The Fish Window Cleaning Franchise Disclosure Document (FDD) is the required informational document prospective franchisees must receive at least 14 days before they are asked to sign any contract or pay any money to Fish Window Cleaning.
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Mandated by the Federal Trade Commission (FTC), the FDD discloses extensive information about the franchisor and the franchise organization which is intended to give potential franchisees information to help them make educated decisions about their investments. The information is divided into a cover page, table of contents and 23 categories called “Items.”
As a follow-up to our earlier post FISH WINDOW CLEANING Franchise Complaints, we have included some highlights from the 2012 Fish Window Cleaning Franchise Disclosure Document in this post, and included a link to the full FDD below.
Is the Fish Window Cleaning Franchise Growing? (Item 20)
In assessing the viability of any franchise system, one should analyze Item 20 of the FDD to see how many franchises have opened in the past 3-4 years, how many have been terminated or discontinued operations. This can give you a quick read on the health of the franchise system, and whether there is franchise “churning” (i.e. a pattern of franchisees failing and being replaced with new franchisees).
Item 20 of the Fish Window Cleaning Franchise Disclosure Document provides the following data:
|Year||Outlets at start of the year -period||Outlets added||Term-inations||Non-renewals||Ceased Operation – other reasons||Outlets at end of the year|
Total Franchises for the period: 288
Franchises exited the system: 64
% franchises exited the system: 22%
In the past four years, Fish Window Cleaning has grown from 178 franchises to 224 franchises, and increase of 46 franchises. However, during the same period, 64 franchises (22%) seem to have exited the system either through terminations, non-renewals or having ceased operation for other reasons.
Fish Window Cleaning Franchise Lawsuits (Item 3)
Despite the complaints and number of franchisees exiting the system, Item 3 of the Fish Window Cleaning Franchise Disclosure Document states:
No litigation is required to be disclosed in this Item.
Fish Window Cleaning Financial Performance Representations (Item 19)
We were glad to see that Fish Window Cleaning is among the minority of franchisors who provide an optional Financial Performance Representation in Item 19 of their FDD. However, it is unfortunate that they only include the financial performance of the Top Performing outlet, the Top 10% and the Top 50% of the franchisees who provided financial information.
Prospective franchisees should ask Fish Window Cleaning: Why not provide the financial performance of all the outlets that you collected? Shouldn’t franchisees be able to make an informed decision based on realistic data, not just the “best case scenario”?
Franchise Marketing Red Flag #1
In researching a franchise, prospective franchisees should look for inconsistencies between what a franchisor alleges in their marketing materials and what they commit to in the FDD and Franchise Agreement. The Fish Window Cleaning franchise website contains this statement from Fish Window Cleaning CEO Mike Merrick:
Everything we do is focused on enabling and effecting the positive growth of the franchise owners. We don’t sell products to our franchise owners to make money. When we negotiate pricing with our vendors, the franchise owners see the savings. Our income is from royalties. That forces us into a position of being interested and motivated to do everything possible to help the franchise owner grow his business.
However, the Fish Window Cleaning FDD contradicts CEO Merrick’s statement that the franchisor does not make money selling products to franchisees:
During our last fiscal year ending December 31,2011, we received consideration in the amount of $15,286.26 from vendors.
…we and FWCD derived revenues of $233, 206 from the sale of products and supplies, or 3.85% of our total revenues of $6,056,211. based on our Consolidated Statement of Income for the year ended December 31. 2011 and attached as part of Exhibit E. We and FWCD derive revenue from the sale of products and supplies by selling some of these items at a price higher than our purchase price. Other items we and FWCD sell to you at our own cost.
We estimate that your purchase of products, supplies, and marketing materials from us or that meet our specifications and standards will represent approximately 80% to 90% or more of the cost to establish the franchise business and 8% to 14% or more of the cost to operate the franchise business on an ongoing basis.
Franchise Marketing Red Flag #2
The Fish Window Cleaning franchise advertisement on the FranchiseGator.com website contains deceptive and blatantly untrue statements that the U.S. Department of Commerce statistics indicate that franchise ownership is nearly risk-free compared to independent business ownership. On Franchise Gator, Fish Window Cleaning claims:
The United States Department of Commerce offers the following statistics regarding business venture successes and failures:
Franchise Operations –
96% success rate after 1 year
92% success rate after 5 years
62% still in operation after 1 year
25% still in operation after 5 years
The “statistics” have been widely proven to be bogus and untrue. In fact, the International Franchise Association (IFA) has issued memos specifically directing its members to discontinue dissemination of these specific claims. The use of these statistics is troubling, and prospective franchisees should question Fish Window Cleaning franchise sales representatives about their accuracy and use.
Investigate Before Investing!
In closing, the franchise due diligence process is not simple, but critically important to making the right investment decision. Our comments are just quick observations after a cursory review of Fish Window Cleaning’s FDD and marketing. Always consult (and pay) a franchise attorney or franchise industry professional (not a broker who calls him/herself a “free consultant”) for a due diligence review and consultation. Feel free to contact us for a recommendation.
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