CURVES Franchisee Regrets Not Sticking It to Others
A recent New York Times article features comments from a Curves franchise owner who regrets not having dumped her four Curves for Women franchise locations on some other poor schmuck when her sales were good.
In a recent post on “You’re the Boss,” NYT editors solicited readers’ stories about businesses that did not survive 2009. The owner of four Curves franchise locations (Joan Donofrio of Concord, California) — shared this comment:
“I made my biggest mistake by not selling my first two clubs when they were raking in the money. I could have made a profit of $700,000. Instead I ended up broke and in bankruptcy court. Not knowing when to get out of a business is the biggest hurdle people make…Not having an exit plan is the biggest peril of all.”
According to the writer, business broker Barbara Taylor, the moral of the story is to make sure that when the music stops, you’re not the moron left without a chair . Writes Taylor: “It can be difficult to let go of your business in good times, as well as bad. No business owner plans to fail, but many — like Ms. Donofrio — fail to plan their exit strategy.”
Really? Donofrio’s biggest mistake was not sticking some unsuspecting buyer with her doomed clubs so they could lost $700K more than she did?
Did it occur to Donofrio that perhaps buying a concept that could not withstand overexpansion and/or an economic downturn was her biggest mistake? Or not taking steps to reverse her declining sales? Or perhaps not organizing with other franchisees to demand more support from the franchisor?
The irony of Donofrio’s statement was not lost on commenter Quasimoto, who responded:
Let me fix that for you.
“I made my biggest mistake by not duping an unwitting bagholder into overpaying for my first two clubs when they were raking in the money hand over fist by preying on insecure women that had access to credit. I could have made a profit of $700,000. Instead my greed landed me broke and in bankruptcy court. Not knowing when to get out of a Ponzi Scheme is the biggest hurdle people make…Not having a greater fool to bail you out of your greed laden binge is the biggest peril of all.”
So what was Joan Donofrio’s second biggest mistake?
Perhaps it was posting her true regrets to the New York Times for all to see.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Hold On.
There are two reasons why I can’t condemn her so easily, although her bitterness and her desire to have had someone else take her place among us “losers” makes us want to. (losers in the sense of franchise losses).
1. Looking back at the history of the fitness club market, we see that there seems to be a very short life cycle for any fitness club, usually under 10 years. It has been theorized -widely- that because most people only pay for fitness memberships out of guilt, this marketability of a club is based on whim, and therefore the newest flashiest different-est thing out there gets the next wave of business (often confused with the pet-rock theory). Many of us thought that since Curves was so much smarter (and really, as a woman who first joined at 30-something about 10 years ago, it has been so much smarter for me to use Curves for my fitness club needs) we could make it break that cycle.
And we were apparently wrong.
24hr fitness may have broke it, although I think they’ve just extended their ‘lease on life’ with “the biggest loser” program selling their memberships.
Gold’s is trying to make a “comeback” but it’s not the same golds as it was 20 years ago.
The YMCA just doesnt count. They get non-profit breaks and funding.
Who else (major chains) has lasted more than ten years?
No one.
Curves should have been the one to break the pattern, because it is different. But it didn’t (and I can blame Gary too… he did plenty of things that hurt our marketability… and he missed some opportunities to help us adapt to the “biggest loser market”- like partnering with weight watchers instead of competing with them).
2. Selling her clubs when they were profitable is a caveat of how business is done. (Almost) Nobody wants to buy any business when it’s losing money. I too wish I had sold when I was turning a profit, but I loved working my club and I was enjoying the success. I put that above my business sense.
Yes, it is a matter of who’s without a chair when the music stops, but we didn’t even know we were playing that game then. And who WANTS to be the loser? Quit blaming her for being human.
Quit blaming her for being human? Gary Heaven is human too. Why do you blame him?
I read through hundreds of comments here from failing Curves owners who are outraged with CI & Gary Heavin, who complain about the closing fees and threats against them by CI for closing their clubs. You would think that the Curves franchise owners are poor innocent virtuous victims taken advantage of by big bad unethical Curves.
Then I read the stories about Curves franchisees not making the contract terms clear to their members, billing their customers’ credit cards even after they quit and then selling their franchise to the next sucker by inflating the membership numbers with the people they’re stealing from every month.
How many of the Curves commenters here bought resales from other franchisees out to save their own butts at the buyer’s expense? Are the Donofrio’s and the “another curver” types really any more ethical than CI?
Who are the real crooks here?
Isn’t the idea of business to build a business up, then sell it for a profit? Or is it nobler to go down with the ship so that no one else loses money?
Curved Logic makes a good point. Franchisors only do what they are enabled and encouraged to do under current law and regulation and franchisees try to survive any way they can — even if it means also unloading an unviable business on another franchisees to themselves survive.
CL points out the conflict of interest between those franchisees who are surviving and those who are failing and who have already failed, and those who have bought “used” or “second-hand” businesses either at too high a price or for almost nothing in a fire sale, to either fail or survive at as later date.
The churning and turning goes on outside of the view of new buyers of the franchise because of the lack of disclosure to prospective buyers of the UNIT performance statistics of the franchise system by the franchisors, themselves. New buyers of franchises don’t get to look inside of the system to determine the actual health of the system.
The original “sin” of “captured regulators” and inadequate presale disclosure to prospective franchisees compounds the damage that is done to the “players” in the game —even the franchisors themselves who will continue to sell the often “unviable” franchise to the public to try to maintain their EBITDAs or grow them in the interests of their survival.
If there was transparency concerning the performance of the units of franchise systems, those systems who didn’t produce profits and who had a high failure rate of “founding” franchisees (the first owners) of their systems would have to try to correct the problem because they wouldn’t be able to sell new franchises to the public if the unhealthy churning was visible to new buyers and to new investors in the franchisor’s commercial paper.
If new buyers of franchises, for instance, knew upfront that they had a 20% or 30% chance of failing and that they had only a 40% or 50% chance of ever earning profits, as reflected by the unit performance statistics of the system, would they still buy the franchise? If they did buy the franchise, knowing the odds of profitability and failure, they, of course, wouldn’t feel so “defrauded” when they failed.
But, of course, true and actual disclosure of the risk to prospective franchisees would inhibit franchising and stem the rapid and uncontrolled growth of franchised chain systems that is the principal incentive for the franchisors to try to franchise their businesses for sale to the public.
Franchising, at its best, is very risky because of the (known by government) survival rates of ALL small business startups (50% fail sometime within the first five years) and if prospective buyers of franchises understood these grim odds up front before they bought franchises, they wouldn’t put so much at risk to earn so little or to fail and lose everything!
It is the hiding of the risk and the government’s cooperation with hiding the risk from prospective buyers of franchises through an inadequate presale disclosure scheme that needs to be fixed.
Why is the sale of a franchise investment treated differently under the UCC and Securities Law? Why doesn’t the seller, who will profit, have the legal obligation to disclose all material facts to the buyer before the sale?
Read “Franchise Regulation Realities — Deception or Patriotism” in a Google Search.
http://thegreatfranchisingrobbery.blogspot.com/
I think it’s unfair to judge the Curves owner for not wanting to sell her clubs when they were thriving. The same thought torments me nearly every day since we lost our clubs.
I wasn’t aware that owners are required to sink with their failing franchises, chained to the anchor.
No one knows what the future holds. Should owners feel guilty about passing a hot potato to another before an unforeseen economic catastrophe struck?
“I think it’s unfair to judge the Curves owner for not wanting to sell her clubs when they were thriving. The same thought torments me nearly every day since we lost our clubs. ”
I think you’re missing the point.
If you sell a house in good faith and the next day a tree falls on it, you’re fortunate.
If you sell a house knowing that the tree is diseased and about to fall on it, and say nothing to the buyer, then you’re a scammer.
If a tree falls on your house, you later realize it was diseased, and your reaction is: “I wish I had known the tree was going to fall so I could’ve stuck some poor sucker with my misfortune” then you’re a sleazebag.
If you actually state your misgivings to a national publication with your real name then, imho, you’re a stupid sleazebag.
I think it’s sad that you are tormented that you didn’t pass your ticking time bomb on to someone else so that their family could suffer instead of yours. I’m sure that you’re a good Christian and think of yourself as a good person. I’m sure you’d be outraged someone would sell you a business that wasn’t sustainable. Somehow it would be OK if you did it to someone else, as long as you had pausible denial.
A decent person might regret having bought the franchise in the first place, and fantasize about a scenario where no one got hurt, instead of a scenario in which you merely passed your hot potato.
If you don’t get the distinction I’m sure you never will.
You don’t seem to understand. Her clubs were THRIVING at one point. THAT’s when she said it would have been a good time to sell. Our clubs were doing well, too several years ago. That’s when I wanted to sell.
This woman didn’t know her successful club would collapse. NO ONE did. But once the downturn starts, are you saying it’s a sin to want to get out? If a buyer looks at the books and decides he or she can turn a striggling club around, who are YOU to tell someone it’s wrong to sell?
Are all those desparate owners at McCord wrong to list their clubs for sale? Most are at prices so low that you know they’re just trying to salvage what they can.
Have you been through the hell of watching a business collapse, of losing your home and your nest egg? If not, don’t judge the rest of us who have.
Curved Logis, if you sell your house when the price is at its peak, are you obligated as a Christian to renegotiate the sale with the now-suffering new owner if the market collapses a few years later? Maybe in YOUR black-and white world.
Judge not . . .
There’s NO evidence this owner did anything unethical. Yet you denounce her for regretting not selling her club when times were good. Why? Because you THINK she’s a crook despite a lack of proof?
“This woman didn’t know her successful club would collapse.”
I’ll try this again: She knows NOW. And Now is the time she’s looking back wishing she had stuck it to someone else. Did you read the title to the post?
“Have you been through the hell of watching a business collapse, of losing your home and your nest egg?”
Yes, I have. And the only positive thing I gained out of it is the ability that to say I didn’t intentionally harm anyone else in the process. I regret having made the decision to start the business, regret many other decisions I made. I don’t, however, wish I had put someone else through the hell of losing their home and nest egg. That’s what you’re saying.
“Are all those desparate owners at McCord wrong to list their clubs for sale? Most are at prices so low that you know they’re just trying to salvage what they can.”
There’s nothing wrong if they’re honestly disclosing the real facts. There’s no such thing as buying a Curves for $1. They are still taking on the liability of the lease, the $10,000 closing fee and the tens of thousands of dollars in future royalties. Isn’t that what the franchisees are really selling for their rock-bottom prices?
I would have to agree with wipedout until you can prove to me that she tried to sell her business knowing it was going to fail. Think of how many sold in 04, 05, 06 at high prices and now a good percentage of those clubs have closed. Were those owners who sold crooked? If they sold at inflated prices and lied about membership than of course they are but not all owners did that. Some obviously did and they are in the same book as Howie but the others aren’t. It seems to me that you are forgetting who the crook is here. The question is why did these clubs fail and on whose shoulder should the blame be put on. Was it the owners fault or was it destined to fail as a result of the mismanagement of the franchise? What do you think?
Perhaps this is too subtle a point to be grasped in a forum like this as both my point and the author’s point seems to be eluding intelligent commenters.
Nobody faults someone who sold a club when things were going well and they didn’t know disaster was coming. Congrats to those who got out while the gittin was good.
But it’s different when someone is looking back, knowing what happened, and wishing they could have had someone else lose even more ($700K) in their place.
If you were on the Titanic as it hit the iceburg would you A) Wish you had never bought a ticket, B) Wish you had simply never used your ticket, or C) wish you had sold your ticket for $100 to someone else who would have ended up drowning?
I think your answer speaks volumes about your character. Franchisee Donofrio didn’t pick A or B, but picked C. That’s what the author, I and Quasimoto are pointing out.
Curved Logic makes a good point about the “Golden Rule” that is often so tarnished in the sale of franchises. Those who try to follow the Golden Rule because they value their character are often victimized by those who don’t and try to “do others” whenever possible in their own interests. Lots of “C” types around!
Read the article in a Google Search “It Ain’t Fraud if you Know Better” by Harry Styron, Ozark Business Law Blog, for an interesting account of a Brokerage Firm and a Franchise Owner who cooperated to make the Subway franchises in re- sale look more profitable than they actually were by indicating that the owner received a salary of $50,000.00, etc.. —and this was not true! –this was a lie!
The lower court found for the new buyer, the plaintiff, and awarded good damages. But! the Brokerage Firm and Owner appealed, and the judge in the Appeal reversed by using his discretion to indicate that the buyers were sophisticated enough to recognize that the broker? and the owner both would lie to make the sale and that the plaintiffs weren’t justified in relying on the misrepresentation in the sales process!
If even the high-court judges condone all of the lying in franchising and their character isn’t questioned, I guess we have to forgive the “smallness” of Donofrio in trying to “stick it to others” as her way of dealing with a stressful and painful reality.
http:thegreatfranchisingrobbery.blogspot.com/
CL, you mention you lost a business. Did you ever entertain ideas of selling it? Or were you chained to it, in do-or-die fashion?
Wipedout:
A, B or C?
CL, you remind me of the commentator on “Airplane!” who callously said of the airline passengers,” ‘They paid their money. They KNEW what they were getting into. I say, let ’em crash!’ ”
Problem is, most Curves owners DIDN’T know what they were getting into. Curves prefers owners with little or no business experience, probably so they’d be less likely to see the signs of imminent disaster.
I agree that club owners who fudge their numbers in order to dump a dying franchise on an unsuspecting new owner aren’t acting ethically. However, the woman in this article apparently did no such thing. She closed her clubs, went bankrupt and lost everything, something you apparently believe a franchise owner is OBLIGATED to do instead of trying to sell. That’s a laughable stance.
Thei woman simply is lamenting the fact that her clubs once could have brought her a tidy profit had she sold at that time of peak value. How is THAT a sign of lack of character? Haven’t you ever heard of an exit strategy? Are you THAT naive?
At one time we had a hugely successful club with nearly 1,100 members. We worked HARD to reach that toal. Using the Curves figures that set a club’s value at $50,000 per 100 members, we determined our club was worth $550,000. Had we gotten that price and sold at the time of peak membership, I wouldn’t have felt guilty if the bottom fell out after our sale. That’s the RISK you take when you buy ANY business. NO ONE knows what the future holds.
I’m stunned you lost a business, yet harbor NO feelings of regret at not having sold it and pocketed your well-earned profit when times are good. Few people who suffered such a fate would share your pride in being a martyr. You make it sound like making a profit when selling a business is a SIN or something.
I think you’d find very few fans of your critical attitude toward failed Curves owners among the 5,000 owners who’ve had to close their doors.
That Curves owner went down with the Titianic. Happy now, CL?
But she bought her ticket because she heard the Titanic was UNSINKABLE. She didn’t buy her ticket with knowledge the ship was going to sink. That’s the fatal flaw in your argument. We were told Curves was UNSINKABLE and weren;t warned about the perils of the deadly, icy ocean that we were saling over. .
I’d choose A. I wish I’d never HEARD of Curves, and I wish I’d put my foot down when I knew when it was time to cash out.
This headline is extremely unfair. The owner doesn’t regret not “sticking it to others.” That’s something a sociopath would do.
It’s clear she regrets not having a sound exit strategy and not selling her clubs when times were good and the clubs were profitable and valuable.
There’s a HUGE difference.
wipeout,
In the above post you state “Using the Curves figures that set a club’s value at $50,000 per 100 members, we determined our club was worth $550,000. ”
Where did you get the equation or formula for the basis of determining the value of your club? Is this something you came up with or do you have something from Curves Corporate showing this evaluation method.
Curves was always vague about its pricing. But that’s one of the formulas we heard over and over again from owners, former oweners and McCord Busines Brokers.
I reread comments here and on the Robert Lay post. The franchisee’s double standard here is amazing… dare I say hypocritical?
In defending the franchisee who laments not sticking someone else with her loser clubs, Wipedout wrote “Isn’t the idea of business to build a business up, then sell it for a profit? Or is it nobler to go down with the ship so that no one else loses money?”
Wipedout wrote “If a buyer looks at the books and decides he or she can turn a struggling club around, who are YOU to tell someone it’s wrong to sell?”
According to Wipedout business owners should build up businesses and sell them, at a profit, to people who think they can make them successful… even if the seller was unable to make them successful. OK. Fair enough.
But when it comes to CI and Heavin, those same principles no longer apply. Shouldn’t Curves’ goal be to build up its business and sell franchises (and eventually the company) at a profit? Isn’t that the goal of business, WO?
If a franchisee thinks they can make a franchise successful in a small market where others may have failed “who are YOU to tell someone it’s wrong to sell?” Why isn’t it OK for Heavin to sell franchises in any market where a franchisee thinks they can make it fly? Isn’t that what you said?
Does Wipedout thank Heavin & Curves for the good years when s/he had a thriving club with lots of members? No, here’s what Wipedout writes:
“We want Heavin’s money. We want our lives and peace of mind back. We want compensation. He sold far too many franchises and oversaturated the market. We want him punished financially for doing so.”
I guess it’s ok for a franchisee to sell a business opportunity for a profit, but whomever sold you yours is just plain evil. Hilarious.
The point is that Curves and all franchisors make a profit even on those units that eventually fail as long as they can sell new franchises out of the front door and as long as their franchise contracts contain harsh inducements for failing franchisees to sell their sinking businesses anyway they can to other “innocents.” Generally, those franchise units that are making an actual profit are not put up for sale. The churning and turning of franchised businesses by the franchisees is premeditated in every franchise contract.
The churning and piggybacking that perpetuates the visibility and profits of the franchisor is central to the business model of “franchising” and to the durability of franchising in the economy. Unfortunately, franchisees, under law and regulation, are merely resources for the franchisor to build his business while greatly reducing his risk.
It is this “way of doing business” –this hybrid business model — wherein franchisors can profit from selling licenses to operate short-term unsustainable small businesses that promote the brand name and profits without disclosing the known risk that feeds all of the deception and dishonesty in franchise sales.
http://thegreatfranchisingrobbery.blogspot.com/
My husband and were also owners. The first thing that started to happen was they were allowing new Clubs open with 5 to 10 miles of us in a Large Metro area. We were always losing members to other newly opened clubs. We lost everything…our Curves our home all of our savings. And as far as advertising…we never got people coming in due to TV ads or the 800 number. There were so many of us so close together that the 800 number was a joke….on us! If I had this to do over again I would never buy a Curves! I loved all of my members, but you just couldn’t get ahead. It was our worst nightmare! I just wish I could sue them too.
By the way…we closed one location, and gave the other away. No Charge! You couldn’t even sell the darn thing…………………………we tried. Many of the owners in our area were in the same boat. Curves was the worse investment ever for us. I fell for all the whole thing hook line and sinker. If you go to Curves Camp they are very good at making it seem like the best thing since sliced bread. Run away.
To Curves logic,
You really are hilarious and you need to go back to school and get an education as you just don’t seem to be able to grasp the argument or logic. The reasons this franchise is failing is because of the unethical, illegal, immoral and dishonesty of Howie and his wife. Read the stories and the posts and you should be able to see the pattern of lies and deception that has been used again and again against the franchisee’s. Open your eyes and see the light. While I agree some of the owners are dishonest and unethical the majority are not. Look at the history of Curves and it should hit you like a ton of bricks. It is the management of Curves International that has caused the downfall of Curves and it is the direct response to the way that this company has been run since Howie forced out the founders of the business and was sued for over 20 million dollars and lost or settled the case out of court. Every one is entitled to his opinion but you show your ignorance when you talk about things you know nothing about which is what you are doing. You can certainly try to stick up for Howie and his actions but there is no defense for his unethical behavior which has been only based on greed. Period.
Dianah Mathis: Yours is a sad story and I feel for you and your husband. It’s outrageous that they oversold territories to that degree and never provided adequate advertising campaigns that drive enough business to too many clubs. Sounds like there simply weren’t enough potential members to support the number of clubs they sold.
I think it’s admirable that you take the time to warn others here about why this is not a good investment and why they should stay away. It’s good to hear you say that you regret buying into Curves in the first place rather than that your biggest mistake wasn’t selling to someone at a $700K profit.
unhappy wrote “The reasons this franchise is failing is because of the unethical, illegal, immoral and dishonesty of Howie and his wife.”
unhappy, it’s clear that you have a personal grudge against “Howie” that completely rules your opinions, and that you resort to personal attacks against those who disagree with you in the same way.
There’s nothing wrong with my education nor my logic, though I admit that when it comes to grammatically mangling a sentence (like the one I quote above), you’re in a league of your own.
The failure of your clubs was all Howie and his wife’s fault? So are you saying that if you had opened independent non-Curves branded 30 minute clubs (with no fees, etc.) for women that they would still be open and thriving today?
A local Curves is for sale for literally nothing. Does anyone know what the transfer fees are from CI? Do they run a credit check, or are they just happy that someone is willing to keep the doors open a little longer?
Curves had a staggering 10,000 franchises a few years ago, almost as many franchises as McDonald’s.
Our county had 18 Curves five years ago. Now only nine are left.
Had Curves limited its number of franchises by 50 to 75 percent, franchisees might have had a better chance at success. But Heavin and Co, got greedy and oversaturated the market. Now 5,000 former owners likely have been ruined financially.
Sure! Wipedout! If Franchise Chains, like Conventional Corporate Chain Operations, had to control their growth in keeping with their failure and success rates, things would be different and the blood bath would be stopped.
But, the franchise model, under law, appears to permit franchisors to grow rapidly with no consideration of the failure rate of “founding” franchisees because the franchisor has no capital invested in the franchisee’s business assets and CAN profit even as 50% of his units fail over a period of time.
Remember! All of the time a franchisee is TRYING to attain breakeven, the franchisor is getting his profits. Additionally, even the failing units can often be churned to NEW franchisees who will TRY-TRY again.
This scenario wouldn’t be possible if franchisors were mandated under law to disclose the failure rate of “founding” franchisees in their systems. Please read in a Google Search the Article “Franchising Fraud – The Continuing Need for Reform” written by attorneys in a Google Search for an excellent discussion of the “inducement” problem in the sale of franchises and the ramifications for franchisees of “captured” regulators and ineffective regulation.
http://thegreatfranchisingrobbery.blogspot.com
Potential buyer, Curved Logic thinks the seller of that Curves is a bad person.
I think that Curved Logic only pointed out that a franchise is not a bargain even at pennies on the original investment costs when you consider the obligations the new franchisee is assuming —that is, the lease obligation and the “long term” contractual obligations to the franchisor under the franchise agreement.
I’m sure Curved Logic understands the principle that “never an ill wind blows that doesn’t blow someone, somewhere, some good” or something like that and “potential buyer” may want to test the winds! — at his/her own risk! to try to earn a living or realize profits.
We didn’t look to sell our failing The UPS Store but the AR brought a buyer to us when we notified Corporate that we were losing thousands of dollars every mointh and had exhausted our startup costs and would be closing down. Of course, failing franchisees give their businesses away to lessen the debt and to get out from under the personal guarantees on the franchise and the lease, and the franchisors are happy if there is someone standing by to take over the business, and that the business continues to feed them royalties, commissions, and fees.
http://thegreatfranchisingrobbery.blogspot.com/
Potential buyer
Yes Curves International does now run a credit check on any new buyers and have also changed the regulations to when you sell a curves the seller is still obligated for one year if the new owner fails. So even if the owner finds some sucker to buy the club their still on the contract and liable to the franchisor for one year after the sale. Before anyone buys a franchise from Curves International they need to read the franchise agreement and have a lawyer go over it for them as they have come up with a new very prohibited contract which from our understanding is very legally binding where the old contract will not hold up in court. They have included closing procedures as well as penalties if you are not in compliance with the contract and can be fined 200 dollars per day for each violation. You would be be nuts to even consider buying a Curves franchise at this time. Walk away at any cost as you will be in the same position as all the other owners on this site if you buy one. At least you have been warned before hand so you know what you are in store for if you purchase one. Buyer beware.
Carol,
You are obviously totally against all franchising as a result of your experience with ups and I can certainly understand your feeling but not all franchise’s are the devil. If the franchisor is honest, ethical and has a good management team I still believe they can be good investments. On the other hand I would like to see more regulation of franchisor’s to keep the dishonest ones honest. How about starting a group to push for legislation in that direction. With your energy, writing ability and determination you may be able to be the driving force to get it done.
Thanks Unhappy! The only reason I post is to try to stir up interest of franchisees to do their own research and to push The Congress –their elected representatives, to do something about the ineffective and captured regulatory policy that permits franchisors to sell often unviable and unprofitable franchises to the public without disclosing the material risk, as known to the franchisor.
What, then, is the purpose of regulation? Did government lie to the public when they indicated that the purpose of the “special” regulation of franchising in 1979 (and not licensing?) was to mandate that franchisors disclose “essential” information that would permit prospective buyers of franchises to assess the risk of the investment and compare it with other investments.
If you will read Robert Purvin’s (AAFD) public comment to the FTC and if you will really read the American Business Law Journal Article “Franchising Fraud, The Continuing Need for Reform” you will understand that the “flaw” in regulation and the “no private right of action” for franchisees is a premeditated subsidy of the franchisors that is unfair and immoral public policy that destroys many innocent good faith buyers of franchises who would have not bought these franchises to begin with if the real risk had been disclosed to them.
I am just one person with no clout or personal influence — but if enough franchisees actually understand the premeditated incompetence or deception in regulation and the fact that there is NO true pre-sale disclosure concerning risk when buying a franchise because of the ineffective FTC Rule, and generally no legal recourse because the law has been stacked against franchisees to implement federal regulatory policy, maybe something will be done? Maybe!
I am not against franchising if the flaw in the rule is fixed and prospective franchisees really understand the risk of being a first owner of any particular franchise as demonstrated by the financial performance of the “founding” franchisees of the system that they are joining. At least sites like “Unhappy Franchisee” provide the opportunity to “warn” others who may then warn others and “word of mouth” will impact franchise sales and the “honest” franchisors will ask for more effective presale disclosure????
The Committees of the Congress already understand that there is a serious flaw in regulation and protective legislation has been proposed but the prospective buyers of franchises don’t know they need a Political Action Committee and have no PAC and money to overcome the influence of all of those who profit from the ineffective regulation and who defeat any bills to level the playing field.
http://thegreatfranchisingrobbery.blogspot.com/
Carol you maybe just one person but it appears you have the time, intellect, and drive to be the founder of a group pushing for legislation to change the laws and get more regulation on the books. Every organization needs a leader and I for one nominate you and in my heart I know we can get enough franchise owners to join in and give us the strength to get some action in congress. Where and how do we start Carol. Should we start a letter witting campaign to certain congressmen or senators or start a phone in campaign? Instead of all of us posting our thoughts lets take this to the next level were we can really make a difference. Don’t ever underestimate you clout or your influence Carol as a lot of the posters here and on all of these unhappyfranchisee.com/ site’s read and listen to you. We are ready to take action and just need a leader. Do I hear any seconds to having Carol nominated as head of our action committee.
Unhappy! I would be happy to head a PAC that would lobby for effective franchise legislation but I already know that any PAC would not have the money and couldn’t raise the money to counter the influence and lobbying of The Congress and The Courts by the International Franchise Association and other special interests, like the bankers, and the Mall Developers, etc.. and the ABA itself. ..
The head of the American FranchiSEE Association, Susan Kezios, has even testified to the Congress and she has not been successful in getting t he “flaw” in the FTC Rule removed. The AAFD has tried to make franchising better for franchisees, as well, It’s not that the Committees in Congress don’t know that uninformed franchisees are being exploited and defrauded under existing regulation
The reality is that the “sheared lambs” –the franchisees — generally fade away into obscurity when destroyed financially and those who are still standing know that any new regulation concerning pre-sale disclosure is too late to do them any good and they have no time for altruism because they are trying to make a living.
The reality is that effective regulation would reduce the pool of prospective franchisees and no elected representative wants to do this because it is not “politically” expedient. The vote to not fairly regulate franchising can be defended as serving the “greatest good.”
The blood of franchisees in great numbers would have to flow through the House of Representatives and the Senate before they would acknowledge that there is a problem in the regulation of franchising.
The only hope is that “word of mouth” and constant posting by failed franchisees will spill over into the main media who will perhaps find that there is enough interest to expose the franchise model and the subsidy of franchising to the public who will then demand the government to fix the flaw in the rule. (You will perhaps understand, Unhappy, that the Courts and the Arbitrators don’t recognize that there is a flaw in the regulation of franchising.)
Prospective buyers of franchises don’t know or understand that they need a Political Action Committee because they believe that government has already acted on their behalf by regulated franchising and requiring the franchisors to disclose the risk in the pre-sale Rule governing the sale of franchises to the public.
In any business, be it a franchise or regular startup, every owner needs to know when to get out. Everyone has their strengths and weaknesses. When Curves was new, there was not a lot of “work” required to build and maintain the business. Owners got complacent and did not spend their money advertising, marketing, etc. to keep members. Then, the memberships when down because of lack of work and also the economy did not help. This is a classic business problem and not one unique to Curves. Some people do better in a “startup” phase instead of “maintenance”.
Doreen says “In any business, be it a franchise or regular statup, every owner need to know when to get out.”
Obviously, this is true! But, more importantly every owner really needs adequate presale disclosure to determine whether or not they should get into the business in the first place. The reality, according to published data, is that 50% of all small startups will fail out of business sometime in the first five years and this reality is ignored by the policy makers and the regulators.
Curves is surviving today because they expanded internationally and because enough of their units have been churned over in resales to keep them standing until things get better.
This is a “classic business problem” for those who buy franchises without full disclosure of the risk as demonstrated by the financial performance stastistics of the units within the franchisor’s system.
The churning of units in large franchise systems is not visible to new buyers or to investors in the franchise systems because of ineffective regulation of franchising. The franchised chain organization depends upon its ability to hide the risk in the presale process in order to survive in both good and bad economic conditions and regulatory policy supports this goal.
http://thegreatfranchisingrobbery.blogspot.com