Franchising is much riskier than non-franchised businesses

Banker says franchised is less risky than independent business
Bootstrapping the assets of a corporation
Fraud is widespread
Futility of taking legal action
Independent businesses much higher profit than franchised ones
Independent businesses survive longer than franchised ones
Internet, franchisor competes against franchisees
Location chosen by franchisor
Malfeasance
No protection from monopoly
Opportunism: contract creates powers which are used to strip investor value during relationship
Risk much higher for franchisee than independent business
Sympathy for the franchisor
When the franchisor tanks, so does the franchisee
Why franchisors sublease to franchisees

Psychology: human foibles are a fraudster's bread and butter

American Dream
Bargaining
Blame the other franchisees
Cognitive Dissonance: stress caused by holding 2 contradictory opinions at 1 time
Collaborators
Death wish
Delusional thinking
Envy
Framing
Franchisees who appear to have lost their mind
Greed
Happy serfs
Heuristics: rule of thumb decision making that can sometimes result in catastrophe
Hindsight Bias: tendency to view the past as more predictable than it was
Hubris
I did drugs because I was sad
Incapable of empathy
Inherited money targeted
Insight into self
Loss Aversion: people dislike losing much more than winning (the same $)
Love money
Narcissism
Necessary illusions
Neuroeconomics
Pride
Psychological denial
Psychological testing
Psychopathology
Seminar selling
Shame
Siren song
Social cascades
Sold during time of psychological vulnerability, especially unemployment
Unsophisticated buyers
Wanted: sheep

Pre-sale information is managed by master salesmen

100 per cent of settlements have gag orders
1st generation of investors knowingly sacrificed
40 per cent of franchisees have unsuccessful relationship with franchisor
55 per cent of franchisees would not advise others to join their system
75 per cent of new franchise systems die within 10 years
Anti-trust provisions not applied to franchising
Cannon fodder
Can't talk to politicians
Contracts across systems are virtually the same
Cruellest lies are often told in silence
Current franchisees can’t talk freely
Disclosure documents are deficient
Franchise investors deprived of information
Gag order (confidentiality agreement)
Gag order muzzles self & descendants
Gag order, court-mandated
Imbalance of information and power
Misleading advertising
Overstatement of sales and profits
Pro forma income statements questions
Quiet settlement
Success rate, Timothy Bates’ study
Success rates fudged

Laws are created by those able to influence the political process

Abuse inherent in modern franchising
Beyond the Tipping Point
Can't collect on court decision
Charade of public consultations
Credibility
Disclosure laws: 10 per cent solution
Feudal relationships
Franchise laws protect franchisors, not franchisees
McLaw: toothless legislation designed to protect the dominant parties
Relationship legislation
Toothless law
Trust
Weak law worse than no law
White-collar crime is widespread

Confidence game: The mob, house, shill, and fixer

4 per cent of population have been fraud victims
Bankruptcies, several
Blame themselves
Canada: white-collar crime haven
Confidence
Deceptive marketing practices
Defrauded more than once
Defrauding the public
Deposit money not refunded
Disclosure documents never given
Easy to sell around a disclosure document
Emboldens industry bottom-feeders
Franchise show
Franchisee advisory group (lap-dog)
Franchisor owns more than one systems (subsidizes dog from cash cow)
Franchisor was once a franchisee
Franchisor's associate
Government corruption
Hefty severance packages
House negro
Initial public offering, IPO
Integral part of the deception
Lawsuit that would crush whole sector
Lawsuits, group
Paid informers
Persuasion
Ponzi (pyramid) scheme
Pump-and-dump scheme
Qualify as franchisee if you fog a mirror & the check clears
Related scammers
Relative of franchisor buys assets from Trustee
Self-delusion
Selling around a disclosure document
South Sea Bubble
Strong back and weak mind
The game is rigged
Trading in false hope
Victims are highly intelligent and educated