The Carol Cross Manifesto

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• Originally posted by Carol Cross on CURVES: Robert Lay’s Story
  Submitted on 2009/11/08 at 5:44pm

  Unhappy! Remember that “knowledge is power” ——Remember that the FTC only regulated franchising to begin with in 1979 to protect the franchisors and their franchisees who are still thriving within the system from those who believe they have been defrauded by mistatements and omissions, etc.. and who try to address the courts when possible in class and mass actions, etc.. Case law for the past 30 years favors the position of the franchisor whose systems are said to be vitally important to the economy by the special interests who benefit from the hybrid legal business model.

  Franchisors are protected by the FTC Rule that deems that there is no fraud or tort if the franchisor has disclosed in compliance with the FTC Rule, and even if he hasn’t, it is only the federal government or the state government who has the standing to sue the franchisor for the violation of the FTC Rule. The policy of the FTC Rule is that “There is no private right of action for violation of the Rule and there is no fraud if there is no violation of the rule and even if there is a violation of the rule, this is not fraud but merely an administrative violation for which the federal or the state government only has the standing to sue the franchisor.”

  You have excellent representation in the courts with your law firm but most of their victories were won through settlements and litigation in the State courts, where judges, perhaps, are not so tied to federal regulatory policy and goals. Your attorney does live a large and luxurious lifestyle but no larger than the big franchisor attorneys — because, obviously, the franchisors do engage in activities that certainly look like fraud to state judges who know what is going on and who might allow juries to look at the situation and find fraud and tort.

  If most of the lawsuits will now be heard in Texas, it will be the federal courts who will hear your complaints. The Class Action Fairness Act of 2005 that throws most class and mass actions to the federal courts doesn’t look like good news for franchisees. Read the Article “Franchise Regulation Realities —Deception or Patiotism” and the Article “Franchising Fraud –The Continuing Need for Reform” by the American Business Law Journal, 01 Jan 2003, for understanding of how the “flaw” (premeditated?) in the FTC Rule works to the advantage of franchisors.

• Originally posted by Carol Cross on Are LIBERTY TAX SERVICE Franchise Owners Happy? Submitted on 2009/10/17 at 6:59pm

  The truth is that the government, itself, stopped researching franchising back in 1988, when the Dept. of Commerce eliminated its research of the industry. Why the Department of Commerce itself stopped gathering these statistics is anyone’s guess–but it accompanied the “privatization” rationale of the business-friendly Congress. Private contractors run the government today to a great extent.

  It has been convenient for the statistics surrounding franchising to remain uncertain, especially as to franchisee failures. Most of the statistics concerning franchising are gathered by those with a conflict of interest who want to paint franchising as a highly successful means of self-employment, especially during recessions, with little risk.

  The truth is that franchisees, under public policy and rule and law, are merely resources for the franchisors and it is the franchise systems and their growth in the economy that is favored by the law.

  Uniquely, franchisors believe they can sell an investment product to the public with no obligation to disclose MATERIAL risk factors in their possession because of the FTC Rule governing franchise disclosure.

  Nothing wrong with being a resource for a franchisor if you make profits and return on your investment but good to beware of any franchisor who doesn’t make, at least, an earnings claim in their Franchise Disclosure Document (FDD). Why would they want to hide “profits” from new buyers?

  The comments on Liberty confirm that the conflict of interest between those franchisees who survive and thrive, and those who do not, always works to the favor of the franchisor —because the thriving franchisees bear witness to the courts that the franchise system has been proven to work for them and they were not fraudulently induced to contract.

  The point, of course, is that those franchisees who invested not knowing the percentage of failure of other founding franchisees or the chances of actual profits are shocked when they fail. They believe they were fraudulently induced to contract by the misrepresentations made outside of the contract and the FDD and by the omissions within the contract and the FDD that obscured the risk of the investment.

  Would prospective buyers invest with odds of 30% failure, more and less, and 50% chance of profits? The odds are hidden because so often the odds would discourage new buyers of franchises. While past performance doesn’t always indicate future performance, it is an essential material risk factor that, uniquely, does not have to be disclosed by the sellers of franchises because of the FTC Rule.

  The criteria for a rating in Entrepreneur Magazine does not reflect the “churning and encroachment” of franchisees within the system and only looks at the growth and expansion of the franchisor and his gross sales —who may have grown because of churning and encroaching management practices.

  Franchisees do not fail in the first stages and all of the time franchisees are working hard to break even, they are counted as successes for the franchisors. If the franchisee eventually fails and the franchisor can acquire the hard assets and sales to continue in the service of the franchisor, it is certainly not a failure for the franchisor who has no capital investment in the hard assets of the failed franchisees.

• Moved from https://unhappyfranchisee.mystagingwebsite.com/signworld-vp-jack-werner-fires-back-at-critics/
  xswoowner is RIGHT! If a franchisor discloses almost nothing in writing concerning any existing facts in the FDD and the contract, and the franchisee signs the contract with the acknowledgement and reliance clauses, the franchisor is protected against charges of of misrepresentation in arbitration and the courts when the franchisee fails and believes the franchise was misrepresented in the sales process.

  Uniquely, because the government especially regulated franchising, prospective franchisees have to try to do their due diligence with current and ex-franchisees instead of getting information from the seller of the franchise who will profit from the sale. The current and ex-franchisees (provided as references in Item 20) have no legal obligation to disclose to prospective buyers of the franchise, and if THEY misrepresent performance statistics to you, your damages are proximate to their misrepresentations and not to any misrepresentations made by the franchisor.

  Your Franchise Contract may be wrapped in the government mandated “disclosure document” – the FDD, but you won’t get any disclosure of the failure rate of the past ten years or any info on gross profits, etc.. on a UNIT basis. These MATERIAL facts concerning risk apparently can be withheld by the frannchisor from new buyers of franchises with impunity under the law because the FTC instead of the SEC regulated the investment in a franchise?

  Apparently, the FTC in its desire to promote competition between franchisors and in the effect of the FTC Rule permits the franchisors to recruit franchisees with hype and false advertising and oral earnings claims, and to withhold material risk factors in the written FDD’s and contracts that would kill the sale if disclosed to new buyers.

  Strangely! is against the law of the FTC Franchise Rule for the franchisor to make earnings claims or performance claims OUTSIDE of the FTC Rule disclosure regime or the State FDD’s but the only OPTIONAL disclosure of the 23 items of mandated disclosure is Item 19, the “earnings claim.” Obviously, franchisors make “earnings claims” outside of the FDD all of the time and there is no real enforcement of the prohibition of making earnings claims outside of the FDD by anyone in government.

  After 30 years of pre-sale disclosure to franchisees under the FTC Rule and the state FDD’s, 90%, more or less, of franchisors make NO earnings claims in their FDD’s and contracts.

  Even, when the franchisor fails to disclose in compliance with the law, this, apparently, isn’t fraud, but merely an administrative violation for which only the government has the standing to sue the franchisor –to protect the public? The franchisees are calculated sacrifices to stimulating economic activity in the economy.

  The effect of the “special” regulation of franchising 30 years ago, in 1979, has been to protect the franchisors from charges of fraudulent inducement to contract and to prevent a private right of action for franchisees in the courts by way of an “invincible” contract of sale (the franchise agreement) that becomes a malicious legal trap when the franchisee fails to thrive.

  Did government lie to the public when they said the purpose of the FTC Rule in 1979 was to require franchisors to disclose “essential” information that would permit prospective franchisees to assess the risk of the investment and compare it with other investments?

• moved from https://unhappyfranchisee.mystagingwebsite.com/signworld-vp-jack-werner-fires-back-at-critics/

  It is you who don’t understand. Because SignWorld is “Not a Franchise”as you indicate, the only difference is: if Signworld did make false misrepresentations of fact or if Signworld is withholding negative material risk statistics in the sales and contract process that could have or should have been disclosed, there would be a private right of action for the buyer who could prove this was fraud to the court.!

  It was only the “franchise contract” that was effected by the regulation of franchising in 1979.

• moved from https://unhappyfranchisee.mystagingwebsite.com/signworld-vp-jack-werner-fires-back-at-critics/
  One problem, Carol.

  SignWorld is not a franchise.

  So nothing you’ve said is relevant in the least.

  Or are you against non-franchise business start-ups too? Maybe no one should open a small business and leave business ownership to the big boys, aye?

• You wrote “if Signworld did make false misrepresentations of fact or if Signworld is withholding negative material risk statistics in the sales and contract process that could have or should have been disclosed, there would be a private right of action for the buyer”

  Oh, OK, you are saying that Signworld is a BETTER investment than a franchise because if they gave bad info you could take them to court.

  It sounded like you were being negative about the Signworld opportunity but now I see you were pointing out a positive selling point in favor of Signworld.

  Signworld… the non-franchise endorsed by Carol Cross!

• Yes and No! Signworld, as a licensor, probably uses the “acknowledgement and no reliance” clauses in their un-negotiable? licensing contracts, understanding that the protection for franchising developed under contract case law will extend to protection for licensors in arbitrations and in the courts.

  When the licensor makes no misrepresentations of current fact by making no representations at all in his written contract, he protects himself but the licensor, under law, is not prohibited from making an earnings claim OUTSIDE of the contract and therefore is not protected from common law fraud or tort for fraudulent inducement/fraudulent concealment as are the franchisors. The big difference is that a private right of action would be available to the licensee if the licensee could prove fraud to the court.

  Licensing is a cheaper way to go in terms of the pre-sale paper work required but, of course, franchising gives the franchisor almost complete protection from charges of fraudulent inducement to contract and makes their insurance cheaper, etc..

  The only difference between a licensor and a franchisor is the degree of control the franchisor has over the franchisee’s use of the tangible assets of the franchisee’s business. The tangible assets of the franchisee or the licensee, under contract, produce the gross sales upon which both the franchisor and t he licensor earn their profits.

  The Franchisor has all of the rights and advantages of an employer-owner of both his business and the franchisee’s business but escapes the risk and the expense of operating the physical business of the franchisee that produces the gross sales for the franchise system.

• xswowner – Carol Cross has been banned from BlueMauMau.org and every other franchise related site because she clogs up the conversations with her anti-franchising anti-business pseudo-legalistic rambling lectures that, if you actually read them, make no sense. I don’t know why this site puts up with her.

  Read the last two comments. They’ve got nothing to do with Signworld and are just about her throwing around big words and pretending she something to say. She continues to ramble about franchising even tho this isn’t a franchise.

• I am proud that I have been banned from Blue Mau Mau and other sites for telling the truth. I understand why I am banned. The truth about what is going on will not encourage the sale of franchises or advertising for franchises on sites that survive because of advertising revenue from franchisors — not franchisees!

  You “Burn the Books” people like “Guest” above think that you can discredit me by personal attacks but it is hard to discredit “truth” The word is getting out and franchisees and licensees are catching on and it will be harder, perhaps, in the future to fraudulently induce licensees and franchisees when the word gets out. It may be that the sellers of licenses and franchises, both, will have to disclose the risk (known to the franchisors) (in terms of the unit performance of the system) to new buyers in the future, in order to sell their licenses or franchises.

  What a terrible prospect for the franchisors and the licensors- huh! They will have to look for really low IQ prospects when government doesn’t pimp for them with ineffective regulation that pretends to disclose the risk and instead protects the franchisor for NOT disclosing the risk.

  I have nothing against franchising or licensing as long as the risk –in terms of past and current UNIT performance — is disclosed to new buyers of the license or the franchise.

• The topic is Signworld, Carol. Are you familiar with the program?
  You’re obviously online… quick, can you answer any of these questions?
  Do units operate under the Signworld name?
  Does Signworld have any control over how they operate their business?
  Does the home office have any way to collect financial data from the locations?
  Do locations pay royalties?
  You don’t get banned because you speak the truth, you get banned because you say the same offtopic crap no matter what the subject.