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Small Business Information |
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Franchise Buyers from Hell
I ran a franchise company for many years, a car wash franchise, and we use to get the most ridiculous franchise buyers who thought they wanted a franchise. It seems we had to deal with these Kookoo birds because they have consumer rights and the Federal Trade Commission, which looks over franchising goes out of their way to let these consumers get away with these tall tales. We had a potential franchise buyer wish to buy a franchise in Peachtree, GA. He filled out our form and said he would seek a small business loan and we discussed what it would take to put in a fixed site carwash. He would not reveal how much money he had available. He said he had excellent credit and had just purchased a new house. We instructed him to look into a business loan and if he could come up with the required capitalization we would proceed. Turns out the guy asked for a 1.6 million dollar loan and found out he needed 20% down, called us back and said he just did not have that level of funding. He of course needed $320,000. As it turns out after several hours of discussion that he did not even qualify to buy our mobile franchise unit and could not come up with $6,000 in real money. He worked for Motorola at the time. He probably has been laid off with the last wave of 20,000 people. The big problem here is how he dodged the question and never revealed he had no money, which would mean he did not qualify. He knew exactly what it would cost before he filled out any forms or even contacted us. He lied or assumed he could easily get financing for a small business. He assumed also since he was black, which he later revealed that the SBA could give him a grant. Now that would be cool, I wonder how many franchises we could put in if that were the case? Of course he did not alert us to the fact that he was going to try to go out and get the money for free. If that were the case we would also not have been interested because he could simply walk away from the franchise later at any time without losing any money and we would have burned territory and lost brand name reputation in the high end neighborhood of Peach Tree, GA. If we disclosed this individual after the few phone calls we had with him, he would have received in fact an offer to buy our franchise from us. Yet once the facts were known we would never offer him a franchise. He couldn't have bought a franchise anyway. With less than $6,000.00 in cash he is not even in the ballpark. We recently had a nice lady out of Brentwood, TN fill out our online form of interest in our franchise. When I called her back to discuss this, she said "What is the name of your company again, I went to so many web sites?" Well, this is interesting. She went to how many web sites and filled out how many forms generating time and work for every franchisor she went to. I almost hung up since she was obviously a looky lou, but I did not wish to be rude. After talking for a while it became very apparent that this individual was in the Image Consulting Business and wanted to sell us some type of services. After listening to her for quite a while about all her great credentials about her Image Business, I realized this lady was not interested in a franchise at all. She of course had a cover story for her inquiry. It went like this; "My son is working for someone else and my husband is a Podiatrist and I have PhD in Image Psychology, and we want to set up our son in his own business. He does not have a college degree. I do not think this type of business is the type I would want him to do." The story seemed questionable since I was talking to her instead of her son. She did not know what her son would want in a franchise and wanted to continue to rule his life. Obviously a story to get me or someone who works for me to listen to her sales pitch. She had clearly misrepresented herself in her telemarketing sales ploy. Does this person deserve a UFOC of 155 pages and the $3.50 to express mail it? On to finish this story; We already have a franchisee in Brentwood TN, who last year indicated he may be willing to sell part of his franchise. I told the lady she should call the franchisee and deal directly with him in a transfer, but that she would have to have herself, if she would be a 5% or more owner, and her son fill out our application form before we could allow a transfer. I gave her the name of the franchisee in Brentwood TN, the phone numbers and indicated that she and her son should contact him and ask to ride on the truck for a day to see if it was what her son would like. Also she would need to talk to the transferring franchisee as to price and other consideration. I should not send a UFOC until I know the franchisee is interested in selling, because otherwise I am offering to sell a franchise in an exclusive territory, which has already been sold. In this type of situation this proposed rule really has a problem. Recently I had a potential buyer fill out our questionnaire and where it asks "How will you pay for this franchise they listed "Family members and personal savings." When talking with them on the phone he confessed to me that his brother was rich and that he could secure all the money necessary to buy two areas (franchises) and multiple units. Great, then we are interested since the person appeared on the application to be a great person, which in our franchise is a criteria. This unfortunately is getting harder and harder to find the average person you meet. I asked the potential buyer if his brother was going to have an ownership of the company. He said no, it would just be a loan. We then proceeded, disclosed the individual only to find out his brother was not liquid and could possibly only lend $15,000 by using credit card checks as cash and wanted a 40% share of the company. Okay we can do a smaller single unit franchise we thought, since the rest he could get in a loan through our vendor from GMAC or GE Capital for the equipment. Of course the brother would now need to qualify too, and together they would be able to make the deal and start their new business. The brother would not sign the application form and we could not verify his information, so we withdrew the offer, but the potential buyer said you cannot withdraw the offer you said; "I can buy your franchise and you sent me the offer to sell me a franchise and the agreement and I sent you back a receipt of receiving this offer and I am going to buy this franchise," His rational was that we had offered to sell him a franchise and on his application he said he could get money from family members and he still had five more siblings and he would not give up until he got the money. I wonder how many UFOCs I will send out to all these siblings, if your rule is adopted, who decide to call up or ask a question about the business, knowing they will not buy into the franchise but act just to appease their brother. And it occurred to me when discussing this issue with some team members, well he may have a hundred relatives and almost everyone has parents and some of us still have grandparents hanging around watching us on the sidelines as we go through life. This buyer is really serious and determined and he said he would never give up, but if I have to send a UFOC to every single friend or relative who promises to look into it, I as a franchisor am not interested in selling him a franchise. Meanwhile how many times will I revise my franchise the UFOC until he finally finds the money under a rock in the back yard? He said "God will help me find a way." Oh Great! And maybe he will, but who is going to pay me for the 50+ UFOCs I have to send out every time he finds someone with a pulse who is willing to send me an email? And as the business relationship studies and articles show in HBR (Harvard Business Review), Fast Company, Fortune Small Business, Darwin, Entrepreneur, Business 2.0, E-Business, Small Business Computing, MIT's Technology Review, Red Herring and CIO it is important for proper CRM (Customer Response Management) to reply to emails with in 24 hours. With this proposed rule simple business etiquette and norms would require disclosure to anyone who asked a question that we answered by any form; email, fax or direct mail? Whether or not we were simply trying to nicely answer a question or thought there was potential with that individual. Forcing franchisor's to be careful in discussions, tentative in information discussed and hostile to simple questions asked by consumers if pressed. And the consumers will press, because they want answers to their questions, they are impatient and demand a direct answer and not the run around. If a franchisor answers, he has to send this phone caller, e-mailer an entire UFOC? Hmmm? Are we sure we should stay in the franchising industry and give all of our information to anyone while working hard to stay within all the current regulations and still provide the American Dream to everyone else? "Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs
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