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Performance of Franchisees’ Loans

dollarBelow is the Small Business Administration’s annual compilation of performance data on thousands of franchisee loans it has guaranteed covering loans made from October 1, 2000, to September 30, 2007. A “failed loan” below is when the SBA must step in and pay back a loan that it has guaranteed. However, does failure rate of a loan equal the number of failed franchises? No, because the chart below only captures the worst of the worst, when someone completely abandons their debt obligations. Definitions are tricky and can mask the true data. Franchisees who sell their units and pay off or transfer their loan or franchisees losing money are not caputred. But, the value in the report card can be a vague checklist for avoiding high-failing franchises.
Hat Tip: WSJ

REPORT CARD

Class Leaders

Franchiser Failure Rate Failed loans Total loans
Comfort Inn 0% 0 158
Primrose 0 0 110
Edible Arrangements 0 0 104
Massage Envy 0 0 61
Holiday Inn Express 1 1 157
Culver’s Frozen Custard 1 1 150
Hampton Inn 1 1 88
Bruster’s Real Ice Cream 1 1 84
Little Caesars Pizza 1 1 72
Fastsigns 1 1 71
Super 8 Motel 2 8 363
Best Western 2 3 156
Choice Hotels International 2 3 144
Rita’s Water Ice 2 2 103
Arco 2 2 85
Zaxby’s 2 2 81
Anytime Fitness 2 1 65
Econo Lodge 3 4 119
Goddard 3 3 109
Subway 4 84 1,974
Dunkin’ Donuts 4 17 410
Sport Clips 4 8 191
Cartridge World Stores 4 5 112
Travelodge 4 4 91
IHOP 4 3 67

Class Trailers

Franchiser Failure Rate Failed loans Total loans
All Tune and Lube 48% 37 77
Philly Connection 48 30 63
Cottman Transmission 46 75 163
Blimpie Subs & Salads 37 58 158
Golf Etc. 36 24 67
Cornwell Quality Tool 36 19 53
Matco Tools 30 95 316
Atlanta Bread Co. Bakery 30 18 61
Carvel Ice Cream 26 20 76

Note: Listed by percent of SBA-backed loans that failed between Oct. 1, 2000, and Sept. 30, 2007, starting with the highest rate. When percent is the same, companies are listed from highest to lowest number of total loans.

Source: Coleman Report

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

28 comments

  1. Thanks! Ryan! for getting this SBA default list of franchisee loans out here. And, thanks for indicating that the SBA failure rate doesn’t indicate the FAILURE RATE OF FRANCHISES that can be obscured in in the FDD in the Item 20 transfers wherein FAILED franchisees have transfer-sold their assets for pennies on the dollar to get out from under the long term leases that they signed to house their businesses —and perhaps to save themselves from bankruptcy if they can continue to service their home equity loans, or loans other than SBA loans.

    Franchise loans in the transfer columns of the FDD are often backed by home equities or even 403’s and 401’s or other private savings by those who believe that this is a cheaper and better way to secure and manage the loan to startup the franchised business and bring it to breakeven based on the franchisor’s estimates.

    These failed franchisees have been INVISIBLE to the banks and lenders, apparently, who have only been looking at the franchisor and the expansion of the system and its visibility AND the SBA default list.

    The SBA default list is therefore misleading to prospective franchisees and to the banks and the lenders. Unfortunately, FranData appears to have considered ONLY the risk factor of the SBA loan default when they sell their snapshots or “risk profiles” to franchisees and apparently FranData did no due diligence on the Item 20 columns of the UFOC/FDD and neither did Coleman? Is this correct?

    I did read on the Internet in postings by Attorneys that “generally, the transfers in those LARGE and visible systems, (those who have been around for awhile) indicated sales at a profit while transfers in NEW startup systems were not a good sign. Perhaps the lenders and the banks who were appoving and granting loans with the home equity as security just weren’t looking at the “transfer failures” at all and felt safe because the business loans were backed by home equity that continued to always rise in value and protect their customers.

    In the June-July issue of The Franchise Times, there is an article that indicates that that the lenders and banks will now be looking at the franchisors and the franchisee failure rate to INCLUDE the TRANSFERS and that many banks and lenders will not want exposure to those franchises in which 10% or more of the first owners are failing out of the system, either in default of SBA loans or default on home equity business or any other type loans.

    BUT, OF COURSE, those FAILED franchisees who CONTINUE TO SERVICE THEIR DEBT that was incurred to startup and buy the FRANCHISED BUSINESSES still will not show up anyplace. This is an UNKNOWN NUMBER OF FRANCHISEE FAILURES. And, will it be business as usual and churning and turning and pumping and dumping if the franchisor can stay under the radar screen at 10% as disclosed by those failures that are VISIBLE to the lenders and the banks.

    Apparently, the FTC Rule and the UFOC/FDD as government policy was designed to permit those franchisees who don’t actually fall into bankruptcy and default on their loans to appear in the “transfer” columns and to be visible to new buyers, by way of mandated listing in the UFOC/FDD, who could under law do their due diligence with these transferees who would admit or reveal to the new buyer of the franchise that they had FAILED TO THRIVE. Obviously, the franchisors knew that new buyers would check only a few, if any, of the transferees and if they heard negative news, they would attribute it to “sour grapes” as Paul Steinberg, author of Beguiling Heresy, indicated in a posting on Blue Mau Mau. Only if the prospective franchisee is turned off of the purchase by negative reports by ex-franchisees can they be saved and by the time they are doing “due diligence” on the references, they have already been turned on by “appearances” and/or the visibility of the franchise the economy.

    Apparently, those franchisees who fail but who don’t go into bankruptcy are of no concern and have been of no concern to the government who doesn’t care about the redistribution of the money of prospectrive franchisees into the pockets of franchisors who can very often beat the harsh and brutal startup statistics revealed by the graph provided by Professor Scott Shane in his recent article on the Internet that can be viewed in a Google Search under Franchise Failure Rate Statistics or Small business startup failure statistics.

    ON THE FOURTH OF JULY, I finally FULLY REALIZE that franchising was regulated to promote franchising and the franchisor and that franchisees ARE JUST A RESOURCE for the franchisor whose PYRAMID SYSTEM feeds the economy and the “greater good” — as determined by the powers that be who get to decide what constitutes the “greater good.”

  2. Carol please grow up! Your posts are filled with incoherent ridiculous assumptions.

    Joe1000

  3. You can just Google Carol Eblen, read a few historic posts and her agenda becomes perfectly clear. She is obviously one very confused old woman who sees conspiracies everywhere. Check out the following snippets:

    [quote]
    because his platform embraces many of the beliefs and goals of the independents who want government to serve the middle class of this country and to provide jobs and benefits that result in a strong and healthy middle class.
    [/quote]

    In this post we see that she thinks the role of Government is to provide jobs and benefits for the middle class.

    [quote]
    Why do you think that John Edwards gets so little coverage —even when he has victories? The Republicans don’t want to run against him and would rather count on the “gender” or the “race” issue to assure that they win the White House Again!

    He is the only candidate that isn’t beholden to big interests because of the money. He is independent, smart, healthy and dedicated and would take on the ENTRENCHED interests who are selling out the middle class to maximize their profits in the global economy.
    [/quote]

    In this post we see yet another conspiracy unfolding.

    [quote]
    I’m happy that Ralph Nader will be out here speaking for the American People and our family will support him. Sure hope we don’t have the same dirty tricks to keep him off our Missouri ballot.

    He has always had courage and he knows that the guns will be pointing at him but we need his TRUTH about the Corporate domination of the Congress and the law and he knows we won’t have this conversation with either the Republicans or the Democrats.
    [/quote]

    Here we have conspiracies, and of course the TRUTH, capitalized as always…

    [quote]
    If the legalized extortion of the past twenty to twenty-five years can , in anyway, be justified , it cannot be justified in the
    future and the FTC who is charged with regulating commerce , etc. on behalf of the people could put an end to this ugly
    status quo.
    This would be a moral solution to the problem of shoplifting for the retailers and for the consumers of this country and the
    world. MIT will have produced technology that will be used for the good of humanity and the FTC will be doing their job
    for all of the people — not just the people who run the corporate entities for profits.
    [/quote]

    What is interesting here, Is you might have thought this was about franchising, as it sounds like her franchising rants, but no it is about RFID chips.

    Which goes to prove the point, on politics, RFID chips, franchising, you name it Carol Eblen is the expert, spewing her hogwash of conspiracy theories and strangely shouting for more Government intervention while simultaneously reviling the very Government she touts as a savior.

  4. I stand by my comments that you so kindly reposted for me on Franchise Pundit.

    You help me to point out that “franchising” as a business model supported by government regulation and the SBA is a means olf providing CORPORATE WELFARE to franchisors, developers, landlords, investors, etc.. through the manipulation of the law and process to capture the hard-earned and saved capital and cheap labor of naive and inexperienced middle class Americans —who are brought to believe that “a franchise, a business of your own” is the American Dream to replace their lost job or the lack of good jobs in the economy.

    Now! It is our VETERANS and their family members who are targets of the franchisors and government who says they are honoring VETS with THE PATRIOT LOAN EXPRESS initiative that is a pilot program? Franchising is said to have helped to bring us out of previous recessions and now they are counting on the VETS to again serve their country by serving the interests of the franchisors, the banks and the lenders, the developers, the landlords, the government revenues and the government job numbers WITHOUT disclosing the true risk of the investment as known to the PROPRIETOR OF THE BRANDED FRANCHISE SYSTEM.

    When democracies stop looking for moral solutions to economic problems and allow corporate interests to introduce immoral solutions into the law, this is not good for the people. AND it IS the great middle class of this country who has given us a stable democracy with its promised freedoms and our high standard of living that is admired by the World.

  5. My god lady, you are a total loon. You are demented.

  6. Socialisto Fantastico

    Carol thank you for moving the cause of equality forward! Together we can erase the lines between the classes and there will no longer be a so called middle-class there will be just one equal class where everyone’s needs are taken into account and provided for based on need.

    Franchising will be fair, honest and regulated by Supra-FTC agency that will have actual regulatory power.

    Socialisto Fantastico

  7. Such nonsense to try to obscure the truth that franchise regulation actually favors the franchisor and protects them in arbitration and in the courts, and permits them to sell their franchises at any degree of risk of survivability or profitability to new buyers. Apparently, you have never heard of “regulatory capture” and want to deny its existence.

    Friedman’s “free to choose and everyone in their proper and earned place in society and the economy” did not contemplate that naive and inexperienced business people looking to replace their jobs and to earn income to support their families would be deprived of MATERIAL facts upon which to make their decision to invest in a franchise because of government regulation. But, of course, Friedman isn’t alive and advising the government, and we can’t discuss this with him.

    Equality in our system and democracy means that we are promised equal treatment when we stand before just laws but, of course, this ideal cannot always be realized because the weaker and the less rich and less influential in our society don’t get to write the regulations and the law. Conversely, it is the weaker and the less rich who defend our nation’s laws and ideals in the wars that appear to permit the rich to get richer and the poor to get poorer and the rich and powerful to continue to write our laws.

    Equality in health care and education would truly enable people to be “free to choose” and to achieve their individual potential in a true democracy.

    The government lied when they announced that they were regulating franchising to protect prospective buyers. While they did eliminate the “fly by night” franchisors who were stealing up front, they enabled the “substantial” franchisors to sell their franchises at any degree of risk of failure and unprofitability to the unsuspecting public —and to do this with immunity and impunity under our laws. The FDD and the franchise agreement is merely a license to cheat, lie and steal when the franchisor is so inclined. See Richard Solomon, Franchise Remedies, excellent tutorial on this subject matter.

    The sub-prime mortgage scandal, however, will mean that banks and lenders will have to be more careful and aware of the risk they are taking when they accept home equity as collateral for business loans to buy franchises. And, investors in franchisors in the public and private markets may be forced to take a look at the “real” failure rate of startup franchisees. When push comes to shove, who knows what might happen?

    Who knows how many old ladies and old men and young ladies and young men might attend The University of Google and discover what is going on?

  8. Socialisto Fantastico

    Carol I agree with your views ! Let’s stand together and create new society where all are treated fairly and there is only one equal class.

    Socialisto Fantastico

  9. I don’t think we need a “new” society. I think we need to make sure that our government retains its goal to be a government of the people, for the people, and by the people. The manipulation of the law and process to grant secret subsidies to special corporate interests at the expense of weak and unrepresented constituents undermines the goals of democracy.

    Federal Government regulation of franchising is a subsidy of the franchise industry that is misrepresented as protection of the prospective buyers of franchises. Government regulation, in reality and in effect, assists the franchisors in obscuring the MATERIAL risk factors of the investment in a franchise from new buyers because government wants to encourage franchising in our economy.

    Obviously, new buyers should KNOW the risk of failure and unviability of the franchise, as represented by UNIT performance statistics, as ONLY known to the franchisor who has this proprietory information in his possession —- BEFORE they invest their lives and savings in a franchise opportunity. In effect, the FTC Rule deems that unit performance statistics of a system are NOT material and do not have to be disclosed to the purchaser of a franchise. In effect, the FTC Rule enables franchisors to sell unviable retail franchises to the public out of view of the public and out of view of government regulators and the courts, and, apparently, with immunity under the law.

    The call for honest and fair regulation of franchising is not a call for equality of the classes economically or socially, because such equality is impossible because of the nature of human beings and the nature of greed. When human nature is incorporated, it somehow becomes greedier because the goal of the corporation is to maximize profits in competition with others who are maximizing their profits. But, there must be checks and balances on corporate power and they must not be able to write laws that destroy individual rights in society.

    Capitalism as combined with democracy in free Republics does serve the nature of human beings who, by nature, always want more than others and who want to preserve the opportunity in democracies to have and to hold more than others.

    This is why capitalism and democracy have been good working partners in successful Republics and why, perhaps, our government has been standing without change since the beginning.

    However, this Friedman credo “free to choose” and to “each his own” in society didn’t mean that government can define “materiality” of contract terms to favor special interests over unpowerful interests, did it?

  10. Socialisto Fantastico

    Carol I know you must agree that a new order of government is needed to ensure that the subjugated, oppresssed and disenfranchised have their fair share of wealth in this great country.

    We must add to contract law a fairness doctrine so the courts can reform and rehabilitate unfair adhesion and general business contracts (especially franchise agreements). As you have on numerous occasions suggested there must be judicial discretion in favor of the “little guy” who has no voice or power against the stronger party.

    Socialisto Fantistico

  11. Socialist_Martyr

    Please let me join the revolution too. There is no price that we the people pay that is too dear in order to assure, through obedience to our master the Government, that equal outcomes is guaranteed throughout this nation. The myth propagated by those who adhere to a belief in liberty and individual responsibility is that this elevates all of society, when it has been shown that liberty and individual responsibility translates into disparate outcomes. The United States must not stand for this. The Government must insure that all are equal from womb to the tomb. We must all strive to arrive at the lowest common denominator. As a compassionate democracy on this we must insist.

    Please join Carol Eblen, Socialisto Fantastico, and myself in starting the revolution. Together we can overrun those fascist pigs who oppress us. Viav La Revolutio…

  12. Socialisto Fantastico

    Carol is our modern day Che Guevara. Carol your followers are legion! We are with you!

    We must tear it down before we can build a brave new world. A world based on equality and altruism where the conservative elite are shown their just due and the common people are liberated from the shackles of corporate injustice.

    Socialisto Fantastico

  13. Socialist_Martyr

    My brother, Socialisto Fantastico, I was meditating on your words, especially equality. Do you think it is fair that some women have A-cups and other DDs? I think the Government should mandate bust size and enforce it by providing Government sponsored enhancement for those with less, and mandatory reductions for those with more. After all fair is fair. It is unfair that rich girls can get them enlarged, lifted, tucked. The Government should do something about this.

    Yours in the movement,

    Socialist_Martyr

  14. Socialisto Fantastico

    I am for the cause and I am focused only on the cause. Carol is my guiding light and inspiration.

    Socialisto Fantastico

  15. Obviously, this disruptive posting from our socialist friend is to change the subject which is PERFORMANCE OF FRANCHISE LOANS.

    It gives the opportunity again to point out that Loan defaults on franchise loans, SBA or otherwise, are NOT an accurate risk assessment factor for propspective franchisees, even if they were made available to them. FranData uses the default rate on SBA guaranteed franchise loans to compile snapshots and risk profiles that are sold to the public, to include prospective franchisees, but do the banks furnish the SBA with the default rate on Home Equity Loans used to finance the purchase and startup of a franchised business?

    Apparently, franchisors can list their franchises on the SBA Franchise Registry as long as they come up with the cash and as long as their actual contract, the franchise agreement, contains the disclaimer that the franchisor has promised the franchisee any success or profits and the franchisee acknowledges this under signature.

    Many first-owner failing franchisees give their businesses away in fire sales to second generation franchisees (when they have great negative cash flow after depleting their startup finances) for the purpose of getting out from under the “debt” owned to the Landlord for the long-term lease that is personally guaranteed and to perhaps avoid bankruptcy. But, of course, to do this, they must continue to pay on the “startup” debt that holds up the unit for the second generation franchisee to try to break even.

    These “failures” appear in the transfer columns of item 20 of the FDD but are not identified as failures, and in large and mature networks, buyers are told on the Internet by attorneys and others that these are generally sale-transfers at a profit in the large networks. But, this isn’t necessarily so. Many time these “failures” who are used as references are silenced by confidentiality agreements they have signed to secure the approval of the franchisor for the fire- sale-transfer of the franchised business. This process permits compounded “churning” in some large franchise networks who use “churning” and “encroachment” as management tools to establish and grow market share and to mazimize gross sales of the SYSTEM upon which franchisors realize their profits.

    Hopefully, the franchisors report all terminations in the FDD which are obviously failures for the franchisees, but, of course, there is no check by the regulators, federal or state, to
    verify the accuracy of Item 20. Anything an Item 20 reference indicates to a prospective buyer has no legal significance and if the franchisee acts upon the information given by past and present franchisee references and fails and is damaged, the damages are proximate to the representations of the franchisee references and NOT to the franchisor.

  16. Obviously, this disruptive posting from our socialist friend is to change the subject which is PERFORMANCE OF FRANCHISE LOANS.

    It gives the opportunity again to point out that Loan defaults on franchise loans, SBA or otherwise, are NOT an accurate risk assessment factor for propspective franchisees, even if they were made available to them. FranData uses the default rate on SBA guaranteed franchise loans to compile snapshots and risk profiles that are sold to the public, to include prospective franchisees, but do the banks furnish the SBA with the default rate on Home Equity Loans used to finance the purchase and startup of a franchised business?

    Apparently, franchisors can list their franchises on the SBA Franchise Registry as long as they come up with the cash and as long as their actual contract, the franchise agreement, contains the disclaimer that the franchisor has promised the franchisee any success or profits and the franchisee acknowledges this under signature.

    Many first-owner failing franchisees give their businesses away in fire sales to second generation franchisees (when they have great negative cash flow after depleting their startup finances) for the purpose of getting out from under the “debt” owned to the Landlord for the long-term lease that is personally guaranteed and to perhaps avoid bankruptcy. But, of course, to do this, they must continue to pay on the “startup” debt that holds up the unit for the second generation franchisee to try to break even.

    These “failures” appear in the transfer columns of item 20 of the FDD but are not identified as failures, and in large and mature networks, buyers are told on the Internet by attorneys and others that these are generally sale-transfers at a profit in the large networks. But, this isn’t necessarily so. Many time these “failures” who are used as references are silenced by confidentiality agreements they have signed to secure the approval of the franchisor for the fire- sale-transfer of the franchised business. This process permits compounded “churning” in some large franchise networks who use “churning” and “encroachment” as management tools to establish and grow market share and to mazimize gross sales of the SYSTEM upon which franchisors realize their profits.

    Hopefully, the franchisors report all terminations in the FDD which are obviously failures for the franchisees, but, of course, there is no check by the regulators, federal or state, to
    verify the accuracy of Item 20. Anything an Item 20 reference indicates to a prospective buyer has no legal significance and if the franchisee acts upon the information given by past and present franchisee references and fails and is damaged, the damages are proximate to the representations of the franchisee references and NOT to the franchisor.

    The FTC Rule/ FDD is a license to lie, cheat, and steal for predatory franchisors who are inclined to do so (see Franchise Remedies, Richard Solomon’s excellent essay on this subject matter) and the FDD in practice acts as a subsidy of the Franchise Industry that protects franchisors in arbitration and in the courts against charges by failed franchisees that they were fraudulently induced to contract by misrepresentation of the success of the franchise or by concealing the risk of the investment in the franchise.

  17. Socialisto Fantastico

    Carol your postings are gospel to me! I see that you agree with me that we must tear down this corporate conspiracy to lie cheat and steal from the common folk who are tricked into indentured servitude. You are correct that we should nationalize large franchise companies and approve all new franchise offerings so they are safe for investors before they can offer these investments to the poor unfranchise educated.

    Socialisto Fantastico

  18. SF must have a BS degree and tries to divert attention from the facts.

    The fact is that the FTC Rule describes the purpose of the FTC Rule which regulates franchising as being for the purpose of giving prospective buyers of franchises the essential information upon which these new prospects can assess the risks and the rewards of the investment and compare it with other investments.

    The FTC Rule doesn’t do this and neither do the state FDD’s. The material risk factor as reflected by the failure or success of startup franchisees, the first owners, in a franchise system can be obscured under the FTC Rule, and is not disclosed to new buyers under the provisions of the FTC Rule because the FTC Rule has deemed that past and present UNIT performance statistics are not MATERIAL statistics that have to be disclosed to new buyers of franchises. Obviously, the purpose of the FTC Rule was to allow franchisors to sell their franchises to prospective franchisees without addressing the matter of risk and to protect the franchisors from those failing franchisees who would try to address the courts because they felt they were misled as to the success and profits of the franchise in the sales process.

    The position of the FTC with the FTC Rule appears to be that prospective franchisees should be encouraged to believe they are investing in the Franchisor, and only two of the 23 Items of mandated disclosure information deal with the franchise the franchisor is selling to the public and the other 21 items are about the franchisor. Item 19, “earnings” is optional, and Item 20 is just an artifice that provides an overview of the franchise system and references that are supposed to be used in the due diligence process to investigate the risks and rewards of the investment. However, if the investigating prospective franchisee acts upon the information of these references and finds he has bought a pig in a poke, the franchisee has no recourse for any damages that he/she may suffer. The Franchisor, if he doesn’t make an earnings claim has made no representations whatsoever concerning success or profits to the new buyer and the new buyer signs the “boilerplate” contract that protects the franchisor in the courts and arbitration because the buyer of the franchise thinks this is the only way the success and profits implied outside of the contract can be accessed.

    Apparently, the banks and the lenders have not been interested in the failure rate of franchiSEES as long as the collateral of the franchisees has been good, or as long as the failed franchisees have continued to service their debt. As a result, franchisors have been able to sell highly unviable/unprofitable franchises to the public and churn an appearance of viability based on visibility that has been provided by “churning.” It is only the franchisee who loses —not the franchisor, not the lender or the banks, not the landlord, not the government.

    Obviously, the regulators and the franchisors knew there would always be failures but why did they regulate franchising to give immunity to the franchisors no matter how unviable or unprofitable there franchises may be for new investors? Did they think that the banks or lenders would provide the checks and balances or were they only interested in promoting franchising in the economy? Was this federal regulatory policy developed because of the brutal statistics concerning the failure rate of startup small businesses. Are franchisees a calculated sacrifice to provide resources to franchisors who can sometimes beat the statistical risks of startup small businesses and who often grow into giant chain pyramids whose portfolios of signed and binding franchise agreements make them attractive to investors?

    Could retail franchising survive if the UNIT performance statistics were required to be disclosed to new buyers under the law?

  19. Socialisto Fantastico

    Viva Carologic! Your truth is truest of all truths. You are my inspiration and I will carry your message far and wide. Once we tear down this false regulatory structure we can replace it with a new fair franchising world order.

    Again viva Carologic the ideology of truth for the masses of mankind and liberation of franchisees from the shackles of corporate servitude!

    Socialisto Fantastico

  20. Hey wasn’t it pretty much established in another thread that you are some self educated old hillbilly named Carol Eblen that never owned a business and simply slept with a former franchisee? I looked for the thread but it is gone. But the thing I remember is you could not refute the comments and actually volunteered the sleeping with the guy part. If not – tell us how old you are and what you have your degree in.

  21. Socialisto Fantastico

    [quote comment=”234754″]Hey wasn’t it pretty much established in another thread that you are some self educated old hillbilly named Carol Eblen that never owned a business and simply slept with a former franchisee? I looked for the thread but it is gone.

    But the thing I remember is you could not refute the comments and actually volunteered the sleeping with the guy part.

    If not – tell us how old you are and what you have your degree in.[/quote]

    Carologic is unimpeachable! It makes no difference that she has no formal education or direct experience. How dare you impugn her great integrity. Carol is for the common person, I am her defender and together we shall liberate the enslaved franchisees of the world!

    Muy magnifico!

    Socialisto Fantastico

  22. Always the attack of the messenger and not the message is the only defense for those who can’t defend against the message.

    What is the definition of a hill billy? Is this an old goat who lives in the hills?

    Have you read NOLO’s TEN GOOD REASONS NOT TO BUY A FRANCHISE, that appeared in Forbes.com? This wasn’t written by a hill billy attorney.

    Of course, the FIRST reason NOLO gave was the inability of the prospective buyer to ascertain whether or not the franchise investment would be profitable. NOLO didn’t comment on government regulation but it is obvious that government regulation permits franchisors to sell their franchises to new buyers without providing proof of the profitability of the franchise, as disclosed by historical unit performance statistics. The SBA is happy to guarantee loans that have a high probability of failing as long as the franchisor disclaims any possibility of success and profits in the actual franchise agreement.

    Isn’t it silly and disingenuous to suggest that prospective franchise buyers commit themselves to a hundreds of thousands of dollars of debt that is personally guaranteed without having been convinced by experts that there were profits and that the risk was low? Isn’t it malicious to demand ten and fifteen-year commitments from franchisees and leases to match that must be personally guaranteed (that imply long-term survivability and profitability) when the franchisor knows that there is a remote possibility that the franchisee will ever survive the long term of the contract even if the franchisor does survive the long term. And, in the case of new franchisors, it is doubtful that they will survive the ten years as well, as indicated by the statistics presented by Scott Shane in his Internet Blog on Startup Failure Rates, the Real Numbers.

    Isn’t it obvious that the purpose of the FTC Rule and the FDD is to protect franchisors and to permit them to sell franchises at any percentage risk of failure or lack of profitability to franchisees, and to immunize the franchisors from any recourse by franchisees in arbitration or the courts? Isn’t it obvious that the FTC Rule is a subsidy of the franchisors?

    Robert Purvin of the AAFD and Susan Kezios of the AFA, both attorneys, pointed out the fatal flaws in the FTC Rule in invited public comments over ten years ago but the ugly status quo of the federal regulation of franchising continues and they were forced to compromise to survive in the marketplace so that they could work to make things better for franchisees. Obviously, the failure of the FTC to give any relief to franchisees through more effective regulation of franchising through the new Rule, effective July 1st, 2008, is a restatement of federal regulatory policy.

    I am just late in making my public comments. What is the purpose of the FTC Rule if it doesn’t protect franchisees from purchasing unviable and high-risk franchises because the risk can be legally obscured in the State FDD process that must be in compliance with the FTC Rule? What is the good of due diligence done on the Artifice of Item 20? What is the good of the little FTC statutes if there is no private right of action for a violation of the FDD that looks like fraudulent inducement to contract or fraudulent concealment of material facts?

  23. Truth in Franchising

    Carol your views are so off mark it isn’t funny.

    TIF

  24. After having observed your inane ranting for some time it occurs to me that there is simply one thing you have not fathomed. It may be possible that you, your husband, and your son are just incredibly stupid people.

    What you fail to see is you are an idiot, your husband must be an idiot also, evidenced by the fact he married you, and the likely result of the breeding of an idiot and an idiot is likely an idiot to the second power. Now with all that mental horsepower in your camp, why do you think you would succeed?

    Your assumption is that “if only” ITEM 20 disclosure was the “xyz” way, then “we” would not have gone into franchising. However, that is most likely not the case. Stated differently a person of ordinary intellect would never have let the process progress to the point of even needing to examine the UFOC. The franchise you selected is/was a loser franchise opportunity and there were/are so many indications of this that the odds are you would simply have also ignored the Item 20 warning you seek as you ignored all the other signs of failure. You see it is simply a matter of salesmanship. Salesman would simply have dangled a shiny babble elsewhere to distract you from the implication of the Item 20 information, and most assuredly, you and yours, would have fallen for it hook. line, and sinker. If you want evidence that this is true, read a SEC Prospectus for a mutual fund. Right there in plain sight, for years has been the fact that the sweeping vast majority of funds underperforms an index, that past performance is not guarantee of future performance, but by simply altering the sales marketing materials to present the same data in a different fashion the marketers of mutual funds are able to induce people to buy a product that the Government’s mandated disclosure demonstrates underperforms a simple index over time. That is what happens to people with average intelligence. The case of a total idiot such as yourself leaves no doubt to the outcome.

    The truth is the only effective remedy for people such as yourself is institutionalization. The world has changed, it has globalized the labor market. The fact that you and yours brilliant solution to combating a globalized world economy was to seek refuge in a lame concept that is already commoditized further indicates the depth of your stupidity.

    The problem is with you. You victimized yourself through your mental laziness and your desire to find an easy way out. A franchise simply offered you and yours the psychological opportunity to transfer responsibility for yourself to someone else, in this case the franchisor. You took that deal, and now you do what weak, spineless, warty people have always done, you bitch and moan to anyone who will listen to your pathetic ramblings.

    Personally I look forward to the days when we let the worthless such as yourself fend for themselves and die in the gutters as a result of their own ineptitude. It is obvious the gene pool needs to be cleansed. Too many misfits have been allowed to reproduce as simply evidenced by your existence. The fact that you reproduced is even scarier.

    Ryan, my unsolicited advice to you, is to ban this despicable person from posting. She has destroyed your forum. No person with a business to run has the time to correct the literal hundreds of misrepresentations Carol repeatedly makes. You might recall that netiquette assumes that when regular posters remain silent they are offering defacto agreement. Hence the reason I no longer participate here. There is not time enough in a week to educate someone so devoid of knowledge of the basic principles of business. From simple business principles, to the Constitution, it is apparent Carol has neither the education nor the intelligence to understand the issues. The only reason I posted here today, was I received a private e-mail telling me to come back because Carol was gone. So like a fool I came here only to find it is still the Carol Eblen show.

  25. Truth in Franchising

    [quote comment=”234917″]After having observed your inane ranting for some time it occurs to me that there is simply one thing you have not fathomed. It may be possible that you, your husband, and your son are just incredibly stupid people.

    What you fail to see is you are an idiot, your husband must be an idiot also, evidenced by the fact he married you, and the likely result of the breeding of an idiot and an idiot is likely an idiot to the second power. Now with all that mental horsepower in your camp, why do you think you would succeed?

    Your assumption is that “if only” ITEM 20 disclosure was the “xyz” way, then “we” would not have gone into franchising.

    However, that is most likely not the case. Stated differently a person of ordinary intellect would never have let the process progress to the point of even needing to examine the UFOC. The franchise you selected is/was a loser franchise opportunity and there were/are so many indications of this that the odds are you would simply have also ignored the Item 20 warning you seek as you ignored all the other signs of failure.

    You see it is simply a matter of salesmanship. Salesman would simply have dangled a shiny babble elsewhere to distract you from the implication of the Item 20 information, and most assuredly, you and yours, would have fallen for it hook. line, and sinker.

    If you want evidence that this is true, read a SEC Prospectus for a mutual fund. Right there in plain sight, for years has been the fact that the sweeping vast majority of funds underperforms an index, that past performance is not guarantee of future performance, but by simply altering the sales marketing materials to present the same data in a different fashion the marketers of mutual funds are able to induce people to buy a product that the Government’s mandated disclosure demonstrates underperforms a simple index over time.

    That is what happens to people with average intelligence. The case of a total idiot such as yourself leaves no doubt to the outcome.

    The truth is the only effective remedy for people such as yourself is institutionalization.

    The world has changed, it has globalized the labor market. The fact that you and yours brilliant solution to combating a globalized world economy was to seek refuge in a lame concept that is already commoditized further indicates the depth of your stupidity.

    The problem is with you. You victimized yourself through your mental laziness and your desire to find an easy way out. A franchise simply offered you and yours the psychological opportunity to transfer responsibility for yourself to someone else, in this case the franchisor. You took that deal, and now you do what weak, spineless, warty people have always done, you bitch and moan to anyone who will listen to your pathetic ramblings.

    Personally I look forward to the days when we let the worthless such as yourself fend for themselves and die in the gutters as a result of their own ineptitude.

    It is obvious the gene pool needs to be cleansed. Too many misfits have been allowed to reproduce as simply evidenced by your existence. The fact that you reproduced is even scarier.

    Ryan, my unsolicited advice to you, is to ban this despicable person from posting.

    She has destroyed your forum. No person with a business to run has the time to correct the literal hundreds of misrepresentations Carol repeatedly makes. You might recall that netiquette assumes that when regular posters remain silent they are offering defacto agreement.

    Hence the reason I no longer participate here. There is not time enough in a week to educate someone so devoid of knowledge of the basic principles of business. From simple business principles, to the Constitution, it is apparent Carol has neither the education nor the intelligence to understand the issues.

    The only reason I posted here today, was I received a private e-mail telling me to come back because Carol was gone.

    So like a fool I came here only to find it is still the Carol Eblen show.[/quote]

    Fuwa this may have been your best post ever.

    TIF

  26. [quote comment=”234917″]

    Your assumption is that “if only” ITEM 20 disclosure was the “xyz” way, then “we” would not have gone into franchising.

    However, that is most likely not the case.

    Stated differently a person of ordinary intellect would never have let the process progress to the point of even needing to examine the UFOC.

    The franchise you selected is/was a loser franchise opportunity and there were/are so many indications of this that…. you would simply have also ignored the Item 20 warning you seek as you ignored all the other signs of failure.

    [/quote]

    The rest of Fuwa’s remarks are perhaps too harsh, but Fuwa is exactly on the mark with this observation.

    The cleansing the gene pool is a silly idea – unfortunately, there is no gene which is responsible for people being honest with themselves about their failures.

    It is very hard to look in the mirror and say “I was wrong”. (Thank god for that or I would be out of a job!)

    Ryan, I agree with Fuwa – Carol has effectively ruined your blog and forum.

  27. [quote comment=”234919″][quote comment=”234917″]

    Your assumption is that “if only” ITEM 20 disclosure was the “xyz” way, then “we” would not have gone into franchising.

    However, that is most likely not the case.

    Stated differently a person of ordinary intellect would never have let the process progress to the point of even needing to examine the UFOC.

    The franchise you selected is/was a loser franchise opportunity and there were/are so many indications of this that…. you would simply have also ignored the Item 20 warning you seek as you ignored all the other signs of failure.

    [/quote]

    The rest of Fuwa’s remarks are perhaps too harsh, but Fuwa is exactly on the mark with this observation.

    The cleansing the gene pool is a silly idea – unfortunately, there is no gene which is responsible for people being honest with themselves about their failures.

    It is very hard to look in the mirror and say “I was wrong”. (Thank god for that or I would be out of a job!)

    Ryan, I agree with Fuwa – Carol has effectively ruined your blog and forum.[/quote]

    I banned Carol from the forum a few weeks ago, and today I banned her IP and email from the front page blog using a WordPress plugin. I cannot give her the benefit of the doubt anymore that she will stop smothering conversations, and reasoning does not seem to work with her. I agree, she has ruined the forum and blog discussions, but hopefully that phase is over. Thanks Michael Webster and FuwaFuwaUsagi for your always welcome input.

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