Home | I wouldn't buy it | We the People, or We the Screwed?

We the People, or We the Screwed?

We the People is a paralegal document preparation service.  People typically use their service for simple legal documents and court filings (name change, non-contested divorce, wills, incorporation).  The company provides customers with forms to fill out with a pen, and the franchisee then sends the form off to a processing center located in the state.  One to seven days later (14 days max), the forms are sent back to the franchisee to give to the customer.  The franchisee may also offer to file the forms with the appropriate court for an additional fee.  The processing center takes a 25% cut of the document charge.  

No legal training is required.  Franchisees are basically a sales and marketing arm for the processing centers.  Franchisees are not allowed to alter any document or provide any service not performed exclusively by the processing center.  

Franchisees are free to set their prices above the mandatory minimum.  For example, restraining orders will run customers $100, a noncontested divorce run $400. (article listing more services and fees)

The company was founded in 1996, purchased by a couple in California, and recently sold to Dollar Financial Corp. (NASDAQ: DLLR) in March, 2005.  Dollar plans to also open the store in conjunction with the Dollar Financial stores (like H&R Blocks).

The experience for customers is somewhat odd if you have previous experience speaking with a lawyer.  We the People employees can’t recommend a form, can’t point you in the right direction, and can’t discuss specific facts about your problem.  All the employees can do is generally describe a form and offer a form booklet to fill out.  Recommending a form or solution is considered engaging in the practice of law, and it can subject the franchisee to fines, jail, or liability for damages resulting from the legal "advice".  When you walk into a We the People, you are simply asked, "What form would you like to fill out?"  

I visited one.  There was one man on the phone trying to explain three different types of divorces.   I was promptly greeted by the other employee asking me which form I wanted to fill out.  I said incorporation and will, and she lept into her sales pitch with a brochure, eager to hand me a paper form to fill out.

The franchisor’s disclosed litigation in the UFOC is staggering.  The company has 13 cases pending and 12 concluded cases that range from unauthorized practice of law to fraud.  Several franchisees have sued the company for fraud and unfair business practices.

From their UFOC…

Franchise Fee: $89,500 (ouch!)
Total Investment: $116,000 – $152,000
Exclusive Territory: usually 2 miles (at discretion of Company)
You must be Notary before opening
Supervising Attorney fee (mandatory): $200/month
"We the People" Do it yourself legal books: 50% off retail price
Time to locate a site after signing Agreement: 90 days (if no site selected, franchise fee may be refunded less $10,000)
Time to Commence Business after signing the Agreement:   120 days
Document Processing Fee:  25% of total customer charge
Royalty on any other products or services: 25% of gross sales
Advertising Co-op:  4-6% of gross revenue
Promotional Fund: 2-4% of gross revenue
Independent Advertising:  $2,000 or 8% of gross revenue (whichever is greater)
Franchise renewal fee: $2,500
Current transfer fee (charge to sell the business):  $7,500
Advice from company fee:  $250/day
Square feet (usually in strip mall):  about 1,000 square feet
Included Training:  5 days in Santa Barbara, California
Phonebook ad requirements:  Must maintain a bold listing
Internet sales from your territory:  15% of company’s net profit is paid to franchisee
Personal Guarantees: Franchisees must personally guarantee the entire Franchise Agreement and all payments due to franchisor
Time to cure default under agreement: 10 days or franchise can be terminated
Litigation:  All disputes must be arbitrated in Pennsylvania

If this franchise can throw off about $20,000 in extra cash flow AFTER paying all expenses and salaries (including the franchisee), then this can be worthwhile investment.  Mandatory royalty, advertising, promotional fees total over 18%, plus the 25% commission earned by We the People to process each document.  So there goes 43% off the gross before paying any operating expenses. 

Let’s make this simple.  If the business is open 300 days per year, and sales total $1,600 per day (that’s about 8 $200 sales each day, which to me seems very high), that will generate $320,000 in sales, minus 43% is fees is $137,600 to pay all rent, salaries, other operating expenses, and still earn a return on your $150,000 investment.  No thanks!

Here is an existing franchise for sale in New York, asking price is less than $250,000.  Gross revenue is also $250,000 and they claim $75,000 in profit (sellers discretionary cash), so that is before taking a salary.  Remeber that beside your fair salary, you should be earning a return on your investment of at least 10% ($15,000/year). 

Pros:

  • little competition
  • easy business to run
  • virtually no inventory to manage
  • seems to be relaxed on granting franchisee’s site preferences

Cons:

  • nasty past litigation by franchisees
  • assistance after your intial 5 days of training is charged at $250/day plus expenses
  • high fees
  • no brand recognition

I’m especially attracted to non-food franchises, but this one I wouldn’t buy!

 

About Ryan Knoll

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

[quote comment="14950"]Does anyone have info on Liberty Tax Service. I am interested in purchasing a franchise and have begun extensive research, calling other franchise owners, etc… So far, have not heard or found any negetives except maybe that you need 1 or 2 tax seasons to make a profit (which I understand is typical in any business). Any stories or articles or knowledge on failures, problems, etc… This Liberty Tax was started 9 years ago by John Hewitt (founder of Jackson Hewitt; sold that business in 10 years ago for 500 million) and they already have 2000 franchises nationwide. Only 5 in my city so far and we are heavily populated so I see a good future for this business here. Any info would be most appreciated![/quote] There may be 5 Liberty Tax Services in your city, but what about the others - H&R Block, Jackson Hewitt, Tax Centers of America, Instant Tax Service, etc.? While it may be good to have few Liberty Tax Services, it also means there is less cash available for advertising and driving walk-in customers. I'm sure you understand this is a volume business, so if you think you can drive the quantity of customers your way, then go for it. If the Liberty Tax Services brand is unknown in your area, have you considered opening up your own tax prep service so you can keep 100% of the fees you charge? There was some discussion on tax prep franchises in the forum http://www.franchisepundit.com/forums/index.php/topic,117.0.html

Lisa
Lisa

Does anyone have info on Liberty Tax Service. I am interested in purchasing a franchise and have begun extensive research, calling other franchise owners, etc… So far, have not heard or found any negetives except maybe that you need 1 or 2 tax seasons to make a profit (which I understand is typical in any business). Any stories or articles or knowledge on failures, problems, etc… This Liberty Tax was started 9 years ago by John Hewitt (founder of Jackson Hewitt; sold that business in 10 years ago for 500 million) and they already have 2000 franchises nationwide. Only 5 in my city so far and we are heavily populated so I see a good future for this business here. Any info would be most appreciated!

asdf
asdf

I was going to ask for more samples but I see you already posted it as the next blog entry. ;)

Ryan
Ryan

#1 Paul - It's reasonable. For comparison: * Pizza Factory: $12,000 * Quizno's: $5,000 * Tax Centers of America: $1,000 * Sports Clips: $25,000 * Fantastic Sams: $20,000 or 10% of sales price (whichever is greater) * Hair Cuttery: $5,000 ($0 if franchisee for 5+ years) * Dominic's of New York: $1,000 + 6% of sales price * Bartercard: 10% of sales price * Submarina: $1,000 * Pizza Patron: $5,000 * Cheeburger Cheeburger: $12,250 * The Dugout: $5,000 * Arby's: $13,500 * Herman's World of Sports: $12,500

Paul
Paul

Is $7,500 a typical tranfer fee?

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