FBR Franchise Business Review claims to be a respected franchise market research. A critic claims that FBR is a franchise lead generation firm that cleverly enables franchisors to circumvent the FTC prohibition against making undisclosed and unsubstantiated earnings claims.
(UnhappyFranchisee.Com) Franchise Business Review, or FBR, claims it is “the most respected source of independent franchise information, highlighting today’s top franchise opportunities — based exclusively on the ratings and reviews from thousands of franchise owners.”
We’re a little confused about how they work exactly, but Franchise Business Review apparently conducts franchisee surveys for participating franchisors.
Negative results, it seems, are never released publicly.
If the franchisee survey results have franchise marketing value, they are packaged into reports that the franchisors can use to boost their credibility or in their franchise sales efforts.
Franchise Business Review offers participating franchisors advertising and lead generation options in connection with its website and a slew of slick, glossy digital publications.
We received a complaint from an Unhappy Franchisee reader (we’ll call him FBR Critic) who sent us a copy of the 2015 Franchise Business Review Multi Unit Special Report, along with this message:
FBR claims to be a research firm. FBR is a franchise marketing lead generation website.
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They are doing with this report what the FTC and certain states do not allow.
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FBR is charging its franchisors for an unlawful earnings claim service. Franchisors mostly would never do this themselves excepting for the aggressive violators.
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Franchisors wouldn’t not even been lawfully able to provide this report to prospective franchisees. No franchise lawyer worth their salt would let their franchisor client use FBR.
FBR Critic pointed out that the FTC forbids franchisors from making Financial Performance Representations (FPRs, aka “earnings claims”) unless they have substantiation for the claims and they are disclosed in Item 19 of the franchisor’s Franchise Disclosure Document (FDD).
The 2015 Item 19 for fledgling franchisor and FBR advertiser You Move Me states “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets.”
However, a “Featured Franchisee” advertorial in the FBR Multi-Unit “Special Report” quotes You Move Me franchisee Andrew Wilson sharing pretty blatant financial performance representations:
What surprised you most about opening your own business?
We did close to one million dollars in sales in the first year, I couldn’t have predicted such success in such a short time. It was an incredible achievement; and indicates that the moving market is filled with opportunity.
What’s next for you and your business?
It’ll be another busy year for our You Move Me business. After doing $1.3 million in revenue in 2014, we’re projected to hit about $2 million in 2015.
For an expanded analysis of Andrew Wilson’s claims, read YOU MOVE ME Franchise Brian Scudamore Making Illegal Earnings Claims?
In the Item 19 of its 2015 FDD, FBR advertiser ShelfGenie includes representations regarding the dollar amount of the average order in 2013, the meeting-to-sales ratio and the cost-of-goods sold… but it declines to include overall profitability of its franchises.
However, ShelfGenie shares this Financial Performance Representation via the FBR Multi-Unit Franchising “Special Report”:
“I netted 20% out of my business last year,” says Ric Trahan, a ShelfGenie franchisee who owns six units in Houston and two in Austin, Texas.”
…He invested in his first ShelfGenie franchise in 2009. During his first year in business with ShelfGenie, he broke even. By the second, he was profitable….
HomeWatch Caregivers make financial representations regarding gross sales and average staff wages in its 2014 FDD, but does not provide information regarding when and if franchisees break-even.
“If you receive any other financial performance information or projections of your future income,” the FDD states, referring, one would assume, such representations as when and if franchisees reach break-even, “you should report it to the franchisor’s management by contacting Leann Reynolds…”
Yet it is Ms. Reynolds providing a Financial Performance Representation in the FBR “Special Report” on Senior Care franchises:
Leann Reynolds, president of Homewatch CareGivers, says franchisees typically break-even (revenue minus expenses and not counting owner salary or loan payments) in 6-9 months.
Synergy Homecare is another company that opted not to disclose break-even information in its 2014 FDD, but apparently was OK providing it in Franchise Business Review’s Senior Care franchising “Special Report”:
“I was able to break even within 6 months, so the wait time is not long if you launch successfully and begin to grow,” said Synergy Homecare franchisee Mitch Opalski.
About these franchisor representations in Franchise Business Review publications, FBR Critic states that they mislead readers into believing “all franchises make money, whether multi-unit or single unit.”
FBR Critic states:
This is an unlawful way to make a earnings claim.
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This may rise to be criminal conspiracy.
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These are franchisors and franchise marketers who know franchise compliance and who are collaborating to violate the law.
What do you think? Is Franchise Business Review and its franchisor advertisers collaborating to circumvent the FTC Franchise Rule? Or are these statements not, in fact, illegal earnings claims?
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TAGS: Franchise Business Review, FBR, FBR Top Franchises, Eric Stites, You Move Me franchise, ShelfGenie franchise, Shelf Genie franchise, Homewatch CareGivers franchise, Leann Reynolds, Synergy Homecare franchise, franchise complaints, unhappy franchisee
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View Comments
This is quite exceptional. What are these franchisors thinking? Do they think that franchisees who are deceived won't get a franchise attorney and show them these profitability claims?
Deceptive franchisors outsourcing claims they can't make by utilizing a 3rd party. Do they really think they can get away with this?
FBR Critic is likely Jeff Johnson at FranSurvey who has never been able to scale his business model and has struggled to earn much market share so he has resorted to these types of mug slinging tactics in hopes he can take away some of FBRs business. Many of the companies that FranSurvey lists as 'world class' are laggards in their category and only are 'world class' because they pay Mr. Johnson an annuity to advertise on his site. Let's be honest here....he's just as much a marketer and lead generator as FBR, if not moreso.
Todd, who cares who FBR Critic is? If these really are illegal earnings claims it means one of two things: That the FBR advertisers aren't aware of it and FBR is putting them at risk, or the advertisers are complicit in it and none of those companies should be trusted.
It seems a little hard to believe that Brian Scudamore who founded You Move Me doesn't know it's wrong to send out a magazine cover promising $1M in the first year.
Plus, Todd, please link to where FranSurvey published illegal earnings claims.
Yes if this earnings claims franchisor marketing bad practice extends to FranSurvey post them too.
Ok, some of these examples look bad.
But, now consider the Homewatch Caregivers franchise.
They have a lengthy item 19, worth reading and understanding in full.
But there is no mention of a break even period in the Item 19, or least that I could find.
And what happens to the prospect who reads about the break even point?
Read their Exhibit M -a standard disclosure acknowledgment.
To wit: "No promises, agreements, contracts, commitments, representations, understandings, “side deals” or otherwise have been made to or with me by any employees or representatives of HII (or any third-party franchise brokers) with respect to any matter related to the HII franchise, including but not limited to any representations or promises regarding advertising, marketing, site location, operational assistance or other services;"
Well, anyone who read the the FBR report probably did want to rely upon Ms. Reynolds statement about the break even period.
It is clearly a representation & not puffery.
And using the Item 7 and knowing the break even point, the prospect is going to get a "new earnings claim".
And to make matters more complicated, this franchisor has a link to the FBR report or award. They may adopted the claims in the FBR and be deemed legally incorporated them into their FDD.
This is all a shame because this franchisor has what appears to be a decent Item 19.
(Anyone know their outside counsel -- who is probably completely unaware of this!)
The 2014 CA registration for Homewatch was submitted by:
Ballard Spahr LLP
1225 17th Street Suite 2300
Denver CO 80202 3396
TEL 303 292 2400
FAX 303 296 3956
www ballardspahr com
Lynne M Hanson
Direct 303 299 7347
Fax 303 296 3956
hansonlm@ballardspahr com
Admin, you should ask the franchise attorneys for comment on their franchisor client's franchise marketing practices.
You Move Me denies any and all allegations of breach at any time of the FTC Rules on franchise disclosure, related to financial representations or otherwise.
You Move Me,
Did you not read this?
"What surprised you most about opening your own business?
We did close to one million dollars in sales in the first year, I couldn’t have predicted such success in such a short time. It was an incredible achievement; and indicates that the moving market is filled with opportunity.
What’s next for you and your business?
It’ll be another busy year for our You Move Me business. After doing $1.3 million in revenue in 2014, we’re projected to hit about $2 million in 2015."
This is your advertorial that you paid FBR to make.
Looks like You Move Me has been blasting this claim all over the Internets.
Andrew Wilson was a franchisee of 1-800-GOT-JUNK in Kansas City. From an Entrepreneur profile: "When the founder of 1-800-GOT-JUNK? Brian Scudamore decided to start a moving franchise, I jumped at the chance... We did close to 3,000 moves in our first year...
"In 2013, we did close to $1 million in revenue between our locations in Tulsa and Oklahoma City which was a pretty impressive feat given it was our first year. In 2014 we are hoping to surpass $1 million and will then look at possibly expanding to a third location."
http://www.entrepreneur.com/article/231816
This article in Military Transition News features Wilson: "This newest venture, which he has been running for about 18 months, already has earned nearly a million dollars in revenue."
http://www.civilianjobs.com/issues/Military_Transition_News-SepOct_2014_print.pdf
VetFran: "Andrew recently launched a moving franchise called You Move Me. In his first year of business he did $1 million in sales."
http://www.vetfran.com/category/franchisee/page/3/
"Smart Hustle" magazine:
"Andrew and his growing company expect to surpass $1 million in sales in 2014."
http://www.smarthustle.com/from-service-to-startup-veterans-making-their-way-as-small-business-entrepreneurs/2/
Founder Brian Scudamore is an experienced franchisor... hard to defend this as an accident.