Andy Puzder, CEO of Carl's Jr. & Hardee's, is offering a coupon or discount to McDonald's fans who lament the loss of the triple Angus burger from the McDonald's menu.

Will this discount turn into a stream of loyal Carl's Jr. & Hardee's followers?  Or is it just clever publicity?

The are two things  that are lovely about this short video:

1. The extended examination of the twitter complaints about McDonald's - as if Andy was talking directly to the individual.

2. The offer "our better burger for less than what you paid at McDonald's" is good language.  You can get a taste of a better Angus burger, but only for a limited time, for less than what McDonald's was charging.  This is a good use of the "limited time" feature - it makes sense.   The disaffected Angus burger lovers will get over it - so offer them something better and cheaper for a limited time.

Generally, it rarely works to target another brand's customers, woo them with discounts, and count on them to be loyal to your brand.  After all, if they just signalled that they are price sensitive, you should not count on them being loyal to your brand.

But, targeted disaffected customers may work.  I would have made one change to the video and execution of the campaign.  Ad a QR code, capture the twitter handle if any, match against the current twitter stream  to see if you actually got disaffected McDonald's tweeters.  The program would be an analytic success if you could show good matches.

All in all, a clever idea & I would love to hear more about the numbers.

Nikki Sicilian explained Buffalo Wing Factory's sales strategy. As an emerging franchise brand, they have focused their search on recruiting new franchisees in their core market of Washington, DC targeting established franchise brand and independent operators.

David Gould shared his wide experience with capital intensive, large footprint, child care franchising, and also lower cost print and business services franchise.

David emphasized importance of having a great franchise sales funnel, or sales process, to ensure franchise recruitment success.

The Audience's Response - When to Provide an FDD

Warren, David and Nikki's program elicited great audience participation.

One very lively discussion ensued about when to give the FDD to a prospective franchisee.

There was mixed opinion amongst the franchise professionals assembled ranging from giving the FDD at the outset or at discovery day.

1. Franchise attorneys in the room agreed that no matter where a franchise seller thought it best for their franchise sales funnel to responsibly deliver the FDD in the event a bona fide qualified prospect requested an FDD the franchisor must provide it upon that reasonable request.

2. But Franchise sellers expressed the concern that "time kills deals" and if you give the franchise-buyer the FDD too soon they can get bogged down with their attorney and other influencers. (This was not a popular sentiment amongst the franchise attorneys who only make money by making deals happen!)

3. However, David pointed out that having a well-designed franchise sales funnel solves the sales problem in a compliant manner.

With a correct sequencing, the FDD could be delivered well before the discovery day. The Franchisor would meet 14 day waiting period that must occur before a franchise deal can close by early delivery of the FDD.

Time does indeed kill deals, so don't put yourself in the position of having closed a deal and then have to wait an extra two weeks. "Don't turn a yes into a maybe." said David.

There was consensus that unnecessary added time can hurt your franchise deal closing "batting average".

A Recap - What Your Sales Funnel Must Include

And while time may kill deals, rushing to a quick franchise transaction close is a problem as well.

When it comes to prospective franchise-buyers, whether they be first-timers or savvy multi-brand multi-unit franchisees, they have a lot of questions.

These questions center around 3 primary things buyers want to know about your franchise offering .

1. Is my area available?

2. How much does it cost?

3. How much can I make?

And since franchising is a complex ongoing relationship sale successful franchisors take great care in designing their franchise sales funnel.

The best franchise sales funnels have a decision-tree that includes these 7 major steps.

1. Inquiry pre-qualification

2. Application qualification

3. Concept - Discussion

4. Relationship - Discussion

5. Development - Discussion

6. Discovery Day Meeting

7. Franchise Agreement Execution

Professional franchise sellers design their franchise sales funnel or process to move franchise candidates through these steps by listening to the 3 concerns expressed by all franchise candidates.

Below, in no particular order, are 4 costly mistakes that can easily be avoided and save you time and money.

1. Incomplete Background Check:

Most franchise buyers do not take enough time to look into the history of a franchise before buying. Skimming the franchise documents and talking to the corporate owners is insufficient.

This is the equivalent of buying a house after speaking to the seller and the seller's agent, but failing to complete a home inspection. It is vital that you visit with other franchisee owner-operators in and around the geographic location in which your franchise will be located. If there are none, speak to other owner-operators regardless of geographic location.

Perhaps the single most important part of a background check is talking to current and prior owners of the franchise. Don't let blind faith and the excitement of the opportunity short circuit your due diligence.

2. Poor Understanding of Business Model:

I am amazed at the number of franchise buyers that fail to understand the business model that serves as a foundation for their business. And, no, having a clear understanding of the service or product you provide is NOT the same as understanding the business model.

To have a complete understanding of your business model, you must have an exacting knowledge of cost structure, expenses, revenues, profits, inventory, staffing, and overhead.

You must have a basic understanding of how to read and interpret balance sheets and profit/loss statements. Understanding these key financial metrics is essential to understanding your business model and will dramatically improve your likelihood of success.

3. Lack of Professional Assistance:

Reading about a franchise opportunity on the internet, speaking with the franchisor, and attending a Discovery Day is NOT the professional assistance I am speaking of.

Buying a franchise business the right way requires that you seek accounting, insurance, banking, and legal assistance. Though this may add to the cost of the purchase, it is well worth it if the counsel you seek is well-versed in franchise and small business matters. And, please, stop going to your cousin's uncle's brother-in-law that is a family law attorney for franchise and small business advice.

You wouldn't go to a pediatrician for knee surgery, so why would you go to an attorney that does not practice in the area in which you need expertise. Don't be pennywise and dollar foolish.

In the end, you will end up spending more on each or going bankrupt.

4. Undercapitalized:

This is a huge problem for franchise buyers. From an expense perspective, think of buying a franchise like going on vacation, it is going to cost 2-3 times more than you think.

Trust me, it will!! If you do not have sufficient cash on hand, the ability to raise capital through friends or family, or a line of credit or other loan source sufficient to get your business through downturns, you will fail.

Make sure you speak with a trusted advisor experienced in small business money matters so you get off to the right start.

The honeymoon period ends quickly, make sure you are ready for the financial realities of the small business world.

Many of these conversions have been successful. The realty brokerage business is one of the more notable instances in which belonging to a large organization with national coverage has facilitated synergies that would never be available to a small or even a regional group of realtors. However, many, maybe even most, conversions are a disaster for the unfortunate person who converted an independent business to a franchise and didn't know how to do the "due diligence" before making the decision to convert.

So many have come to me with this problem, usually no longer having sufficient funds even to hire a lawyer, that I have decided to put the due diligence protocol on this web site in the hope that some fine small businesses may be saved from a franchise conversion disaster.

What is needed to mitigate the conversion decision risk is never offered. What is offered is a franchise agreement with an initial franchise fee, subsumes an initial investment in changing the business identification to that of the franchise organization, a required regular payment to an advertising fund, a required periodic royalty payment which starts with the first dollar of income every month. 

The franchise contract purports to obligate the converting franchisee to a term of affiliation of at least five years, with a non-competition agreement to prevent departure from the franchise chain - you lose your business if you leave. While these are much less enforceable in the context of a conversion franchise, they are not entirely free of enforcement risk, and even if you win you have spent a great deal of money to fund the litigation.

Then, too, there is the cost of re-identifying your business to its old name and advertising blitz expenses to get that name back out there where people are educated and conditioned to accept and patronize it.

Every conversion franchise agreement I have ever seen has these provisions. If this is the deal being offered, and it always is, there are certain obvious exercises that must be done to analyze its investment worthiness. Obvious, yes, but almost never done. I guess it is obvious if you know about it and how to do it. Well, now that you are reading this article, you will know.

The formula is quite simple. You will, by converting to a franchised business, add to your expense profile the monthly royalties (anywhere from 4% to 8% of sales), plus the advertising fund payments (usually around 2% to 4% of sales) plus other expenses. Frequently use of e-commerce facilities and other "support" elements are not included in the fee and royalty structure, but are separately and additionally charged for. These monthly expenses must be added up and subtracted from your profit and loss statement.

What is the impact upon your profit as a percentage of gross sales? That reduced profitability will be your future profit-as-a-percent-of-sales profile if you decide to convert.

What do you get for that? You are told that you will get greater name recognition, the impact of being in a national organization that can generate more sales, "support" (whatever that is), and the privilege to participate in that franchisor's "unique" system of doing business. There is an objective way to determine how much of what you are being told is true and how much of it is blatantly untrue.

The test is that you aggregate the monthly incremental cost of being a franchisee, and mathematically determine how much in incremental sales at the now-reduced profit percentage you will need to reach break even on your having assumed this additional financial burden. Your accountant can do this for you. And that is merely a break even sales number. To make the conversion decision a profitable investment you have to exceed that sales number by a substantial margin.

Once you have derived that sales number, go to Item 19 of the Franchise Disclosure Document (FDD) that the franchisor is required to have provided to you before you signed any contract, and see if sales ranges achieved by their franchisees is provided. If not, you are about to make a big mistake if you decide to convert your business to their franchise.

Immediately and absolutely refuse to convert to any franchise that does not provide their franchisee sales ranges broken down into the categories of: (1) the number of franchisees in the top 25%, the second 25%, the third 25% and the bottom 25%; (2) the number of franchisees in each geographic region that are in each sales percent category (frequently there is great variance in sales performance by region, and knowing which region you would be in can be critical - not all regions perform with equal success profiles for any franchisor); and (3) the length of time the franchisees have been affiliated with the franchisor in each percentage of sales grouping (if it takes ten years to get near the top tier, you don't want to convert your business).

Now that you know how your sales would have to increase just to cover your expenses of conversion, without any incremental profit to you from having converted, ask the question, "How many of this franchisor's franchisees have achieved this sales level?

The reason so many conversion franchisees have ended up in my office wanting to know how to get out of the franchise contract and how to get their money back is that their franchisor had few or no franchisees generating sufficient sales to justify the conversion investment.

It is a loss situation for the converted franchisees. In many instances, the answer to this exercise is that the franchisor has never had even one franchisee with sales at the level you would need to justify converting your business.

This analytical exercise tells you whether the sales pitch about how wonderful the franchisor's stuff really is is true or false. While there may well be franchisees in that system that are satisfied with their relationship with this franchisor, that is not the question. The question for you is whether the affiliation with this franchisor will provide sales results for you to make you happy at the reduced profit percentage caused by the costs of affiliation.

If the results of this exercise are not positive, but for some reason you still wish to consider converting your business and joining this organization, you can mitigate the risk by insisting upon the following terms being put into your franchise agreement:

1. Current sales are exempt from all payments based upon percentage of sales. Percentage of sales payment obligations apply only to sales above current levels.

2. If sales growth does not exceed 20% by the second year, you may terminate the franchise agreement with no non-competition or other constraint upon your right to do whatever you want to do with your business.

3. If you are still in the system when the time comes to renew your franchise agreement, you have the right to renew upon the same terms as your current agreement, with no adverse changes. Many franchisors want you to renew on their new agreement that frequently has higher fees and less protection for you.

4. If you sell your business, your buyer gets your contract, not some new contract with different rights, including renewal rights.

If the franchisor if unwilling to agree to these terms, reject the conversion offer. So endeth the lesson.

Over the years I created my own model of practice. I did not spend any time in a large law firm. I hung out my shingle after leaving in house corporate practice with very large companies, went looking for work and got very lucky. The harder you work the smarter you get and the better you seem.

My model worked. I didn't promise people things that I probably could not achieve. Even when hungry, I turned down work that should have been turned down. It has always been more than money for me. I wanted (still want) a reputation for professional excellence and I worked very hard to get it.

For many years it was difficult trial work. I love it. But now I try fewer cases. After almost 50 years people want my insights based on what I have learned in that time. They want me to show them how to solve problems without having to try lawsuits as the only approach. I am enjoying the problem solver role, the expert role, the collaborator role and the analyst role.

Life is still a lot of fun. I will probably never quit.

Most law firms feel blessed by long client lists and heavy foot billing methods. The law factory approach has been the model for most large law firms for many decades. They will put enough lawyers on any matter to do everything that could possibly be done. Sometimes the spend the project into the ground approach may exhaust the opposition.

Large clients like to think they can just buy the pot, outspend everyone and win every time, regardless of the merits. That was always the General Motors approach -we don't have to care and we are always right because no one can afford to be as right as we can afford to be.

But, that gravy train is slowing rapidly. Clients are looking at those bills and shaking their heads. Clients are looking more carefully for talent than for sheer weight. Talent isn't cheap, but the file jobbing approach to billing for legal work is on the way out.

The big firms that lived on excessive billing are now splitting up and in some cases just going out of business.

Fortunately for me, most of the clients who seek me out would prefer a best solution approach, a netting out of potentialities and prioritizing them for risk, expense, impact upon other collateral interests. My clients are usually spending their own money, not that of hordes of anonymous shareholders. They don't always know that's what they want when they first come to see me.

When they first walk through the door they want to be reassured that they are right and that they will prevail - whatever prevail means. I could have a lot more business if I played that game.

I have reservations about giving clients a line of misleading salesmanship just to get retained. Many times the client is not as "right" as he thinks he is, and many times that is somewhat obvious in the beginning of the relationship. Often ancillary matters negatively impact prospects for a good result. These need to be identified and taken into account.

Rather than tell a potential client that I agree with him, I tell him that I am going to be a "devil's advocate" and ask a lot of challenging questions to see to what extent his view of things and his expectations can withstand cross examination. That's about as nice as I am capable of being. Accordingly, many potential clients go off and seek a more compliant resource.

While I would very much appreciate being retained, it is better that someone who cannot or will not tolerate challenge go elsewhere.

I handle mainly crisis, bet the company situations and groups of people with common life threatening business problems. Few people understand that a client in crisis is rarely without some responsibility for the fight. In these situations no one is entirely without blame. If the boss cannot accept qualifications to any endorsement of his position, I am really not the right person to be his lawyer. I am not a potted palm and I have been around too many blocks to accept stories on their first telling.

The guy who has to be "right" will pay a lot more elsewhere, and very often he will in the end have spent that money for nothing.

I strongly believe the Rupert Murdock debacle is a product of simple client arrogance. Maybe he has so much money that nothing matters and no result can affect him adversely. He is certainly conducting his response to the hacking accusations as though he had divine immunity. His son is an even worse example of how not to do this.

But even if the Murdocks can afford to mishandle everything, most people cannot. His lawyers follow anything he says without question. If there were effective questioning either things would go better for them or they would be cashiered. I suspect they believe they would be cashiered and just go along for the sake of the fees.

The Murdock spectacle has to be the worst example of crisis management this year. It should be a case study on the subject. I know there will be at least one book on the story and maybe a movie, like the Enron debacle. At least the public financial harm in the Murdock matters is not as substantial.

Your lawyer has to be able to tell you the hard news and not get fired. If your lawyer is more worried about getting paid than about doing the best possible job for you, you are defeating your own cause with a very negative attitude.

You can always get a second opinion to be sure you are not missing anything. I can guarantee you that you would much rather hear bad news in private than in court before the public, a jury or in a written court opinion about what is wrong with you. Of course it is better to provide a spoon of sugar to help the medicine go down, but this is a world where people have to grow up and to do it more quickly.

The digital age has accelerated the speed of calamity. Reality is an imperative in what I do. Your pastor can punch your card if that is what you need.

In the not too distant past a company that thought they just had to be represented by a large Wall Street law firm instead of by the people who prevailed in the nearly identical case a few years before, paid $ 16,000,000 to a Wall Street firm to lose. It was worse than that. They charged $ 16,000,000 and then told the client they couldn't win. Even worse, they had filed suit before they knew what to expect. To me running up a $ 16,000,000 tab and then telling the client you can't do anything for him is a description of incompetence. Competent pre filing due diligence on your client's case really should prevent such a travesty. Maybe if the client had hired the folks who knew how to try such cases he would have been better off. My team won the nearly identical case three years earlier against the same Defendants for around $ 1,000,000. My clients told this client about our success and recommended that they come see us. They didn't. An army of upper crust honor graduates is surprisingly ineffective in a crisis.

My client to this day tells everyone that he almost didn't hire me because I had very different and contrary views about the situation from the views his lawyers had been telling him. They had missed their very best strategic position and had focused upon a technical rather than a real theory of recovery. The opposition had hired four of the biggest firms in Texas to represent them. The opposition was used to "buying the pot", so finding their Achilles Heel was not easy.

But we found it and the big guys cried uncle instead of us. Now my client follows his statement about almost not hiring me with a lot of praise. His is one of the posts on http://www.franchiseremedies.com/what_others_say_about_richard_solomon.htm.

There are occasions when someone really is on the right side of a conflict, and the wonder is that they are in the fight at all. When it seems that my client is that correct and that the opposition is that incorrect, unless I know the client for many years, I am still skeptical. If I can't find the hole in the boat, the boat probably doesn't have a hole in it, or at least not a big one.

I have been told many times that "I'm not going to let a damned lawyer tell me how to run my business." On the other hand, if I see you headed for a fall, based on what I have seen others do to their detriment, I can't just sit there and smile and salute. My guts won't let me do that. I failed to get a good client just a week ago on just that kind of scenario. The potential client told me the plan going forward and I have had a few clients in the past go down in flames doing things like that. When I told her that if she retained me I was going to ask her to rethink that plan, I was dead meat. She had already announced her plan to everyone and was not going to reconsider. I could see on her face that I was about to be shown the door, but no one in her organization was going to tell her anything that she might consider questioning her "authority" as the owner of the company. I am reasonably certain her company will fail within eighteen months if she goes forward with that plan, and I could not salute it. On the way out I asked her one more time to "test market" the plan before betting the farm on it. The look on her face was extremely combative.

As one friend often tells me, "You are a good lawyer but a bad businessman." So be it.

Now had I not insisted on being up front about the need to cross examine every investment plan before going forward with it, I probably would have been retained. I have an awful lot of experience representing clients in her business. The plan would still have failed. I'm a lawyer, not a magician. She would only have been upset with me later anyway. She might even have blamed me then for not having spoken up earlier. People are like that. How does one finesse that? I am certain there are folks who can do that. It takes a pretense that you really think their idea is great and faking it until your relationship with the client is on firmer ground. However, when the drop dead date is staring you in the face, you don’t have time for that. Her plan was going to be put into effect almost immediately and there were three other conflict issues that were about to come to a head within a month or so. Things are closing in on her and she is about to implode her company. Sadly, some other law firm will smile and hold her hand right into oblivion. The rough justice will be that they will go out holding a rather large and uncollectible receivable. When the bad news does roost she will owe them a lot of money that she will refuse to pay.

A long time ago someone I respect told me "Bad news can't wait." I have seen a lot of times when bad news really couldn't wait and no one had the guts to say what it was. I have always spoken up. Most of the time, although I pissed off everyone in the room, I was later thanked for it.

Part of the issue may be that clients often wait until it is the last minute and they have already gone out on some limb before they call me in. That's when things are really tough. I published an article about what not to do when bad things happen. My first recommendation is to say and do absolutely nothing until you really do know what all the facts are. But people seem never to do that. They are always into denial of wrongdoing before they are aware of whether there really have been some shenanigans on the part of their company. It's tough to stuff shit back into the horse. There is no harm in saying that you have nothing to say now and that you may have something to say when you are certain of what the facts are.

Being the owner of a company does not mean you know everything that is going on. Sometimes it turns out that you really did know about bad stuff. Sometimes it turns out that someone you might want to protect has gotten the company into a jam and you don't yet know about it. That stuff will come out. Don't make a fool of yourself by ignorantly denying wrongdoing when you aren't certain what really happened.

The standard P R firm advice is to make immediate self justification statements in response to any accusations. That is really nonsense. If you want credibility you need to make responsible statements. Claiming to be right before you could possibly know the facts and have sorted them out is not responsible or credible. Why do that to yourself?

When you have taken a public enforcement position on a defective contract that seems facially to agree with you but in reality does not give you the rights and prerogatives you think it does, be prepared to spend a lot more money than you really had to spend in getting to a livable result. When the source of the bad news is someone who used to be with your company and knows the truth from the inside, deniability may not be just a matter of hiring a PR firm or a nasty lawyer. Talk is usually not cheap in these situations. Everyone, no matter how much of a good guy he may be (or think he is), has enemies.

It is dangerous to rely upon advice from people who were on watch when the bad conduct in question took place. They are usually on the defensive about it and for that reason less reliable. Get a fresh outside look before you take a position. Tell the fresh outside resource that you really do want to know the news, good or bad, and that you promise to deal with it realistically, whatever it may turn out to be. You will never regret having done that.

I know these admonitions seem simplistic. Truth usually is direct and simple. The amazing thing is that these obvious more successful approaches are so seldom used. If they seem so obvious to you when you read this, you might ask why the more harmful approaches are so often adopted. I think the answer may be that when you are the target of an immediate threat, your reflexes engage more intensely than your ability to be logical. In many instances it is ego driven.

Educating clients is dangerous stuff in moments of emergency. I think I am getting better at it. However I still get shown the door more often than I would like. This is the best mode of emergency representation, however, and I do not intend to change it. Clients in really serious difficulty need to grow up quickly and swallow fear. Fear never drives successful tactics and strategy. If you don't start by sorting out the truths that are in play you will spend a lot more money for a much less favorable result.

Some great ideas, and much discussion.

Obviously, much more practical work needs to be done before October, 2013.  

Looking forward to you joining us providing some answers for the franchise community.  

More round-tables like this need to happen.

Practical Solutions to ACA/Obamacare - Follow Up Papers

Affordable Care Act (ACA) Update: Full-Time Status Determination Rules - Courtesy of Co-Sponsor ADP This article was originally featured in our ADP Eye on Washington update. On December 28, 2012, the Internal Revenue Service (IRS) issued a proposed regulation 1 regarding the Affordable Care Act (ACA) Shared Responsibility provisions, which affect large employers (generally those with at least 50 full-time equivalent employees).     [continue...]     Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees | SBA.gov     Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees As a business owner, it's important to understand how the Affordable Care Act can affect your business. However, with so many misconceptions about how the Affordable Care Act works, this can be difficult.     [continue...]     Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act     December 28, 2012 Basics of the Employer Shared Responsibility Provisions 1. What are the Employer Shared Responsibility provisions? Starting in 2014, employers employing at least a certain number of employees (generally 50 full-time employees and full-time equivalents, explained more fully below) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code (added to the Code by the Affordable Care Act).     [continue...]     PPACA: Play or pay? 7 reasons why 'pay' is not the easy answer     Today's guest post is from United Benefit Advisors CEO Thom Mangan, who offers up seven reasons that the decision to pay or play may not be as cut and dried as employers might think. Enjoy, and as always, share your thoughts in the comments. -Kelley M.     [continue...]     S Corporation Health Insurance Reporting > Yount Hyde & Barbour Co-Sponsor     In recent years, the Internal Revenue Service has made a point to crack down on the reporting of medical insurance premiums paid on behalf of greater than two percent shareholders of a Subchapter S corporation.     [continue...]     Akerman - Meeting Sponsor - Warren L. Lewis       [continue...]

The world is coming out of the closet, little by little, kicking and struggling, but coming out none the less. Recognition and acceptance of gay and lesbian culture grows constantly as people become educated to the plain and simple fact that we are all as God made us and not all alike in many important respects.

Being who you are is no longer thought of as a sin, except in the minds of those who refuse to accept truth in its unvarnished obviousness. The franchise industry is no exception.

Given the positive trend, there remain questions about capability, suitability, style, business methods, liability issues, vetting for suitability taking lifestyle issues into account where that is an important consideration in the ability of a business to function and succeed, and how to deal with furthering progress in positive attitude adjustment in the business world generally and in franchising in particular.

Inasmuch as franchising as a business concept and business model embraces dozens of legal specialties and calls them into specific focus, there should be a central locus of reference where assistance may be found to sort out how all these variations relate (if at all) to businesses operated by gay-lesbian owners and to franchising companies owned/operated/managed by gay-lesbian officers and employees.

Up until now, gay and lesbian business issues have been dealt with primarily from a perspective of civil rights issues.

It is time to move beyond that and to deal with the fact that there is absolutely no reason on earth why gay and lesbian business people should not be able to achieve business success in the franchise model just like any other capable operator.

We bring to the table consultative assistance in the facilitation of making your company accessible for investment purposes to all qualified franchisees, regardless of life style. In fact, we can assist you to achieve sufficient insight that lifestyle itself is not an issue at all.

Similarly, there is no reason on earth why any gay-lesbian business that has positive attributes to become a franchised model should not move in that direction. We bring to the table consultative assistance to get you there if that is what you think you might like to do with your business.

We will show you how to take the courageous steps that should be taken to overcome the remaining barriers to economic success in the franchise world.

That makes me extremely proud. I love it that the United States enjoys the respect of foreign nationals in the context of sanctuary. I also derive enormous personal enjoyment at the diversity that exists here in Houston. That diversity is the direct result of a world in chaos.

I can go into stores and hear fifty languages in fifteen minutes, as well as enjoy the food, music and other cultural richness of the people who are now my neighbors - literally my neighbors. To me that is a blessing.

Since so much of what I do involves vetting small business investment opportunities for potential business buyers, I am in a position to observe pernicious patterns of nefarious dealings, especially by certain franchise companies.

I started to see this back in the 1970s, when it was possible for someone from another country to get fast tracked to a Green Card and to US citizenship if they invested in a business here. Unscrupulous franchise companies deliberately marketed franchise offerings to potential immigrants with malignant intentions.

The malignancy of the intentions took two main forms. First was the aggressive misrepresentation of the likelihood for success if the immigrants invested. These included every classic form of falsehood that almost everyone now knows about. Everything positive was overstated, and everything potentially recognizable as being a negative aspect of the investment was either denied or greatly understated and dismissed.

Secondly, there were a number of franchise companies that were offering real investment opportunities that were qualitatively excellent, but the agreements were written so that once the immigrant franchisee achieved success, it was easy for the franchisor to find incidents that could be claimed to be breaches of the agreement on the part of the franchisee that allowed the franchisor to take the business away for little or no money simply by terminating the franchise.

These were usually accompanied by threats that any resistance would result in the franchisee being reported to the immigration authorities as undesirables who engaged in dishonesty, and that they and their families could be deported, losing everything. I represented many of these people, and while some were so wealthy and sophisticated that they were hard to assault, many who were also wealthy by then current standards could also be frightened by threats to assault their standing to remain in the USA.

I saw this with sufficient frequency to recognize that some franchise companies made it a point to target immigrants. Immigrants had money. Many immigrants didn't understand how the American legal system works. Immigrants could more easily be frightened and intimidated.

I am seeing this again in epidemic proportions. The sharks are again thriving in immigrant rich target environments. Immigrants know less than any other category of potential franchise investors how to vet these so-called opportunities. They are, therefore, amongst the most defenseless and easy prey. While fraud is fraud everywhere, the "styles" of fraud are somewhat different here. Fraud is most effective when subtle.

One of the first due diligence issues to note in approaching one of these deals is the nationality/cultural affinity of the existing franchisee population, and also whether the franchisor's principals are from the same culture as the majority of the franchisees. The notion that people are less likely cheat their own kind is utter stupidity.

This cultural or national affinity profile is a huge red flag. It makes the traditional steps of franchise investment vetting much less reliable. Immigrants are much more fearful of telling any stranger anything that is not positive. They are accustomed to being enticed into betraying signs of disloyalty. Whenever someone is apparently trying to seek unflattering information, or check out the truthfulness of statements made, they instantly and instinctively smell a rat/sense a trap, and they clam up.

Talking to immigrant franchisees as part of the due diligence in this kind of franchisee population is almost a waste of time. You have to have a sense of what sections of the FDD, when read in light of that franchisor's marketing and sales brochures and sales pitch on discovery day, are changed in their significance by the cultural affinity of the franchisee group. What it does most urgently is change the mix between what you do with what you can see and what you have to go and find that simply isn't there amongst the readily available information sources.

If you are not of the same culture/nationality as the majority of the franchisees, your risks go even higher, because you are really much more thought of as "fair game". These franchisees wouldn't come to the aid of each other in any crisis, and they certainly wouldn't bestir themselves for the benefit of some outsider.

This xenophobia obtains in so many cultures that it is a more extreme issue in vetting a potential franchise investment when your client is an immigrant and when your client is an American Anglo Saxon thinking of becoming a franchisee in a system heavily populated and possibly also owned by foreign nationals. That they may have become American citizens has no weight whatsoever in this context.

If you are afraid of being thought politically incorrect and shy away from being harshly cynical in this kind of situation, you simply are not ready for prime time. Here you have to call the shots as they are in reality, not as you might think of doing at some church social with the bishop present. If people are offended by this harsh insight, that's just too bad. The job here is to properly vet the investment risks, not to be fearful of giving offense. In fact, you can expect the franchisor to accuse you of being a racist pig.

And if they do, then you know you have just hit a home run and that you should strongly advise against investing in any business deal with any such people. That is so because the answer to these criticisms is to be forthcoming with facts that are subject to corroboration to refute the doubt, rather than to call the challenger a racist.

Immigrants have a higher risk in investing in franchises in America (or anywhere else for that matter). They have pressure points of vulnerability that citizens of long standing do not have. Moreover, their perception of their vulnerability is much more acute. And they don't know how to/ are afraid to be directly challenging to what they are told by franchise companies. They are more easily swayed into believing by the bare number of franchisees, and, in many such cultures, they also believe that what will happen is really out of their hands anyway. That they were successful business people in their former homeland also makes them believe that they have staying power when confronted with difficulty.

But they simply don't have better staying power when they are fleeced, and they go through bankruptcy just like everyone else when they have been cleaned out by thieves.

When you represent an immigrant investor, the due diligence must be far more acutely incisive than due diligence in any normal situation. The acuity begins with the obligation to begin to educate your client about how the franchise world works. The client won't want to take this tutorial seriously, believing that anything that isn't transaction processing to get the deal closed is just a lawyer's way to job the file and make more money.

Americans aren't the only ones who distrust lawyers. The educational process is easier if you have actually been involved in situation of abuse and can provide actual case history type information. It will be important that you keep his regular lawyer in the loop, as that lawyer is probably of the same culture and has more personal credibility with the client than you do.

You need him to vouch for you in this new relationship. Keep also in mind that the better you treat this lawyer, the more immigrant business you are likely to get, as immigration issues are probably more of a specialty for him.

You will be able to assign less homework to the immigrant client than you normally would to a potential franchise investor who is not an immigrant. You will have to do more of the leg work yourself. If you are lucky and the client has children in college in America, you can bet they are highly computer literate and they can be a big help in homework assignments. They will also be gaining respect in the eyes of their parent by pitching in, and that means a lot more in most other cultures than it does in ours. The quality of their work will probably be superb with competent guidance from you.

In dealing with immigrants, it will be extremely helpful if you can find a way not to charge them for saying hello. If they/their lawyer can feel that they can come to you with questions without being charged for every phone call, a better job will be done. Showing respect for their culture goes a lot farther in international professional relationships. In other words, there are sensibilities that are called for in representing immigrants that we don't normally think about when we are representing Americans.

How you go about telling an immigrant that a franchisor representative that comes from his country/district/city/village and speaks to him in his native dialect is trying to fleece him requires some delicacy. They all have relatives back home, and the salesmanship here includes calling back home to learn about the investor's family, friends and associates, and then using that information to suggest that there are relationships back home that should be a basis of special trust by the investor in the bona fides of the franchisor.

You must be sensitive enough to take the initiative to ask specifically about conversations that seemed casual to your client at the time, but that were part of the "scheme" by a crooked franchisor.

The manner in which immigrant investors think about compliance with the rules and regulations that will touch their interests as they operate their future business is also an area of concern. The "education" provided by the crooked franchisor on this subject in the sales pitch must be accounted for, as it is done in a manner - always oral and always later denied - that suggests the presence of many opportunities for revenue that will be "off the books".

Those extraneous revenue opportunities are almost never available, and if the franchisor catches the franchisee operating extraneous business that is not reported, that will be an opportunity to terminate the franchise and take over a business should the business succeed.

Having a franchisee take the start up risk, establish the business, and then taking the business away for very little money is just as frequently part of the scam as the fraudulent inducement to invest in a franchise that has little chance for success.

This planned takeover aspect of selling franchises to immigrants is not usually given as much serious concern when vetting a franchise investment for an American client. It should be, but it isn't.

Your immigrant franchise investor client has to be vetted a bit differently also. Vetting your client for investment suitability is always important, but in the context of someone who has lived in another place where the rules, customs and expectations may be quite different, it takes on added significance. While you have to do it without giving offense, you really ought to put your client through a "discussion exam" in which he tells you about how things have been done in his life up to now and you counsel him about what differences have to be expected and about how to adjust to those differences.

For example, there is far more information exchange in business relationships here, especially in franchising, and the information is rather formalized compared to most other places. The attitudes about information exchanges are frequently very different where your client comes from, and he has to be made aware that a casual attitude toward information exchanges can cost him his business in a typical American franchised business. That is only one of many examples of the education you need to provide for the immigrant client that you wouldn't give as much attention to for someone who has lived here all his life.

I have seen some real nightmares that have arisen out of just a different attitude about information reliability - entire very successful businesses lost. If the business is being purchased as an up and running business rather than a start up, what the current business owner told the potential buyer will be absolutely outrageous compared to anything you will ever see in a UFOC or franchise sales brochure. If the seller is also an immigrant, you can bet that the discourse between the seller and buyer is right out of some street bizarre scenario.

Although I can't prove it, I am sure in my own mind that the franchisees who sell their franchised businesses commit the most egregious frauds of all. A franchise resale transaction is a minefield of deception.

The scope of this article is about representing people who are not born and raised in America when they are thinking of investing in a franchise. It is by no means intended to be a tutorial about how to do due diligence from a broader perspective. There are several other articles on this web site dealing with franchise investment fraud and how to approach it.

Even in their totality they are not encyclopedic in the subject of due diligence. You simply can't cover every possible scam tactic, as the fertile mind of the shyster franchisor keeps coming up with new tricks. Nuances on old tricks are counted here as new tricks. So much in vetting for investment fraud is only in the guts of the person doing the vetting, what he brings to the table based upon the multiplicity of schemes that he has been exposed to in his career.

But these articles are intended to assist general business lawyers to do a better job for their franchise investor clients. When I see them - after it's too late - I always ask whether they went to a lawyer, and they almost always say yes - and then go into a rant about how incompetently the job was done. That is the problem I am working on when I publish these tutorials.

If you are not a lawyer, but someone thinking of buying a franchise, direct your lawyer to this site to read those articles. As it is not politically correct to point out the fraudulent practices in the franchise industry, your lawyer won't find another place to get an education about that subject. Be advised, however, that reading articles about how to vet franchise transactions is not really a responsible substitute for experience.

Please join our expert panel for a ground-level interactive discussion that will certainly help you with your business planning.

Garry L. Wilson Panelist,  Gregory Plotts Panelist  Warren Lee Lewis Moderator 

And remember Open Enrollment begins October 1, 2013  Please feel welcome to invite your franchising friends and colleagues.

Tuesday, March 19, 2013, from 11:45 - 2pm;

Registration 11:45 - 12:15 - Lunch 12:15 - 12:45 - RoundTable 12:45-2:00

The Tower Club

8000 Towers Crescent Drive,  Suite 1700
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But, think before you convert your existing business to a franchise.  If you have an existing business, you may discover opportunities to convert your business to a franchise--to get the benefits of a "well known brand", to gain "purchasing power", or to gain advertising and support.  You may even be tempted because of the attractiveness of the package.

Such conversions probably occasionally work out well for the franchisee--but often they do not.  As part of such conversion agreements, you probably are transferring (giving) all of your current customers and their information to the franchisor.  In most cases, if the franchise ends for any reason, you have no right to even contact any of those customers--and you will probably be prohibited from being in the business you have been operating for years without their help--we call it a non-compete. 

It is rare that franchisors pay for such benefits--except the somewhat illusory "right" they give you to sign their franchise agreement.  Meanwhile, by signing the franchise agreement, you give up a great deal of the flexibility you now enjoy to control the products and services you offer to your customers and the direction of your business. 

They want your money.  If they want it bad enough, they will agree to some simple changes that might protect you in case things do not work out.  For example, they might waive the post-term non-compete under certain circumstances or pay for your customer list or make other concessions.  They might even agree to exclude your existing customers from royalty calculations. 

If you do not think very carefully and listen to some good advice, you could lose not only your franchise, but the business you worked to build before you learned about the franchise "opportunity". 

You could discover, after it is too late, that you now have to pay royalties on all of your existing customers--but that new brand and all the promised advertising and support has not delivered new customers. 

In this situation, we cannot give a bright line rule.  You should discuss your decision with an experienced franchisee lawyer.  He or she should be able to advise you as to the risks specific to your situation.  The longer you have been in business, the greater the risk in most cases.  An experienced franchisee lawyer might also be able to help you negotiate some of the terms of the franchise agreement.  (Yes, franchise sales people say they are non-negotiable, but that is not true.)

Take your time and think before you convert.

Something that is not a washed up concept is still to be had and it is a wonder that established respectable franchisors are not out there finding the gems hidden in the bushes. If I were an established franchisor that has not yet run out of development energy, I would today, in this fast improving economy, be beating those bushes for the early stage gems and using these very scalable models to refresh my capabilities in a new medium.

My inspiration for this is that recently I have been seeing a few of these newer, fresher, different concepts that are not a "me too" of anybody. They have just a few stores and good volume.

They are the originators who need to be teamed with the respectable franchisors who can take them to their destinies faster.

Development speed is a much more critical factor now than it was twenty years ago. One store at a time scaling has more risk of simply showing a duplicator how to take your plum and squeeze a lot of the juice out of it by following you around.

We know from some of the nightmares of late that there is a lot of money out there dying to invest in a good concept. The trouble has been that so much of that money was stolen by FranWhacks selling stupid deals to wealthy suckers who didn't know how to vet the deal - think Dagwood Sandwiches, or Soup Man for example. There have been several others of similar ilk. The world doesn't have to operate like that. Their victims will never find the money they invested, as that left the building right after the checks cleared.

Several of the Soup Man victims later explained their investment decisions to have been based upon how good the soup was, as confirmed by some Zagat rating, and then were offended when I suggested they should just have invested in a bowl of the soup.

After 50 years working in franchising, I am now recognizing several really worthwhile opportunities that are fresh and well thought out and well executed.

The good franchisors who could pair up with these new concepts already have all the know how and the capital. The wave of this burgeoning economic recovery will continue to provide the right degree of incentive. There really are people out there who will pay more than a dollar for lunch now.

Breaking out in the most fertile markets and making our bones where the sun is shining brightest; being really revenue credible at the earliest possible moment; and competently profiling franchisee prospects to be people who already have track records - not taking checks from people who have only checks and little else - will make this the way to establish new franchise concepts for others in this new growth era.

The SEC alleges that Anshoo R. Sethi created A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC) and fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China.

Sethi and his companies duped investors into believing that by purchasing interests in ACCC, they would be financing construction of the "World's First Zero Carbon Emission Platinum LEED certified" hotel and conference center near Chicago's O'Hare Airport.

Investors were misled to believe their investments were simultaneously enhancing their prospects for U.S. citizenship through the EB-5 Immigrant Investor Pilot Program, which provides foreign investors an avenue to U.S. residency by investing in domestic projects that will create or preserve a minimum number of jobs for U.S. workers.

The SEC alleges that Sethi and his companies falsely boasted to investors that they had acquired all the necessary building permits and that several major hotel chains had signed onto the project.

They also provided falsified documents to U.S. Citizenship and Immigration Services (USCIS) -- the federal agency that administers the EB-5 program -- in an attempt to secure the agency's preliminary approval of the project and investors' provisional visas.

Meanwhile, Sethi and his companies have spent more than 90 percent of the administrative fees collected from investors despite their promise to return this money to investors if their visa applications are denied. More than $2.5 million of these funds were directed to Sethi's personal bank account in Hong Kong.

Sethi and his companies prominently featured in their marketing materials the purported participation of three major hotel chains in the project: Hyatt, Intercontinental Hotel Group, and Starwood Hotels.

However, none of these hotel chains have executed franchise agreements to include a brand hotel in this project as represented to investors in the offering materials.

Two of the chains actually terminated prior deals with other Sethi-related entities more than two years before these offering materials were circulated to investors.

For more see the entire SEC Press Release.

Do you have to translate the franchise disclosure document into another language? The quick answer is 'NO.'

US franchise disclosure laws do not require franchisors to translate the franchise disclosure document, FDD, into the native language of the prospect.  If you are looking to franchise outside the US border, that is whole different conversation.

While not required to provide translation, franchisors may be confronted with what to do if a franchise prospect does not comprehend English very well.

Providing translation of the disclosure document inherently carries risks. There is the risk that the translated disclosure document will be inaccurate or carry an untended meaning. There is a risk that the disclosure document will inadvertently go awry of disclosing prescribed franchise disclosure legal mandates.

Or that the translated disclosure, by way of translation, will somehow be different or incongruent with the English disclosure document.

But is a franchisor to do? It is important that franchisees understand what they are signing when they enter into a franchise agreement. And, couldn't the franchise agreement be rendered void, if the franchisees successfully claim that they did not understand what they were signing when they signed the franchise agreement?

A good solution is to advise and support franchisees in seeking their own translation and consultation services for translation and comprehension of the franchise documents.

This post is in response to a reader's question. Do you have a question you want us to answer in a post? Email us with your question mbgettins@gettinslaw.com!

When someone is perceived to be hurting your economic interests, any normal person becomes enraged and wants to go immediately on the counterattack. They do this in a number of ways.

One of the first very bad things that they do is write an angry letter in which they vent their frustration, often accusing their franchisor of unlawful conduct or conduct that violates the franchise agreement, or both.

Frequently there is much in the letter that is aggressively accusatory and threatening, to put it mildly.

The threats customarily include reports to government enforcement authorities, lawsuits, group action by many franchisees, political action and publicity about the negative attributes that the franchisee(s) believe deserve exposure to the public eye.

Another of the bad things that franchisees do is that they call each other without thinking it through and try to stimulate some group cohesion for the purpose of sharing expenses and jointly addressing the grievances.

Another very bad thing that they do is to get involved with a lawyer who does not know much about how franchising works -- frequently a relative or some other lawyer who may have represented them in some matter totally different. Having no sensitivity about how franchise relationships work, the advice is usually awful.

The bad letter to the franchisor usually contains strong statements accusing the franchisor of violating duties that the franchisor really does not have. As such, it is insulting and not conducive to the achievement of positive results.

There are some very fundamental truths about franchise disputes that hardly any franchisees know about. For example, a franchisor may lawfully do just about anything that there is no contract or statutory prohibition against. The fact that whatever the action is may negatively impact upon the franchisee's business does not mean that the franchisee has any right to prevent it or to recover damages because of it. Some injuries are simply the product of other companies behaving rationally in a changing market (merging with competitors, for example).

In addition, there is no 'moral' duty in any commercial agreement. The parties are obligated to do what their contract says they will do, and to refrain from doing what the contract says they cannot do. Even those apparent absolutes are sometimes not as absolute as they sound. If the contract does not impose a specific duty to act or to refrain from acting, the duty probably does not exist.

No implied doctrines of good faith or fair dealing will supply provisions in a franchise agreement that the parties did not put there in writing in the first place.

Several courts have sought to insert good faith and fair dealing doctrines into franchising cases, mostly having to do with encroachment. These courts have either been reversed, or their rationales have not been followed in other cases. Congress has been holding hearings on changing the franchise legal relationship to include concepts like good faith and fair dealing. This has gone nowhere, and it will not go anywhere in the future.

Threatening the franchisor is always the worst first step in addressing any serious problem. The threat may be empty, either because the franchisor has the right to do whatever it is he is doing, or because there are not adequate resources to fund litigation/arbitration to redress the grievance.

Empty threats put everything on the worst possible footing. Everyone digs in his heels, and getting anything resolved peaceably is made doubly difficult or impossible.

Getting legal advice from some lawyer, who does not know what he is doing, either because he is a relative or because he is inexpensive, is always bad. If the gravity of the problem is not sufficient to justify spending a few thousand dollars to get really good professional help, it isn't worth starting a fight over anyway.

Today you can get on the Internet and find many experienced franchise lawyers who will evaluate competently whatever your situation may be and suggest alternative approaches in an order of priority calculated to make the worst and most expensive response a last resort. No competent lawyer will recommend litigation without first having analyzed the problem and done research to bring his knowledge of what the courts are doing with similar problems up to date.

No group action should ever be attempted without capable guidance from legal counsel about how to go about it. Rabble rousing always gets reported to the franchisor and makes people targets. Other franchisees will always think they can get an inside deal for themselves by ratting you out. How one goes about making group action happen is very important.

Often the angry franchisee(s) may have some dirt in their back yard also, and that may come back and bite you if you don't handle this activity very professionally. Get a lawyer who knows how to do this to show you how. Ask lawyers whether they have ever done this before and how they would go about it. Don't think that every franchise lawyer knows how to organize a revolt.

The goal of this approach is to preserve as many franchisee options as possible -- to burn bridges only when absolutely necessary. Angry confrontation often ruins the chance to resolve matters with a positive business solution. It may very well come down to angry confrontation. That should be done when other approaches are unrewarding and when there is a proper legal basis to wage war and the chances of winning are good.

Most franchisors can afford to defend bozo lawsuits.

Only a real, valid claim, competently presented to the court or arbitration panel, has a likelihood of changing anyone's mind or getting redress for injuries suffered. A seasoned franchise litigator can provide that kind of help. A document writer is not likely to know how to handle dispute resolution effectively.

There is a moment (and it may last for days or weeks) when nothing could make you angrier, when what is happening to your business is seriously injurious and is being done by your franchisor. It is in this moment that you must, for your own benefit, find competent counsel -- that you must, for your own benefit, keep a lid on your feelings while the right thing to do and the right way to do it is accounted for.

Item 20 of the document can seem daunting, but be sure to dig in and examine the information it contains. This section is made up of five tables that show the status of outlets within the system over the past three years.

Table 1: History of system outlets

Table 1 summarizes the history of system outlets over the past three years. It shows the number of franchised outlets, the number of company-owned outlets, and the number of total outlets. This chart is important because you can see if the franchise is growing or declining.

Table 2: Transfers

Table 2 shows the number of transfers by state from existing franchisees to new owners. A high number of transfers, particularly within one state, could indicate franchisee difficulties in that locale.

Table 3: Status of franchised outlets

Table 3 shows the status of franchised outlets by state for the last three years. It also provides details on the number of terminations, non-renewals, and units reacquired by the franchisor.

Terminations and non-renewals occur less frequently these days, so it's important to look at the number reacquired by the franchisor because franchisors often use this method to take care of stores that are in trouble.

A high number of terminated, non-renewed, or reacquired franchisee stores--particularly within a state--may be cause for concern.

Also, look for stores that have ceased operation for other reasons.

Table 4: Status of company-owned outlets

Table 4 shows the status of company-owned outlets over the last three years, including the number of outlets closed or sold to franchisees. In large systems, this table shows how the franchisor is fairing with its own stores. A decline in the total number of outlets may indicate trouble or that the franchisor is simply selling its stores to franchisees.

Table 5: Projected openings

Table 5 shows projected openings and provides the number of outlets the franchisor expects to open over a period of time. This gives you an idea of whether the franchisor anticipates growth in the near future and in what locations.