TERIYAKI MADNESS Franchise Warning

Teriyaki Madness is a franchise opportunity with a website promising “FLAMING HOT SUCCESS BABY!  $225K INVESTMENT, $224K PROFIT.”

Teriyaki MadnessTeriyaki Madness has sent the needle of our franchise hype-meter into the red, so we suggest you approach this franchise opportunity with extreme caution and skepticism.

The Teriyaki Madness website promotes a video in which franchisee Dean Clarino brags about his million-dollar store.

“I started in 2006-2007 with the first store, in 2011 I built my second establishment…” says Clarino.  “This particular store, this year, we’re looking at doing over a million… my first store does over $800,000 (It used to do $400,000 five years ago)…”

“We never have a bad day, we always have a good day…”

As franchise attorney Michael Webster points out in his article below, the $224,000 profit number is extrapolated from a single company-owned store – not even a franchise.

Of the few stores documented in the company’s Item 19 Financial Performance Representation in its 2012 FDD, there is no documentation of a $1M+ franchise location.

The following article by Michael Webster was originally published on The International Association of Franchisees and Dealers website, and is reprinted here with permission via Creative Commons license.

 

How Much Can I Make with a Teriyaki Madness Franchise?

By Michael Webster on July 1, 2013 10:09 AM

Mike WebsterOne of the important findings in behavioral economics is the discovery of “anchoring”.  Anchoring is responsible many poor financial decisions and this is how it works in franchise sales.

Science has discovered that when we are presented with an estimate or percentage measure from a population that we know nothing about, we tend to anchor on the estimate and act as if it was true -even though we understand that we have no real knowledge.

Here is an example, from a QSR interview and Teriyaki Madness, which states how much you can make with Teriyaki Madness.

“He says that not only are potential franchisees attracted to the impressive numbers operators are pulling off–including an average 23 percent same-store sales increase; AUVs of $855,000; and profitability of 16-21 percent–but also to the uniqueness of the concept, which combines Asian flavors with healthy items.”

Now you and I have no idea whether the AUV is correct, what the average is based upon, or how “profitability” was calculated.  However, the science says that you will anchor on these numbers and act is if they were true – despite not knowing what the Item 19 actually stated.

You will also notice that this claim made in an interview could not be compliant if it were an ad – the required disclaimer about how many units achieved that AUV is not present.  QSR can make this claim on behalf of Teriyaki Madness only if the interview is not a paid advertorial.

So for fun, let’s take a look at the numbers behind the claim.

This is from Terriyaki Madnesses’ 2012 FDD – and things could have changed by then.  Even so, the real numbers are revealing.

Teriyaki Madness Item 19 (2012)

We have provided the following information: the high and low annual gross revenue information for each year that the franchised locations were open; the average same store sales percentage increases for each year; the average unit volume of the group for each year; and the  number and percentages of franchisees that met or exceeded the average unit volume for each year.

For 2011, four (4) Teriyaki Madness restaurants were in operation for the entire year and for the years 2008 to 2010 only three (3) Teriyaki Madness restaurants were open for the entire year.

Teriyaki Madness Item 19

The financial picture disclosed in the Item 19 looks very different from the rosy picture described in the QSR article.  We find out that we have reporting only from 4 units, and two of those units had an AUV between $380,000  and $615,000 for the three years 2008-2010.

A new store would likely face a similar ramp up period.

Even the reported high is less than the AUV reported in the QSR story, compare $796,000 to an AUV of $855,000.

Further, the profitability story is taken not from a franchisee store but a company or affiliate store.

All of the reporting is designed in the writers minds to paint the glossiest story that he or she can tell – but, a smart reader like you knows to go beyond the anchoring effect, read for youself the Item 19, request the back-up for the Item 19,  and then come to a more realistic conclusion.

ARE YOU AN TERIYAKI MADNESS FRANCHISE OWNER OR FRANCHISEE?  ARE YOU FAMILIAR WITH THE TERIYAKI MADNESS FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

TAGS: Teriyaki Madness,Teriyaki Madness franchise, Teriyaki Madness franchise warning, Teriyaki Madness complaints, Teriyaki Madness franchise investment, marketing sherpa, franchise earnings claims, franchise financial performance representations, Item 19

6 thoughts on “TERIYAKI MADNESS Franchise Warning

  • July 4, 2013 at 8:37 am
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    This is just a warning when you read an AUV, or average unit volume, claim to check the Item 19 right away.

    Don’t think that you have got the right numbers the trade magazine’s interview.

  • August 6, 2013 at 3:05 am
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    your facts and info are so wrong even the east things like how many teriyaki madness are there in las vegas? since 2006, 5 and since 2011 . 7 stores . this is an easy cnfirm and is public knowledge . so how are you so far off from total stores and that’s just in las vegas alone. check Seattle , California and texas. ant to claim a tmad store og 2400sq 9k a month cant do 220k a year is ridiculous. I have 11 othe franchise stores in my plaza that do 1.6- 2.8 mil a year , im just the little guy. not sure why your hating on me as a store franchise owner but I bust my tale and my number do not lie. my tax returns prove it year after year. its easy to have 300 tickets a day with a $16 price ticket and do ver million early. I would like to know why u say I brag and im not being truthful. that’s video was done free yes, and its help me bring 32 new people to the tmad family. I hope one day you up date this story when we have 50 stores next year and we take the country by storm, the concept is that easy and itd what people like and want . no gimmicks just hard work and great fresh healthy food. thanks Dean . id feel free to talk to you anytime

  • August 6, 2013 at 5:31 am
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    Dean:

    I’m sorry you misinterpreted the article. Reread it and you’ll see that no one was hating on you nor did we say you were lying.

    You missed the points made in the intro and in Webster’s article.

    The point in the intro is that franchise laws forbid franchisors from disclosing or promoting any “earnings claims” other than those that are documented in the Item 19 Financial Performance Representation section of the FDD. You are free to share your financials individually with prospective franchisees, but the franchisor should not be using them unless they are included in the Item 19.

    If any of those 32 franchisees fail, or do not do the numbers they were expecting, they can claim that they were deceived by Teriyaki Madness, as they were provided “illegal” earnings claims not included in the FDD.

    Michael Webster’s point is that prospective franchisees should check the documented numbers in the Item 19, and be very skeptical if the franchisor is supplying writers and editors with more favorable numbers than they are willing to commit to in the FDD. It’s a time-honored practice of franchisors to sneak more favorable numbers for trade magazines to publish, as its a way to circumvent (so they think) franchise laws.

    We’re not saying the franchisor is being intentionally deceptive, but they’re playing fast and loose with earnings claims which can cause unrealistic expectations in franchisees, and bad feelings, lost investments & franchisor liability when those expectations aren’t met.

  • January 9, 2014 at 4:33 pm
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    I contacted Teriyaki Madness for information. I was hit with a very systematic high end sales approach. There was nothing personal about the process. The negative sale is used at the highest level I have seen in a long time.

    “We have a process to determine if you are the kind of franchisee that we want. We are very choosey at this point, etc, etc, etc.”. I was told that I must complete a Financial Questionnaire before receiving the FDD. This is not uncommon but whenever I asked about it I never could get a straight answer. There is NO reason for a Franchise to not be willing to send out their FDD. If anyone wanted it they could obtain it by purchasing it online for around $290. So, its not as if they are keeping it confidential by not providing it. Any competitor could get it easily.

    I was told more then once that it was a 4-6 week process. I’m sorry but I am not disclosing my financials just to speak to someone and then going thru numerous phone calls which all have to be done by appointment by the way in order to get basic information. I provided my financials and they sent me several very cheesy sales emails with no information in it. There are a lot of Franchises and they do not all operate this way. Their very strong sales approach starts with their website and seems to never end. I am looking for a Franchise who will treat me like a person and not just another “lead”. The gentlemen I spoke with told me of his long 20 years experience in Franchising. Well, I have attended numerous discovery days, even paid as much as $5K to attend one and have never experienced anything like their approach. They are not the only one trying to decide if the other one is a good fit and how dare they think they are superior. Right away the high end negative sales approach turned me off. I do not think I approve of them. I hate it when I let people walk all over me but they have my financials and I still have yet to obtain ANY information from them.

  • January 10, 2014 at 4:33 pm
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    Stacy:

    Thanks for your comment. Here are some thoughts.

    “I contacted Teriyaki Madness for information. I was hit with a very systematic high end sales approach. There was nothing personal about the process. The negative sale is used at the highest level I have seen in a long time.”

    The “negative sell” is common with franchise salesmen. The cliche is “We don’t sell franchises. we AWARD them.”

    “I was told that I must complete a Financial Questionnaire before receiving the FDD. This is not uncommon but whenever I asked about it I never could get a straight answer.”

    Franchise salespeople use the FDD as a carrot to get your application and financials, often. If you would like a TM FDD still, email me at unhappyfranchisee[at]gmail.com and I’ll send it to you.

    “Well, I have attended numerous discovery days, even paid as much as $5K to attend one…”

    Wow. Who charged $5K for discovery Day?

    “Right away the high end negative sales approach turned me off. I do not think I approve of them. I hate it when I let people walk all over me but they have my financials and I still have yet to obtain ANY information from them.”

    I glanced through their FDD and didn’t see glaring red flags (except for 1), but I know what you mean. In our limited interaction with them they seemed kind of arrogant and belligerent. Also, their “$275K Investment. $225K Profit.” sure sounds like a promise of performance – in violation of the FTC Franchise Rule.

    On the other hand, if a franchisee opens and doesn’t make $225K profit they could probably use that in a lawsuit against them. Seems like madness to make such a claim – and not the teriyaki kind of madness.

  • September 1, 2017 at 9:41 pm
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    I came across this article during my research into Terriyaki Madness, which made me look into a lot of articles on the subjects raised here. Very informative.

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