October 6, 2012
SHOWHOMES Franchise Complaints include churning existing territories (ie allowing franchisees to fail, then reselling the territory), dwindling sales, a high franchise failure rate, and paying existing franchisees to give glowing recommendations to prospective franchisees.
(UnhappyFranchisee.Com) Showhomes is a home staging franchise that aggressively markets its franchise opportunity.
Showhomes franchise website reads:
“OWN A SHOWHOMES HOME STAGING FRANCHISE!
“Showhomes, the premier home staging franchise, offers you these advantages:
- A tested, in demand business
- Work from home with small staff
- Relatively low investment
- 25-year track record of growth & franchisee support
“Through our nationwide franchise network of home staging experts, Showhomes has helped over 25,000 Homeowners and their Realtors sell homes valued at over $8 billion!”
SHOWHOMES Franchise Complaints are on the Rise
BE VERY WARY about buying a franchise from this outfit. Showhomes bills themselves as America’s largest home stager, but are working hard at being America’s largest home staging Ponzi scheme.
DO NOT TRUST any current franchise owner to give you an honest assessment of this business. Franchise owners receive $10,000 for every investor they convince to buy in. These people do not disclose this fact upfront. You will not find out about this until after you buy. You think you are getting the kind of true and honest information you need to make a business decision from the people who might become your peer group. Instead, who Showhomes management has you talk to, are in reality extensions of their paid sales team working "undercover"… a sales team that doesn’t get paid unless they help close the deal.
This business practice isn’t new for Showhomes. Many of the franchisees gladly engaging in this deceptive practice presently were unknowing victims themselves when they bought in, so see nothing wrong with balancing the ledger when it comes to their personal account by passing the debit on to to some newbie.
There are usually two sides to every story… but not in this case. Sometimes wrong is still wrong no matter the energy of any retort or the red herrings thrown back.
Showhomes Franchise Corporation and for-sale Showhomes franchise owners have a vested interest in refuting or deflecting posts like the above complaint… instead of acknowledging the issue, whether it is an allegation of unethical and deceptive business practices, or fraud, and then committing to a change in behavior.
To shed more light on this:
1. None of the Tampa area Showhomes franchises are doing well based on their P&Ls. None. One owner said that last year she had a ‘profit of just $4, 000′ before taking a penny out to pay herself.
2. Nationally, Showhomes’ August 2012 gross revenues from all their franchise territories was 9% lower than from a year ago.
3. Showhomes Franchise Corporation charges an industry high 10% royalty tax every month based on a territory’s gross monthly revenues. AND they also mandate an additional 2% of gross for an advertising fee, another 2% of gross for insurances, and they debit you for the cost of their annual meeting whether you attend or not. Altogether, this comes to about 15% of each franchisee’s gross revenue being shipped off to Showhomes Franchise Corporation. For many furniture staging jobs, 15% is your total profit margin.
4. Showhomes Franchise Corporation requires minimum royalty payments of about $800 per month from each new territory sold. In other words, each territory owner has to gross $8, 000/month in order not to be hit by a ‘higher than 10%’ royalty rate for that month, which I already mentioned is the industry high royalty rate. Here’s the kicker: the average gross monthly income per Showhomes territory through August 2012 was under $5, 000/month. If we can assume Showhomes Franchise Corporation has a trackable business model with contractual consistency across all their newer territories, then it appears that the majority of Showhomes territories are not making minimums and are in fact, in trouble financially.
5. Since Showhomes Franchise Corporation started in 2003, the failure/dropout rate for new Showhomes franchisees has been high, yet the corporation seems unaffected. Why? The answer is the franchisor doesn’t realize a penalty for failed territories, only the franchisee does.
In fact, the Showhomes franchisor can theoretically make more money if new owners fail and he resells the territory before their third anniversary. Assume a new territory does better than average and grosses $8, 000/month for 3 straight years, and then goes under. $800/month x 12 months/yr x 3yrs = $28, 800, which is the amount in just royalty payments sent to Corporate. Showhomes Franchise Corporation sold territories in 2011-12 for between $30, 000 and $44, 000. Clearly, 28, 800 is less than the sale/resale revenue from flipping the same territory over and over again within every three year period. It’s even more profitable for the franchisor if new franchise owners fail before their second anniversary. This is indeed happening.
Ergo there is a growing motivation to ‘sell’ if you are a current Showhomes franchise owner, and just as strong a motivation to preempt any issues brought up by ‘rock the boaters’ until yours actually sells.
Back to the original point of the above complaint: Showhomes Franchise Corporation pays its current franchisees $10, 000 to help them sell ‘territories’. For a non-insignificant number of Showhomes franchise owners, this is more than the profit they earn working the business in a year. Buyers think they are getting critical decision-making information about the business model before they buy, not a sales pitch made by what are essentially people who are an extension of the corporate sales team working "undercover".
Getting paid a referral fee is not illegal, but being on the take and not disclosing it is clearly unethical and a deceptive business practice because of the role you play in getting/closing the sale. Being better informed about who is giving you advice and their background/motivation I think is important. That’s the whole reason for why the poster wants to fully disclosing this practice on this and other consumer protection forums on the World Wide Web.
ARE YOU A SHOWHOMES FRANCHISE OWNER OR FORMER FRANCHISEE? ARE YOU FAMILIAR WITH THE SHOWHOMES FRANCHISE OPPORTUNITY?
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