Franchise Frauds, from around the Web
This is from
With a Flawed Concept, Franchise Failure Takes a Heavy Toll: "
(FranchisePick.Com) When franchising goes bad, it can go really, really bad. Former iSold It franchisees Karen McGinn and Gene Bowen, who operate amitheonlyone.org, tell just how bad in a video interview with AuctionBytes Ina Steiner.
With franchising, success is not assured.
Franchising is one of the most dynamic and innovative business growth strategies ever devised. The idea is powerful in its simplicity: provide would-be business owners with a system that’s already been proven to be successful. They can then concentrate on building, not inventing, their own small businesses. Franchising is intended to provide business owners with the guidance, training, tools, procedures, and marketing they need to effectively compete and build a thriving business. While they give up a degree of freedom, they operate under a brand shared and promoted by their franchisee comrades who are also, as the oft-used marketing slogan says, in business for themselves, but not by themselves.
Read the whole article, it is very interesting.
Janet Sparks, at the Blue Mau Mau, has an interesting story on the Sona Medspa problem.
"The UFOC of Sona MedSpa (pdf, 203 pgs) shows how its financial statements were not based on General Accepted Accounting Principles (GAAP), says a franchisee. The franchisee explained that the reason people became enticed by the business concept was that when they looked at the UFOC, they saw financials that were cash based. GAAP observes accrual accounting, in which revenues must be matched in a timely fashion to expenses associated with the delivery of services. He said Sona tells you that 93 to 95 percent of the time it would take five treatments for the hair removal process, which is a very complex medical issue. So when franchisees sell packages of five treatments, they don't fully recognize that it takes 12 to 19 months to deliver those services. He said, "They showed cash-based numbers, so it was very deceiving to even those who had high-level executive backgrounds." He said he knows of two franchisees who were CPAs and they didn't figure it out until they were well into the franchise."
Read the full article to see what the commentators thought.
