The Franchise News

Amazing Soda Shop - Not a Franchise

2009-11-06T17:50:33Z

One of the great myths in franchising is that a bigger distribution center is always better for each operator on the node.

The operator of the Amazing Soda Shop is great story, and provides a compelling counter example to franchising.

"Welcome to Galco's Soda Pop Stop, where you will find over 450 different sodas in glass bottles and half forgotten candies.

(Yes, we do also carry over 500 different beers from around the world, but these are not yet available online.).

You may have seen us in such magazines as AARP, Westways, and Sunset, and on such television programs as "Visiting With Huell Howser" on PBS, The Food Channel's "Unwrapped", CBS "Sunday Morning" or "Modern Marvels" on the History Channel. "

The passion for soda began when John F. Nese was a child. His father's best friend owned a soda pop bottling plant where John loved to visit in the 1950's.

At that time, he also spent his summers at Happy Camp. It was here that he would dream of how he could hook the natural, bubbling spring water, add syrup and siphon it to his elementary school's drinking fountains.

In 1995 John began increasing his assortment of sodas not only out of love, but also as a protest to some of the larger soda companies that were not offering him the same prices as his larger competitors. He figured why not support other small businesses such as his own?

What the John Nese says on the video is also very interesting.

1. He wouldn't become a Pepsi distributor because he could recommend that his customers get a better deal from Pepsi down the street at a competitor.

2. "I own my self space and I can do anything I want." When Nese put 25 hard to find soda pops on his shelves, the customer reaction was: "Why are you trying to sell those old things?" When he got to 250, the customer reaction was: "Where are you getting this things?"

3. Heavy glass bottles which are recycled is better for the environment than using cheap bottles and refundable deposits.

4. "When the American public has a choice, they will buy it." A glass bottle keeps carbonation, whereas carbon dioxide leaks from the plastic. Modern bottles explode if drop.

5. Most diet sodas are pretty bad, and modern soda pops use corn syrup instead of cane sugar. Try the Coke made at the Jewish High Holidays, yellow cap bottles. to see the difference. People have allergies to corn and there is a spore that cannot be removed from the corn sugar process. This spore is what people are allergic to.

6. Energy drinks are terrible.

7. Big business leaves big government. "My thought was always to do business with other businesses my size."

Want to be a Jamba Franchisee?

2009-09-24T14:46:08Z

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Over at QSR, there is an interesting story about Jamba Juice.

"Jamba Juice announced the debut of its new franchise website.

The new franchise site, also accessible from the company's Web site, was developed to make it easier for prospective franchisees to learn about franchise opportunities with Jamba.

"We announced our franchise development strategy as part of our Company BLEND plan in January 2009," says Thibault de Chatellus, senior vice president of global franchise and development for Jamba Juice Company.

"Since that time we have had an influx of calls from parties interested in opening Jamba Juice stores.

We are launching our site to provide potential franchisees with round-the-clock access to detailed information about Jamba and to provide an easy way to apply for a franchise."

This makes a lot of sense, if in the long term the website ranks high in either organic or paid search for "jamba juice franchise". As might be expected, there is little or no traffic on the jamba juice franchise website.

Interestingly, it ranks in the top ten google search for this misspelling: "jabma juice franchise", as of September 24th, 2009, using google.ca - the Canadian search. It doesn't rank for the US search for the same misspelling. And right now it is not ranking for "jamba juice franchise", although the franchisor's main website is.

What you see when you type "jamba juice franchise" is that the franchisor is competing with a number of franchise portals, salesmen selling their product.

If I am the franchisor, I am more than annoyed that I am competing with third party salesmen, many who might be only using their ranking for "jamba juice franchise" to obtain a lead, because they ranked highly for the term.

Google says that it tries to protect bidding on trademarks, but as the CBC recently reported, "a European Union court adviser said Tuesday that Google Inc. does not violate luxury goods makers' trademarks when it sells brand names as advertising keywords triggered by internet searches.

The adviser's legal opinion will now be studied by judges at the European Court of Justice, which has been asked to tell a French Appeal Court how to apply EU trademark law in a dispute between Google and several French luxury goods companies over the internet search engine's ad system."

The bidding on a company's trademarks in order to compete with a company is a big practical problem for a franchisor.

How can their websites rank higher and provide better content?

Janet Sparks is the Best Damn Franchise Reporter.

2009-09-15T23:34:21Z

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In a franchising world that loves the fluffy stories, Janet Sparks shines like a beacon.

With hard hitting, factual, and important stories Janet Sparks leads the way over at at the first rate franchise news site, Bluemaumau.

Look at her latest story about a very dubious franchise system, Peaberry Coffee.

"On August 31, Bill Tointon, owner and CEO of Peaberry Coffee, sent out notices of termination to the remaining five franchisees out of the original ten, advising them that the company was closing its doors. The franchisees were immediately cut off from needed supplies to run their stores and disconnected from the POS computer system, leaving them greatly handicapped in ringing up customer sales. Two franchisees, who were subleasing from Peaberry, were told their property leases were terminated.

One said he had no choice but to put up signs advising loyal customers that his coffee shop was out of business. Five company-owned stores were also closed.

Peaberry attorney Hugh Gottschalk explained it this way, "When you close your business you simply decide it is no longer worth continuing the effort to try to make money." When asked if the franchisor was going into bankruptcy, he said, "No, they do not have to file bankruptcy. Bankruptcy says I don't want to pay my creditors."

So what does it mean to simpy shut down a franchise system by sending notices of termination?

Again, Janet writes:

"Richard B. Podoll, the attorney representing the franchise owners, thinks the franchisor left its franchisees high and dry with little communication and warning of its precarious predicament.

He said closing down the coffee chain is typical of Tointon. "He knows the remaining franchisees are totally dependent on the Peaberry product and he has signed 10-year agreements with them to go five years down the road. So now he sends them notices of termination, knowing it was contrary to terms of the franchise agreement."

Podoll said Tointon portrays himself as a kind guy, but in reality he couldn't care less about the ten people that he induced to invest more than $400,000 into a cloned business that had been losing a million dollars a year since 1990.

Closing down Peaberry Coffee without notice to the franchisees evidences the same lack of character for the franchise owners."

You simply don't find this investigative writing outside of Bluemaumau.

Finance to Franchising?

2009-09-15T16:56:05Z

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Donald Cranford writing at the franchise direct blog claims:

It's official: the shift is underway. In the wake of the global economic downturn, the massive lay-offs on Wall Street and the chaos of the financial markets, hundreds and hundreds of America's best businessmen and women have been sent looking for a new field to apply their business skills. And that place is the franchising industry.

In this week's issue of Business Week, there is a compelling article discussing the migration of financing to franchising for 11 professionals. Be it with Roni Deutsch Tax Centers or Hungry Howie's, the broadness of franchising has allowed many intelligent, unemployed people to reignite their business careers.

Unfortunately, 11 stories don't equal data.

Are people flooding into franchising? Are leads, completetion rates - the sending in of the confidential questionnaire, and conversions up?

No.

In fact, the Franchise Bench Report for July 2009, states:

"What are you seeing on lead flow? The answer?

For the May-July 2009 period compared to the same period in 2008, lead flow is down approximately 34% for the brands included in the FranchiseBenchmark report.

There are franchisors that have cut back on advertising in an effort to reduce costs sectors that have shown slightly higher or slightly lower changes but the bigger shift is in the focus on lower priced concepts.

Donald Cranford writes for one of the portals in this report, and should have researched the trend on lead flow before simply parroting the fluff piece in Business Week about financial professionals now in franchising.

Deceptive Franchise Ads

2009-08-20T14:15:27Z

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Sean Kelly writing at his Franchise Pick blog has an excellent article about the deceptive advertising by Liberty Tax. Sean writes:

"A search for Liberty Tax Service on CareerBuilder.com revealed no less than 433 Liberty Tax Service franchise opportunity promotional listings mixed in with the employment ads.

While one of the fields was tagged "Franchise" and the title for most was "Liberty Tax Service - Franchise Ownership," the franchise ads were steeped in employment lingo including "Job type: Full Time," "View Full Job Description" & "View Similar Jobs."

Is Liberty Tax Service crossing the line set by the FTC by trolling for franchise prospects among desperate job seekers?"

Here is the ad that Sean spotted.

What Sean was quick to spot was two things: first the franchise is being pitched as a job, and second, to make it more realistic, a "salary" was quoted.

Sean also pointed out that this was probably a violation of the FTC Staff Advisory Opinion, 06-1.

"The only substantive regulation of the content of advertising in the Franchise Rule are provisions regarding the making of earnings claims in the general media. Pursuant to section 436.1(e), a franchisor making earnings claims in advertisements, such as in newspapers or trade journals, must have a reasonable basis for the representation at the time it is made and disclose in immediate conjunction with the earnings claim the number and percentage of purchasers known by the franchisor to have achieved the same or better results in the same time period."

So why does Liberty Tax make such outrageous claims? Because for the most part they cannot be held accountable. Any violation of the FTC Rule has to be pursued by the FTC, and the usual integration clause in the franchise agreement will preclude an individual from suing Liberty Tax.

Thanks again to Sean for uncovering this neat bit of deceptive advertising.

Toronto - Home to ABA Franchising Forume

2009-08-11T00:08:21Z

Does Sex Sell Hamburgers?

2009-07-24T16:37:04Z

Your views?

Franchisor Fined for Fake Reviews

2009-07-18T02:50:37Z

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A ABC news story, by Joel Stonington, reports on a "franchisor's" use of fake reviews.

Lifestyle Lift agreed to stop posting false reviews online, in a settlement with state Attorney General Andrew Cuomo on Tuesday.

This is reportedly the first prosecution nationally of "astroturfing," the practice of creating a fake grassroots movement or illegitimate buzz around a commercial item, something that Cuomo's office called "a growing problem on the Internet," in a statement issued Tuesday.

Cuomo's investigation revealed internal emails in which employees were encouraged by company executives to take spare time during the day to write the reviews and post to message boards. "Put your wig and skirt on and tell them about the great experience you had," read one.

According to the AG's website, regarding the use of fake reviews by Lifestyle Lift:

Lifestyle Lift has more than 40 locations across the U.S., including Manhattan, Long Island and Syracuse.

The company engaged in a concerted effort to bombard Internet message boards with positive stories about themselves.

Lifestyle Lift's president believed that negative Internet postings had significantly hurt the company's reputation and thought the success of the company hinged on controlling messages posted online.

Company employees were directed to create accounts with various Internet message boards and pose as satisfied customers of Lifestyle Lift.

Employees also attacked legitimate message board posters who criticized Lifestyle Lift and tried to get those posts removed from message boards.

Some of the employees, or shills, stories can be read by clicking here.

Here is one of the more interesting shill post:

"What was with all the negative posts online? Those negative stories did not add up atall. They did not make any sense.

Lifestyle Lift had done thousands of procedures,their doctors are board certified, and they have doctors from Harvard, Stanford, and all the topuniversities in the country ...

Why was that happening? Was Lifestyle Lift really a scam?

The juxtaposition of the authority of "doctors from Harvard and Stanford" with Lifestyle Lift is cute.

Lifestyle Lift is not a franchisor, but operates about 40 centers in the US.

This action by AG Cuomo is consistent with what the FTC now demands in their guidelines on testimonials.

Endorsements must always reflect the honest opinions, findings, beliefs, or experience of the endorser.

Furthermore, they may not contain any representations which would be deceptive, or could not be substantiated if made directly by the advertiser.

Slash dot picked up the fake review story and there about 200 comments on the story, but none of the commentators make the obvious point: the employees could have been quite straightforward that they were employees defending their companies reputation.

The desire to meet negative posts online with fake reviews tells you a great deal about the underlying ethics of the company and ultimately product: they are willing to lie about the product to counter act negative reviews.

Hmm, does this apply to your franchise?

Fixed Royalty Rates

2009-07-07T15:14:54Z

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Sean Kelly, writing at Franchise Pick, has an interview with Jonathan Barnett of Oxi Fresh.

"Oxi Fresh was designed to operate as a home-based business. Our services and business model eliminate the need for a store front, making it much more affordable for franchisees.

We are able to keep the initial cost of investment low by offering franchisees a home based system and not requiring the purchase of company vehicles.

Our royalty structure allows us to charge our franchisees a flat low monthly fee, rather than a percentage of sales like other franchising systems."

At least this system has a registered trademark, unlike one of its competitors.

I am against the flat fee model for royalties. Although, it looks enticing at first for the franchisee, the flat fee means that as the franchisee grows in sales, there is no more money to pay the franchisor for training, support or infrastructure.

Now, if the franchisor thinks that the franchisee who grows needs less support and training, then I favour a shrinking royalty based on stated volume of sales levels.

I am not aware of a successful franchise system that works on flat fees, and this is a red flag for this franchise, in my opinion.

Franchising as a Corporate Form

2009-07-03T15:43:35Z

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Imagine that you are in a Hardee's restaurant, slip and fall, breaking your leg. You would likely bring an action against the franchisee, and franchisor.

But would you ever bring a lawsuit against the Hardee's franchisee just up the street because they look to be a more prosperous unit?

It would be absurd - yet this is just the outcome that a number of global accounting, law, and consultancy firms face as the result of the Parmalat fraud.

First, some background. In a global world of service, trademarks denote a level quality, understanding and depth not available from local firms. Naturally, an accounting firm, for example, wants its trademark to be used for marketing purposes.

Consider the recent problems that Deloitte Touche is having because of the Parmalat fraud and its use of an alternative corporate form, the Swiss Veiren.

From the Judicial Opinion, which refused summary judgment, here is some background on the Parmalat lawsuit.

"In the early 1990s, Parmalat, an Italian dairy conglomerate known for its long shelf life milk, pursued an aggressive growth strategy financed largely by debt.

Its expansion into South America, however, turned out to be ill-advised, and it began to lose hundreds of millions of dollars there.

The company needed constant infusions of cash to cover these 14 losses, service its massive debt, and hide the personal diversion of funds by Parmalat chief executive officer Calisto Tanzi and his family.

But cash could be obtained only so long as Parmalat appeared to be a sound investment.

To this end, insiders at Parmalat and Grant Thornton S.p.A. ("GT-Italy") concocted a scheme involving misleading transactions and off-shore entities that created the appearance of financial health.

One such transaction, for example, involved a fictitious sale of 300,000 tons of powdered milk to Cuba for $620 million.

Loans obtained on the basis of this transaction were used to service debt and obtain more loans.

In short, Parmalat and its confederates were operating something akin to a Ponzi scheme."

Lawrence Cunningham, writing at Concurring Opinions, describes the particular problem, one of the correct corporate form.

"The [plaintiff's] argument is that Deloitte Italy acted as an agent of Deloitte Central and/or Deloitte US acting as principal.

The Deloitte defendants, acknowledging securities law violations by Deloitte Italy, first deny the existence of any principal-agent relationship between Deloitte Central and Deloitte Italy and second deny that Deloitte US controls Deloitte Central.

A principal-agent relationship arises from agreement that the agent will act for the principal under the latter's control.

Authority can be actual, apparent or implied; control, which is essential, is evaluated according to all surrounding circumstances.

Deloitte Central denies giving Deloitte Italy any agency authority or exercising any control over it.

But the proffered evidence raises material fact questions about these assertions."

The particular corporate form, giving Deloitte US and Deloitte Central, problems is the known as a Swiss Verein.

"The Verein can also be used as a legal form for a busines organization consisting of a number of independent offices, each of which has limited liability vis-à-vis the others.

The form is often used by multinational professional firms. One advantage to the Verein structure is that because control of the firm is decentralized, offices are only bound by regulators in their country.

For instance, non-US offices of accounting firms in a Verein structure are not bound by Securities and Exchange Commission subpoenae from the United States.

Since the assets and earnings of a Swiss Verein are controlled by the member firms, Swiss Verein borrowers should provide a lender with guarantees from member firms or backup Letters of Credit."

Rob Millar, his blog Adventure of Strategy, points out similar problem for PriceWaterHouseCoppers:

"Dennis Howlett at AccMan has a side bet going that PriceWaterhouseCoopers is going to be the first of the current "Big 4" accounting firms to collapse, precipitated by the Satyam debacle. Quinn Forensics seems to have the same view.

At the centre of the question of their survival, it seems, is the degree to which the rest of PWC's member firms across the globe can and/or will be held liable for the actions of the Indian firm's partners."

Basically, the members of the international network all share a like desire to maintain standards, in this case professional accounting standards, under a common brand, which is in part regulated by local laws and customs- a franchise system.

Franchising should be recognized for its value as, a different corporate form, solving a number of the principal agent problems inherent in expanding service based firm, such as accounting, law, or some other consultancy.

Franchising, in general as a corporate form, provides for a centralized authority which protects the trademark, leaving local decisions to the individual franchisee. This is a very high level view, but we should not lose sight of its importance - asset insulation of individuals operating under a common trademark.

The operational control of any member of the network by another can be evidence of a principal/agent role, which defeats the intent to keep member liabilities and assets distinct.

Operational control may be inferred, depending on the facts. This problem is well known in franchise law, and there is well established case law delineating when operational contorl will pierce the franchisor - franchisee veil.

I would argue that the proper corporate form for this type of international network is a franchise system, with the franchisor setting standards but not exerting operational control over any of the members beyond what is needed to police the trademark.

Indeed, it would be a great deal of sense to have all disuptes concerning standards, and the local interpretation of those standards, resolved by an independent mediation/arbitration firm.

Currently, the Deloitte solution is a typical naive formalistic - constantly repeating that each member is a distinct entity, but also marketing their common expertise.

The current solution is largely window dressing - these business networks need to have centralized standards and an independent mediation/arbitration process to resolve if those standards have been met.

The independence is required, otherwise operational control will pierce the franchisor/franchisee veil.

Out-of-work execs hunt for white-collar franchises ??!

2009-06-30T13:38:03Z

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Executives looking for job security are getting fleeced by franchising.

Consider the headline from the National Post, on June 30, 2009. Another typical story about how out of work executives are turning to franchising in order to control their risks of being fired.

There is a shift in attitudes that is not a short-term reaction to a fad, but an indication of a larger trend as more executives see greater risk in long-term employment than they do in self-employment.

"That's why more people are investing in the one area of security they have - me," says Mr. Prenevost, who defines white-collar franchises as those that provide intellectual capital, instead of the stereotypical food and retail outlets.

White-collar franchises include consumer and commercial services, such as business coaching, health-care services, home maintenance and décor, environmental services, financial oversight and accounting or any other consultative franchise adventure."

As reported earlier on Blue Mau Mau, I stated that those looking to buy job security are easily scammed.

An expert says that buyers of small businesses who do so solely to have control of their career are easy marks. Mr. Michael Webster, a practicing franchise attorney who fights real-life hucksters in court and has a Ph. D in decision theory, a study that helps explain how we make such bad choices, seems well situated to explain how we so easily can be defrauded.

The biggest obstacle people face in doing proper due diligence of their franchise is cognitive dissonance: they want to control their job environment because getting sacked was traumatic, so inconvenient facts about their choice of franchise opportunities get ignored - at great financial cost.

Here is a simple example, straight from the National Post story on franchising.

In March Mr. Nelson bought a franchise from PuroClean, a property and disaster restoration services company, where he will be able to apply his management and sales experience. It may not appear to be white-collar by definition, but it uses his transferable business skills in sales and management.

PuroClean operates in the US also, and as such their Franchise Disclosure Document is available online for free.

Also the 2007 financials are available, online and free.

The financial statements are quite revealing: between 2005-2007, between 1/4 and 1/3 of the franchisees were closed or terminated!

Is this what Mr. Nelson expected when he was looking for employment security?

Seven - Eleven cannot force minimum resale in Japan

2009-06-23T13:43:43Z

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Interesting story out of Japan about a minimum resale policy by Seven-Eleven.

Seven-Eleven's franchised outlets must cover the prime cost of food products that remained unsold, although the company's franchise contract states that member stores can freely decide on the retail prices of their products, according to the commission.

In fact, there were 30 to 40 cases in which Seven-Eleven Japan virtually prohibited its franchised stores from discounting the prices of expiring food items under the pretext that it would trigger price competition and a sales decline.

In those cases, managerial trainers dispatched from company headquarters to its franchised stores told outlet managers: "Please stop discounting or your contracts won't be renewed," according to a probe by the commission.

The [JFTC] commission determined that Seven-Eleven headquarters took advantage of its superior position to deprive its franchised stores of opportunities to reduce their burden of covering the prime cost of unsold products.

The commission ordered the company to look into measures to prevent a recurrence by producing materials to explain to its franchise operators how to discount expiring products.

This is an interesting problem: the franchisor believes the discounters could send the system into a cycle of price cutting, while the individual franchisee only seeks to recover some of the cost of what would be a wasted product. There is also the consumer to think about: will they wait and purchase only the discounted products?

When I was at the University of Waterloo, the graduate club bar used to sell hot dogs at 1/2 price or even give them away after midnight. Some nights, almost no hot dogs were sold, but the entire inventory was cleaned out with the giveaways! One bartender refused to adhere to the giveaway policy and deliberately threw out the hot dogs rather than give them away. Sounds like Seven-Eleven needs a similar mixed strategy.

Texas AG to Defend GM Dealer's Franchise Rights

2009-06-19T16:45:41Z

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A dramatic class of federal bankruptcy law and state franchise laws is in the making with the GM bankruptcy. Unlike the Chrysler bankruptcy, the state Attorney Generals have decided to intervene.

Here is the Texas AG's press release about protecting state franchise laws for the automobile dealers.

"GM is putting dealerships across Texas - and thousands of their employees - at risk.

The new federally controlled GM that emerges from bankruptcy wants to be freed from Texas laws that require it to deal fairly with local dealerships.

Its plan will move the business toward a command economy model and away from a free market model.

In an unprecedented move, GM - which will be majority owned by the federal government - claims that states' rights and states' laws that protect dealerships can be ignored at GM's choosing.

In doing so, federally-owned GM guts Texas statutes that regulate car dealers - and flaunts U.S. Supreme Court precedent that upholds our state-based dealership structure.

Under its bankruptcy plan, GM seeks to sell itself to a new company - at this time called "New GM".

GM has insisted that current dealers sign a new dealership agreement if they want to be part of the New GM operation.

The new agreements, however, amount to take-it-or-leave-it ultimatums that force current dealers to waive state laws that were enacted to protect businesses from those kinds of oppressive moves.

If dealers don't sign the contract, they will lose their business.

According to the Texas Automobile Dealers Association, there are 415 franchised GM auto dealers in the State of Texas. These largely family-owned businesses generate billions of dollars in annual sales and employ almost 27,000 Texans.

Under the new dealership agreements GM is seeking to, among other things:

· Free itself from Texas law limiting GM's ability to dictate that a franchise be modified or terminated

· Skirt Texas laws regarding new vehicle inventory by forcing dealers to order new GM vehicles from the manufacturer - even if a dealer does not believe those cars will sell

· Deny Texas dealers their legal right to market other brands

· Alter Texas law (or skirt around existing law) regarding dealer locations

· Limit dealers' warranty claims under Texas law States' legal rights to establish a structure for auto dealerships has been long-standing and unquestioned.

The United States Supreme Court recognized that States are "empowered to subordinate the franchise rights of automobile manufacturers to the conflicting rights of their franchisees where necessary to prevent unfair or oppressive trade practices." (New Motor Vehicle Board of Cal. V. Orrin W. Fox Co. 439 U.S. 96 (1978)).

The Texas Occupations Code provides a comprehensive legal structure for dealerships. Now, under the threat of financial panic and the guise of emergency, GM is asking a bankruptcy court to hurriedly approve a plan that would let it - the only federally controlled auto manufacturer - be the sole exception to those well-established state laws.

The Texas AG also made a submission on behalf of the dealer franchisees to the bankruptcy judge. The Chrysler dealers were given short shrift so this should be more interesting given that at least one state Attorney General has weighed in on behalf of the state's rights.

Perhaps more ominously, GM's new mandates threaten free enterprise by allowing the federally controlled company to compel business judgment decisions that formerly were made by businessmen and women.

GM is seeking to place short term profit above long held principles; short term accounting above long term accountability. America deserves better; Texas is demanding it."

Looking to Buy Gold from a Vending Machine?

2009-06-18T13:31:00Z

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"The New York Times is reporting, what appears to be only a plan at this point, on a scheme to dispense gold through vending machines.

Mr. Geissler's company, TG-Gold-Super-Markt, plans to have "a substantial number" of machines up and running in Germany, Austria and Switzerland with hopes for 500 around the world.

He is aiming for a franchise model in which clients buy the machines, which cost 20,000 euros, or about $28,000, and then pay to have them serviced by TG-Gold.

Are there any franchising laws in Austria, for example, which might prevent the licensing of vending machines which dispense gold?

There have been several legal changes in the EU's anti-trust laws which impact upon franchising, and several are relevant to the vending scheme.

"The 30% rule: only those franchises with a supplier's market share that does not exceed 30% can find protection from anti-trust regulations under the new rule.

Unlike the old rule, however, companies for which the block exemption does not apply are not automatically assumed to be disallowed, but must register separately with the E.U. Anti-Trust Court."

How would the supplier's market be determined in this case? Is vending a separate market, or part of the entire market for gold?

There is another distinct business problem for Austria.

"The more challenging legal framework is that of Austrian business law, which is based on a principle of prescription and tends to take the wind out of rapid franchise expansion.

That is because most business activities in Austria are regulated, and require that an application be made for a business license (Gewerbeschein).

Evidence of proficiency must be brought before the license is granted.

Depending on the business in question, the applicant may have to attend training and pass an examination in addition to providing evidence of prior experience in the field.

Then, before final approval can be granted, the concept must be pushed through several independent agencies who will rule on questions such as zoning, safety, and environment.

In short, the red tape that may take a day and half in the United States could take 6 months or more in Austria."

This vending scheme appears to be aimed more at those who would buy or invest in the scheme as opposed to selling to the consumer. And of course, there are no Austrian disclosure laws which might prevent the selling of fake vending opportunities. (Several commentators at Tyler Cowen's Marginal Revolution have concluded that this vending scheme is a fake, and given that Dane Carlson speaks highly of the opportunity, I am in agreement with those who think this is a fraud. See also Naked Capitalism for more comments on the vending gold story.)

Barbeque Cleaner - A Franchise in Disguise?

2009-06-17T00:19:01Z

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Many business opportunities are actually legally franchise arrangements. Google "inadvertantent franchise" to get a sense of the legal overview of this problem.

People who sell jobs to other people often try to pretend that they are not a franchise, because of the cost the regulatory compliance when selling a franchise.

The BBQ Cleaner appears to fit this mold.

The BBQ Cleaner gives people looking to start their own business all the tools, training, supplies and knowledge they need to start a successful business.

It's easy to setup and operate, offers great earnings potential and has almost no restrictions.

Because we are not a franchise, we give people the freedom to operate this business how they want.

Plus, the home barbeque market is bigger than ever which means a large customer base. And, unlike other home services, like paving or siding, which only happen every ten years or so, our customers keep coming back year after year.

Why does it matter whether BBQ Cleaner is a franchise or not?

Here is what the FTC Franchise Rule requires from Franchisors:

A franchise or business opportunity seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase.

You can use these disclosures to compare a particular business with others you may be considering or simply for information.

The disclosure document includes:

names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to you;

a fully audited financial statement of the seller;

background and experience of the business's key executives;

cost of starting and maintaining the business; and
the responsibilities you and the seller will have to each other once you've invested in the opportunity.

If the seller doesn't give you a disclosure document, ask why.
Verify the explanation with an attorney, a business advisor or the FTC.

to verify the explanation before you investigate further.

Even if the business is not legally required to provide a disclosure document, you still may want one for your own information.