With A Little Help From My Friends

Tea Party

 

      Closing the store was inevitable.  By the time we shut our doors, several other SoupMan franchises had also closed.   Franchisees in PA, NY, Myrtle Beach, SC, Canada, Vermont, and Boulder, Colorado were facing the same demise as we were.  Many more locations would be added to the list in the months ahead.

     By Christmas 2007, we had no jobs and no money but, fortunately, we did have friends.  You really do find out who your friends are when you're down and out.  The Salvation Army was the only institution that provided aid and kept us from living under the bridge.  We not on received help but made friends in the process.

    My friend Susan (from high school) and her husband Allen gave us a gift card to a local super market and forty dollars to buy our grand-daughter a Christmas present.  We cooked an old fashioned New Orleans style Christmas dinner and Susan, Allen, their daughter Becca and her husband joined our family in sharing this meal.  It would be the last holiday spent in our home in Colorado Springs but it was one of the best and most memorable.  

     Two months later David was hired by Coors and we moved to Golden, Colorado.  I got a job in nearby Evergreen.   Financial recovery would begin but healing from the emotional toll would take much more time.

Even the Moon Mocks Me

Shadow Mockery

     After I had cut our costs of goods everywhere I could, I had to lay off some employees and cut hours on the others.  Things were bad enough when problems with corporate arose, compounding our troubles.  Our soup order was late, considerably late.  Corporate was unaware until I informed them.  Since it was past the allowable amount of time in our contract, the person handling the orders was understandably excited.  She snapped that she would find out what happened and get back with me.

     Somehow the soup was on a truck with the longest possible route to our store in Colorado and wouldn't arrive for another 4 - 5 days.  We could possibly be out of soup by then.  She promised to have a few cases sent overnight to help tide us over but that never materialized.  By the time the soup arrived, we were almost depleted and daily offerings were not as varied as they normally were.

       The next order was also late.  When I called corporate, the response was one of indifference.  Again, she would get back with me after finding out what happened to the order.  When I received her call, I was told, "You're not going to believe this!",  which is usually followed by an incredible story.  And it was.  She informed me that the driver that was delivering our soup--retired.  Silence. Did she just say the driver "retired"?  So after the soup was loaded on a truck in New Jersey, somewhere between New Jersey and Colorado, the driver pulled over somewhere and retired?  She was right, I didn't believe it.

     Do I bluntly call her a liar?  Do I feign a British accent with a tinge of sarcasm and say, " A likely story"?  No, I said nothing.  I think gobsmacked is the word--much better than flabbergasted since I had just been smacked with a gob of b.s.  She quickly broke the silence saying that the order would arrive soon and hung up.

     The more I thought about what has just occurred, the funnier it became.  Seriously, he retired.  When the soup finally arrived, the driver was the same driver that had delivered our last order.

     I was alone in the restaurant, when two college aged girls walked in, ordered some soup and proceeded to take it outside to eat on the patio.  They were talking and eating when the downtown local poet approached them.  He's a fixture downtown, walking the streets soliciting his work in the business district, wearing a suit and tie, and carrying a briefcase with copies of his stories and poems.  Most people pick up speed and try to avoid him but the girls were his captive audience.

     Immediately, one of the girls ignored him as if he wasn't there.  He turned toward the other girl and continued his spiel.   The girl who had ignored him and now sitting behind him, looked at her friend, raised her hand to the side of her head and twirled her index finger, making the crazy sign.

     As an uncontrollable grin flashed across my face, I thought,  This is what my life has become -- crazy.  My reality show is a mash up of  Fawlty Towers and The Sopranos -- a comedy and a tragedy.  Maybe, I should write a book; I started keeping a journal to record everything that was happening on a daily basis.  As memorable as these events were, there were so many and I didn't want to lose any of it.  So every day after the lunch rush, when I was alone, I would record the events of the day in a notebook--it helped me focus on the absurdity of the situation and reprieved my mind from the fear of what was ahead.
                                             
                                                                                                        to be continued....

   

   

   

   

   

Smoke and Mirrors

Lesson in Due Diligence

Reflection

                                                          

Due Diligence  -  research and analysis of a company or organization done in preparation for a business transaction.

     The current atmosphere of the franchise industry is one of enormous risks.  In most cases buying a franchise translates into being nothing more than a modern day share cropper, working menial tasks for meager wages.  You will not be in control of your business but a slave to the franchisor.

      Due diligence requires more than hiring a business attorney to review your UFOC (Uniform Franchise Offering Circular) and contract, googling and checking the resumes of the top board members of the company.  The CEO of the franchise we purchased had an exceptionally impressive resume but unfortunately, had little to do with the operation of this franchise.

     In order to protect yourself and do a proper due diligence, one must perform a forensic evaluation of the franchise in question.  If your attorney cannot or will not do this, the daunting task falls on you.  If you fail to do this, be warned--your endeavor will be (financially) fatal.

    Not all business lawyers can provide the proper analysis of a franchise.  They are knowledgeable on reading contracts but just reading the contract doesn't inform you of the risks in that particular franchise.  Also, they may not catch the traps in the contract language.  Proper due diligence involves deconstructing the franchise for fraud analysis.

     Most franchises are not as good as represented. One of the first misrepresentations is the amount of investment needed.  Because of UFOC disclosures, it is assumed that if any of the info turns out to be untrue, the investors can sue for fraud.  But usually by that time, most investors are bankrupt.  Bad franchisors count on investors inability to hold them accountable.     

     Turning to regulators and government agencies is fruitless.  They almost never do anything to protect victims of bad franchises.  Having other franchisees join together in filing complaints doesn't help.  Arbitration and Acknowledgement clauses give franchisors free reign and government agencies' resources are limited.  

    Prevention is always the best medicine.  Pay attention to red flags.  Never sign an agreement that gives the franchisor the provision to assume the lease on the franchise location.  This prevents the franchisee (in the case of a bad franchise) from operation in that location as another business.

    Recently in the Denver area, two local Steak 'n Shake franchises were losing money with the franchisor's mandated value menu.  Corporate pulled the plug on these locations by shutting down the restaurant's computer system (which they control).  They filed suit and took over the business from the franchisees for reneging on the menu prices.  Even though a local judge allowed the franchisee to continue business in the location minus the signage, the franchisor was able to take over the business and assume the lease.  

    After we closed the doors of our franchise, I spent many sleepless nights online.  While googling every key word(s) I could think of that related to the franchisor, I tripped across an unfamiliar name.  After finding a connection, I began to research that company by reading SEC documents and following a trail of failed food franchises that later resurrected with new franchise names but identical profiles.

    A great product, after failing in one franchise, can be renamed and repackaged as something new.  Players can be shifted into new positions--sometimes appearing to have a less role in the "new" company and out of scrutiny, while remaining the main player.

    Forensic deconstruction involves discovering the hidden risks and knowing who really controls the enterprise.  UFOC regulations only requires the company officers to disclose any personal bankruptcies but not if any of the companies in which they have held positions have gone bankrupt.  Being salaried, their personal wealth is not affected when the company goes down.

     Don't just look at the people holding the top positions,  Who are the required vendors?  Are they truly independent or is there a hidden connection to the company?  How are you buying the franchise?  The franchise salesperson may be called a Director or V.P. but usually, he's an outside sales person working on commission.  You have to question everything you are being sold.