USA MOBILE DRUG TESTING’s Franchise Disclosure Document for 2012 provides a Financial Performance Representation to prospective franchise owners.
The representation is used by USA Mobile Drug Testing franchise salesmen and franchise brokers to help convince prospective franchisees to invest $80,000 to $120,000 in a USAMDT franchise.
[Also read: USA MOBILE DRUG TESTING Franchise Complaints]
The Financial Performance Representation states that between January 1, 2011 – December 31, 2011, the USA Mobile Drug Testing location in New Haven, CT achieved the following financial results:
|A&B Employer Solutions Revenue:|
Is USAMDT & CEO Joe Strom Intentionally Deceiving Prospective Franchisees?
The Financial Representation provided in the 2012 FDD makes the USAMDT franchise seem like a pretty profitable opportunity.
[Read it here: USAMDT 2012 FDD redlined]
Why, then, did 30% of its franchises disappear in the past year?
It didn’t add up, so we looked a little closer at the fine print.
Here’s what we found:
The New Haven, CT business used for the Financial Performance Representation is NOT a USA Mobile Drug Testing franchise, but is actually A&B Employer Solutions, Inc. (“A&B”), which operates its drug testing business as an add-on to an existing, previous business.
The A&B Employer Solutions, Inc. website states “Headquarters for A&B Employer Solutions are located in New Haven, CT., however, services are provided nationwide.”
The USAMDT FDD states: “We do not know the extent to which this operator provides products or services outside of his territory, or the portion of its revenues that are derived from outside of the territory.”
So the $329,225.40 revenue number could include sales to existing A&B Employer Solutions clients and/or drug testing clients throughout the nation.
As new USA Mobile Drug Testing franchise owners would have neither an existing client base nor the ability to market outside their local area, the $329,225.40 could be highly misleading.
Additionally, A&B Employer Solutions, Inc. paid no royalties, ad fund contributions or other required expenses that a new franchisee would incur.
A&B Employer Solutions, Inc. did not have to pay the Roll-out Advertising of $10,500 for its first three months.
A&B Employer Solutions, Inc. did not have to pay a $49,900 franchise fee, as the new franchisee will.
A&B Employer Solutions, Inc. did not have to pay a 9% royalties on its gross sales, which would be $29,630.
So it seems that the Financial Performance Representation provided by USA Mobile Drug Testing could be substantially overstating revenue and understating the expenses a new franchisee could realistically expect.
Questions for CEO Joe Strom regarding the USA Mobile Drug Testing franchise opportunity
UnhappyFranchisee.Com has a number of questions for USA Mobile Drug Testing, LLC CEO Joe Strom.
1) USAMDT operated a company-owned location from June, 2010 through April, 2011 in Tampa, FL. What were the sales achieved by USAMDT in its home market? Why not use the Tampa revenue numbers as the Financial Performance Representation?
2) Have any USA Mobile Drug Testing franchise owners achieved $330,000+ in sales? If not, why are you providing this representation in your FDD?
3) Did A&B Employer Solutions, Inc. receive compensation of any kind for allowing its sales numbers to be used in the marketing of USAMDT franchises?
4) Why did A&B Employer Solutions, Inc. sever its relationship with USAMDT shortly after signing a franchise agreement? Is USA Mobile Drug Testing, LLC pursuing legal remedies against A&B Employer Solutions, Inc. for breaking its franchise agreement?
5) According to Entrepreneur magazine, the number of USA Mobile Drug Testing franchises dropped 30% from 77 in 2011 to 52 in 2012. What accounts for the loss of 25 franchised locations?
6) According to our sources, more than 25% of the remaining franchisees wish to close or leave the system. What is causing this franchisee dissatisfaction, and what is USA Mobile Drug Testing, LLC doing to reverse this downward spiral?
7) Do you think that selling the USA Mobile Drug Testing franchise using the A&B Employer Solutions, Inc. numbers and calling it a “lower-risk” opportunity (despite an apparent failure rate of 30% and climbing) is ethical and aboveboard?
ARE YOU A USA MOBILE DRUG TESTING FRANCHISE OWNER, EXECUTIVE, EMPLOYEE OR CLIENT? ARE YOU FAMILIAR WITH THE USA MOBILE DRUG TESTING FRANCHISE OPPORTUNITY? PLEASE SHARE A COMMENT BELOW.
Tags: USA Mobile Drug Testing, USA Mobile Drug Testing franchise, USA Mobile Drug Testing complaints, USA Mobile Drug Testing franchise complaints, USA Mobile Drug Testing failure rate, drug testing franchise, mobile drug testing, Joseph Strom, Joe Strom, Franchise Disclosure Document, FDD