-Prior to court, we entered into settlement discussions on numerous occassions with the Wilsons and their attorney, and it was clear that they wanted $200k+, which we did not have to give. Offers of payments over time were referred to by their attorney as a ‘pig in the poke’.

“12-I NEVER knowingly ‘double sold’ any territories. The ONE Mr. Wilson refers to is one of the older dealer training agreements where (bad) copies of maps were used and drawn onto with territory lines. The maps overlapped in a small area, and was NEVER discovered OR brought up in ANY capacity until the Wilson’s needed it to use in their lawsuit. It was merely a mistake.

“13-There are many happy people who bought into our dealer group, and then signed on to our new franchise program, who still are in the window covering business because of the Best Blinds training and support. Some of whom have been damaged because of the unneccesary dismantling of the Best Blinds Franchise program.

“14-The Wilsons changed their name, but still operate a window covering company, which is in direct competition with my retail operation.

“This IS what is wrong with our country today…LITIGOUS PEOPLE costing our courts time and our small company’s their businesses.

“The reason the Wilsons lost their adversary proceeding in Federal Bankruptcy Court is because there was NO FRAUD. I appreciate that our courts protect individuals from relentless and unreasonable creditors who would rather you live in the street if you do not pay them what they demand.”

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

CHILDREN’S ORCHARD Suing Failed Franchise Owner

According to a story in the Detroit Free Press, Children’s Orchard is suing one of its Oklahoma franchisees for allegedly closing her store and reopening in a new location under a new name.

According to the Free Press article, the lawsuit, filed by Children’s Orchard in U.S. District Court in Detroit, alleges that franchisee Tiffany Thomas (formerly Tiffany Jaecke) and her then-husband Kent Jaecke, signed a  10-year franchise agreement in 2005 to operate a Children’s Orchard store in Oklahoma City.

The lawsuit claims that on July 14, 2010, just halfway through the agreement, the couple closed the Children’s Orchard store, moved to another location, and “clandestinely began operating the store under the name Upsy Daizy, in violation of a noncompete agreement.”

The Free Press states that Tiffany’s father also got dragged into this:  “Upsy Daisy [sic] is owned by Thomas’ father, Paul Overton Thomas, who was unavailable for comment. The lawsuit claims that Paul Thomas knew of the franchise agreement between his daughter and Children’s Orchard and intentionally interfered with that relationship by setting up a competing business.”  Paul Thomas is also named in the suit.

Happy Father’s Day, Paul.

Children’s Orchard alleges that the Oklahoma City franchisees failed to return confidential operating manuals, customer lists, records, files.  They claim that in opening Upsy Daizy, their franchisees violated their franchise agreement and a noncompete agreement, and stole trade secrets.  The lawsuit states:  “Defendants are using the Children’s Orchard Business System and Trade Secrets and are directly competing with the Children’s Orchard franchise system.”

Is Children’s Orchard Pushing Daizies?

Children’s Orchard is legally represented by COI CEO’s brother, Adam (Shaken, Not Stirred) Bond.

It will be interesting to see if Attorney Bond can keep a straight face as he explains the powerful, even magical, success secrets entrusted to Children’s Orchard franchisees upon their acceptance into the franchise’s elite ranks.  When Adam’s brother, Taylor Bond, took over, he proclaimed that he would grow the chain to 300 stores.

In the years that followed, Taylor Bond grew the chain from nearly 100 stores to just over 40 stores.

The brilliance of growing a chain by closing stores is a well-guarded trade secret to be sure.

A Blight in the Orchard.

As their comrades fell around them, disgruntled and failing franchisees formed an independent franchise association called The Orchard Cooperative.  Unable to get their concerns taken seriously by Taylor Bond and COI management, the Orchard Cooperative published a website detailing its complaints.  Chief among those complaints was the onerous Children’s Orchard franchise agreement that made it nearly impossible for franchisees to sell their stores.

In the Free Press article, Tiffany Thomas is quoted as saying “I tried to sell [her Children’s Orchard franchise] several times, but I couldn’t get anyone to sign the franchise agreement.”

According to Orchard Cooperative members, their concerns regarding the agreement, as well as operational and financial issues, fell on deaf ears.

And the stores kept closing…

Whoopsy Daizy!  Everybody Loses.

Of course, it’s likely the defendants will lose (or settle).  That inch-and-a-half thick franchise document Thomas and Jaecke signed 5 years ago was not drafted to allow franchisees to bail on their agreements and open under another name – no matter how bad the franchisor sucks.

And while putting the new company in a family member’s name may have seemed clever at the time, it just served to make  Dad – and his assets – an additional, brightly colored legal target.

But while the franchisees will likely lose, so will the franchisor.

Abraham Lincoln may have come up with the line “A house divided against itself cannot stand,” but Children’s Orchard deserves credit for providing living proof in the contemporary business world.

The irony is, it appears to be a great market for consignment and resales.  Children’s Orchard’s competitors (Once Upon a Child, especially) seem to be thriving while CO’s stores are slowly expiring.  Yet it seems that because the Children’s Orchard franchisor has failed to build a rapport, camaraderie and team approach to building the chain, its desperate franchisees are looking for ideas outside the organization – and their agreements – to get back in the game.

It turns out that Tiffany Thomas has extensive franchise development experience – she was a VP for Glamour Shots.  It’s unfortunate that Children’s Orchard wasn’t able to channel her experience, as well as the energy, creativity and finances she put into developing Upsy Daizy, into their chain or at least her own store.  But when a franchisor is inflexible, autocratic, dictatorial and/or nonresponsive, franchisees will seek other outlets for their entrepreneurial energy and drive.

And it’s unfortunate that Children’s Orchard will now devote time, energy and financial resources toward suing – rather than supporting – their desperate franchisees.

Related reading:

CHILDREN’S ORCHARD: Overview & Links

CHILDREN’S ORCHARD: CEO Taylor Bond Claims Franchisees Giving “Rave Reviews”

CHILDREN’S ORCHARD: May 2010 Press Release

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.