(Pictured; The Webster Missile Lobber)
Cleveland, Ohio— Canadian franchise attorney, Michael Webster, (a writer for a franchise news website) launched an almost blistering attack on a post about researching a franchise, that Cleveland, Ohio franchise consultant Joel Libava wrote in 2007. Libava-The Franchise King®, says it’s time for “a franchise fight…”
As I was checking my Google Alerts this morning, I came across a rather interesting post that got me a little riled up. In it, Michael Webster, a franchise attorney in Canada, slammed one of my franchise research tips……for no apparent reason.
Please keep reading this, as it’s not really about me-it’s about certain people in my industry that try to create problems that aren’t even there…and would-be franchise owners getting talked out of their dreams before they get far enough to make their own decisions.
Franchise Fight: Paranoid Canadian Franchise Attorney Lobs Lame Attack
If you’ve been following me for long, you know that I’m a rather skeptical guy. I’m pro-franchise, but I’m not always pro-franchisor.
I love the business model of franchising, and I encourage folks that are out of work, or who hate their career tracks, to at least look into franchise ownership as a career alternative.
I also don’t have a problem calling out less-than average franchisors and franchise brokerage groups who are weak at best, or who I feel are preying on others.
Important Franchise Research Tip
Call existing franchisees. It’s a real simple, helpful suggestion. My eBook teaches you how to do franchisee calls.
Webster disagrees with my research technique for some reason. Here’s what he said about my suggestion;
“This point immensely bothers me. Although often repeated by franchise attorneys and salespersons, it is flatly false.”
False?
So, if I understand Webster correctly, he’s suggesting that would-be franchise owners not call existing franchise owners of the concepts that they’re looking at. (Why would anybody want to call the folks that already took the risk of buying into that franchise, and are living it and breathing it everyday?)
Webster goes on to say that, “cold contacting franchisees, especially in a faltering or failing system, will produce little or no valuable information. Franchisees will be suspicious that it is really the franchisor calling, perhaps looking for a good territory to encroach upon.”
There Must Be Be Something Very Weird In The Canadian Water Supply
C’mon. A franchise’s corporate headquarters calling its franchisees secretly? (OK. Maybe I’ll give a little on that one. There’s that case of some Dunkin’ Donuts franchisees being spied on.)
But…in all the years I’ve been doing this, I’ve never had a current franchisee, or a would-be franchise owner tell me that this was happening, or was even suspected of happening.
He goes on with his bizarre analysis of my franchise research suggestion:
“Knowing that someone with ten years in the system wouldn’t buy a franchise again may be utterly meaningless for your situation.”
Huh?
Here Comes Some “Legal” Advice
According to Webster, “one cannot legally rely on the information gathered, which is presented outside the FDD.”
The FDD, is a fact-filled document that you get from the franchisor. It has very detailed and important information. It’s data. It’s important. But, all the data included won’t matter if you can’t “see” yourself being successful as a franchise owner in that particular business. The only way to find that out is to call, and even visit, existing franchisees.
It’s Time For A Theoretical Math Lesson
This is where Webster freaks me out;
“There is an easier way to calculate franchisee sentiment. Look at Item 20 in the FDD and do this simple test. Treat all transfers as business failures, and then calculate your chances of success. Anything north of 10% is likely to be too risky for most.”
So, now Webster has to get all “geographical” in his “don’t talk to existing franchisee’s” diatribe. North of what? (By the way, Item 20 of the FDD lists all of the current and closed outlets of the franchise you’re investigating.)
I have not seen a more paranoid anti-franchise rant in a long time. That’s because I don’t visit the BlueMauMau site as much as I did, a few years ago. (Like never)
The owner of the site, Don Sniegowski, called me when he first launched the site. He asked me to contribute my expertise, along with some content and discussion, to help him get things going. I did.
Unfortunately, Don’s allowed things to get out of hand. It used to be a pretty good site to learn about both sides of franchising, and I’m all for that.
Now, it’s nothing more than an anti-franchising website/blog, and a lot of really hateful and bizarre stuff is regularly posted in the comment section there.
What Happened To Webster?
In Michael Webster’s case, he used to kind of support me. For some reason, he dislikes hates franchise consultants/brokers, (I used to be a broker) so maybe that’s part of his reason for trying to tear apart my franchise research techniques.
Folks, if you’re seriously considering franchise ownership as a way for you to get where you want to go, ignore the advice of anti-franchise-franchise attorney’s, and start calling (and visiting, if possible) franchisees of the franchise chain you’re thinking of investing in.
Michael Webster is just plain wrong. It’s not like I’m the only one who strongly recommends calling franchisees.
The SBA Must Be Wrong
Maybe Webster should go after the SBA. (United States Small Business Administration)
Here’s one of their many suggestions for researching franchises;
“Visit or phone as many of the current and former franchisees as possible; ask them about their experiences. See for yourself the volume and type of business being done.”
They have several other terrific suggestions on their website.
Entrepreneur Magazine® Must Be Wrong, Too
An easy target for Webster to lob an attack on would be the folks over at Entrepreneur magazine. They’ve only been around for 25 years or so, giving would-be franchise owners and entrepreneurs valuable advice. In one of their articles, an franchise expert suggests that, “once you’ve thoroughly grilled the franchisor, you’re ready to chat up franchisees. After establishing a rapport, you’ll want to ask hard questions–but in ways that the franchisee will feel comfortable answering.” Rest of article
The FTC Is Wrong, Too The United States Federal Trade Commission is the arm of the US Government that is there to protect consumers. They’re our watchdogs, Michael.
Are you suggesting that the folks over at the FTC are wrong when they suggest to US consumers that they should, “look for contact information for current franchisees and franchisees who have left the system within the last year; talking to them may be the most reliable way for you to verify the franchisor’s claims. Visit or phone as many of the current and former franchisees as possible to chat about their experiences, and the volume and type of business they’re doing.” Here’s a few more valuable franchise research posts.
The real answers will come from existing and former franchisees.
Don’t let folks who hate franchisors in general, steer you away from investing in a franchise.
In other words, don’t let someone talk you out of your dream of business ownership. If the data that you’ve collected is positive, and the opportunity feels right, go for it.
This is your dream.
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I think Michael Webster is over-lawyering this one. Validating with franchisees is one of the most important parts of the franchise research process. While you might not be able to “legally” rely on the information provided, it can provide some insight as to what it’s like to own and operate the business. It’s part of the equation. One question I would ask Michael is if he were buying a franchise would he NOT call current owners of the system?
Todd,
The level of paranoia is pretty astounding, sometimes.
You and I know that the franchise industry and the model itself, is less than perfect. So what?
That’s life.
I try to protect my candidates, and anybody else who calls on me for advice and counsel.
People are adults, and if they do the correct research, I trust that they can really make their own decisions, whatever they end up being.
The Franchise King®
Joel, the rule I prescribed is a filtering rule designed to avoid type 1 errors, misidentifying a good prospect when it is bad.
There are a number of reasons to discount the value of talking with existing franchisees, and it certainly doesn’t deserve to be one of the top 3 due diligence tips.
Many people will simply use the opportunity to confirm their beliefs instead of testing them. Indeed that is what due diligence is all about – looking for information that could, would, or tend to disconfirm your initial beliefs.
(As far as I aware, I don’t have any detailed thoughts about brokers/consultants – but I probably will have something after my review of Lesley Curran’s radio piece, on Segerto and Caruso’s blog talk radio.)
@Todd, see my comments to Perry Shoom. And read the wikipedia article on confirmation bias.
Michael,
It’s an absolutely ridiculous assumption that calling existing franchisees of the franchise concept that one is researching, shouldn’t be on the “Top 3 Due Diligence Tips.”
I’ve found that if prospective franchisees know which questions to ask, and HOW to ask them, they’ll be able to easily get the facts needed to make an intelligent choice about going forward (or not) with the purchase of a franchise business.
Heck, Michael, I wrote a couple of eBooks on how to do it! It’s actully pretty easy.
The Franchise King®
I respect both Michael Webster & Joel Libava, and believe both have the best interest of prospective franchisees at heart. So this may be a matter not of whether you call franchisees, but what you ask and how you evaluate the information.
Current & former Franchisees have posted thousands of anonymous comments about their franchisors at UnhappyFranchisee.com. Some raise legitimate concerns that are worth noting and paying special attention to in the due diligence process. That’s valuable. Others clearly didn’t do their homework OR follow the system and blame the franchisor. That’s valuable too, as it indicates the lack of selectivity and overall low quality of the franchise owners which will definitely impact the brand and your business.
Instead of saying “don’t call franchisees” I would love for Michael Webster to give a list of questions he’d ask, how he’s ask and how to interprete them. Joel knows the sales tricks and could provide his list for cutting through the BS, too. Together, these lists could make a good BS detector – unlike the normal “tests” used to create an illusion of research & results.
I’ll be happy to publish them and/or link to Mike & the King’s lists.
Sean,
I’ve been providing lists of questions, and even detailed posts on which franchise research questions to ask franchisees, and even how to ask them, for years, now.
Here’s an example.
http://www.thefranchisekingblog.com/2010/06/howmuch-money-can-i-make-in-a-franchisebusiness.html
It’s what I DO.
Thanks for stopping by.
The Franchise King®
I love the franchise concept to, there are so many thing that have came up regarding legal issues in franchising, figuring out what is right and wrong, misinformation, invalid contracts. Its so important to validate all this information. I think thats really where a consultant has any value over anything.
We need a resource for these kinds of things.
Nice post
Interesting post. I appreciate the “tongue in cheek” humor you use in your blog writing. It allows the reader a sense of comfort and informality, especially if they are not familiar with the franchise industry.
Perhaps Joel, you could educate people about the levels of risk when they make a bad investment decision. It seems to me that if prospects were to truly appreciate how much is at stake and what bad franchising looks like we might see more effective due diligence and a healthier industry.
One minute its up and the next it was gone. I posted a nice comment suggesting risk education at the this blog and Joel didn’t like it. I suppose if you are selling franchises that is fair enough. Can’t have people considering what is truly at stake now can we. Joel; you’ve shown your true colors. Perhaps this should be the Franchise Queen blog.
Ray,
The comment is right where it’s been. In it you say;
“Perhaps Joel, you could educate people about the levels of risk when they make a bad investment decision. It seems to me that if prospects were to truly appreciate how much is at stake and what bad franchising looks like we might see more effective due diligence and a healthier industry.”
The Franchise King®
Joel,
I conducted extensive telephone interviews with 18 of the existing 45 current Nutri-Lawn franchisees in 1992. In addition, I did site visits of 6 others as well as 5 years of pro forma mth IS & annual BS.
After achieving 23% of my first five years of sales, my franchisor president agreed with ON Justice K Swinton that I had done the most comprehensive pre-sale due diligence that they had ever seen. I’d be happy to post my trial hand-written survey notes, if you like.
While I disagree with several things Michael Webster writes, I would support his advice 100% in discounting almost-to-zero what sunk cost investors have to say.
The sad reality is that franchisees that are experiencing heavy incoming franchisor opportunism have everything to gain and nothing to lose by lying, bald-faced to investigating candidates.
I think franchisees are just human when they perceive correctly that “Everything is a happy face” when your life savings are hanging in the balance.
Les Stewart MBA
Midhurst ON Canada
FranchiseFool : WikidFranchise.org : LinkedIn
Thanks for the informative advice on Franchising.
I AGREEE with your statement:-
“Folks, if you’re seriously considering franchise ownership as a way for you to get where you want to go, ignore the advice of anti-franchise, franchise attorney’s, and start calling (and visiting, if possible) franchisees of the franchise chain you’re thinking of investing in.”
You MUST DO your research prior to making ANY purchase. Richard Bejah
Ray,
Thanks for stopping by, all the way from Down Under. (I would imagine that I’ll see more of Michael’s BlueMauMau buddies stop by and comment, once they’re able to craft a response.)
(It will take a long-ass time, because I’m right, and you and Michael know it)
Maybe we should hold a news conference.
This blog’s archives have plenty of stories and information on bad franchise investments, and how to avoid making one.
Here’s one category for you to check out;http://www.thefranchisekingblog.com/franchise_flops/
Here’s a short post in which I call out all the folks that are still putting out bad statistics about franchise success rates;
http://www.thefranchisekingblog.com/2010/04/my-franchise-business-advice-for-the-week-of-april-19th-2010.html
Ray, I provide a realistic perspective of what it’s like to invest in a franchise. I also give helpful tips.
Like this one;
One way would be to reach out and call several franchisees of the franchise concept that one’s thinking about investing in.
Please feel free to peruse more of my archives, at your leisure.
The Franchise King®
Les,
In your case, one of the only things that may have made a difference in your fairly unique situation is the “fit” part.
You’ve had some time to look back on your disaster, and I’m wondering if you asked yourself if this specific franchise was the wrong fit for your unique skill sets, talents, and yes, even your weaknesses.
Just think of all the folks who’ve invested in sub sandwich shops and the like, who were never right for those franchises to begin with, but still moved forward with them-only to fail, and lose their money.
I wish things would have turned out a lot better for you, Les.
The Franchise King®
Richard,
Thank you so much for stopping by, and chiming in.
Fatin,
Thanks for commenting. One really important factor is “fit.”
Do your skill sets, personality traits, and budget, fit with the particular opportunity you’re interested in?
A question for the ages.
The Franchise King®
Well this is an interesting post, with some great comment interaction.
Keep up the good work! Keep us informed.
J. Bailey
As the president of a New York business club, I cannot imagine why Mr. Webster would advise someone not to talk to other franchisee owners. That is simply absurd. I have often addressed business owners randomly just to see how they feel about the industry and how they are faring in the current US economy.
The SBA is an excellent resource. Why is he knocking it? Perhaps he should spend some time with actual people who own small businesses and actually use the services rendered by the SBA. Perhaps then he will be illuminated.
Clearly, Mr. Michael Webster may be an attorney but he clearly is not Daniel Webster nor has he convinced this devil that he is right.
Thank you Long Island,
So far, you win the award for the funniest comment on this comment stream. Thanks!
“He clearly is not Daniel Webster.”
That’s a classic.
Thanks for stopping by.
The Franchise King®
Michael Webster sounds as though he is yet another glorified administrative assistant with a license to practice law. He should stop harassing productive people and that he knows anything about business.
The water up here in Canada is fine. I came to this post through a Tweet so I’m new to your blog, but on this issue I agree with you completely. I’m not familiar with Mr. Webster or his blog but I can’t see logic in his argument.
A few posts back, I wrote on my blog that calling franchisees was key part of due diligence. As Les points out, it is not infallible but i think it is still worthwhile.
Scott,
Thanks for making the trek across Lake Erie, where both of us get our water, most likely.
I agree, and just don’t get it.
Waaay too much paranoia.
Bill,
Thank you for stopping by, too. Although I appreciate your snarky comment about Webster probably being ” yet another glorified administrative assistant with a license to practice law,” I happen to know that he’s a real lawyer.
Just not a busy one.
Snark. Snark.
The Franchise King®
Some good points here. Common sense dictates that of course existing franchisees are and should be viewed as a good source of franchise investment information.The more interesting point that you raise relates to the “negative spin” that some consultants, advisors and lawyers categorically place on franchising and the value of buying a franchise. Speaking as both a franchisor and franchise lawyer I can certainly say that he franchising – if approached correctly – can serve as an amazing business model for franchisees, franchisors and their customers. I have seen far too many excellent franchise systems attacked by lawyers and others that profit from conflict and in the end achieve nothing other than harming some good franchisors that deliver excellent value to their franchisees.
Thank you, Charles!
Paranoid franchise lawyers at that…profiting from all the BS they create.
Thanks a lot for including yourself in my Franchise Biz Directory. You add legitimacy to the franchise attorney listings- http://www.franchisebizdirectory.com/category/franchise-attorneys/
And, thanks for your friendship and support, CI.
You rock.
Joel