COMMISSION EXPRESS Disputes Worst Franchise Designation

The Commission Express franchise  was ranked one of the worst franchise opportunities in the country by Forbes magazine, using information supplied by FranData.  Commission Express president John Stedman provides this rebuttal.

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(UnhappyFranchisee.Com) Is Commission Express one of the worst franchise opportunities in the country?

Forbes and FranData say it is:  COMMISSION EXPRESS Rated a Worst Franchise by Forbes. Do You Agree?

While he admits half of his franchisees failed during the real estate crash, Commission Express president John Stedman objects to FranData’s characterization and questions significance the research company places on a franchisor’s registration with the SBA Franchise Registry – Which FranData manages.

Here is John Stedman’s rebuttal:

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To whom it may concern:

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How can a company be in business 22 years, having been franchised for 18 of those years, and be ranked by FRANdata as the third worst franchise in the country?

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Answer: By applying an arbitrariIy set of criteria over a limited period hostiIe to a particular business category.

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Commission Express is in the business of purchasing accounts receivable (earned but unsettled real estate sales commissions) from real estate professionals. Our business relies on a healthy real estate market and a stable banking system supporting that market.

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FRANdata based its rankings on the five year period from 2008 to 2012, the worst real estate market and worst banking environment since the great depression.

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FRANdata, who alone defined the criteria, determined that Commission Express was not supportive with regard to “lender friendliness” in that we do not have streamlined financing programs through SBA approval documents on the franchise registry (a service that FRANdata has a sole source contract with the SBA to perform). Our prospects are accomplished individuals who are simply too sophisticated to require this. Nor do we provide a third party analysis and credit risk analysis through a Bank Credit Report performed by FRANdata (clearly self serving). Our Franchise Disclosure Document contains audited financials that are easily understood by our prospects.

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FRANdata also determined that we lack transparency in that we do not provide a Financial Performance Representation, which is not required by the Federal Trade Commission. Furthermore, past performance is no guarantee of future success.  Note: We have begun providing Financial Performance Representations with our 2015 Franchise Disclosure Document.

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FRANdata then chose the years 2008 to 2012 to judge our performance, the worst five years for the real estate market and the banking system. Having franchised in 1996, we grew to 65 franchises in 33 states at the close of 2005. With the burst of the real estate bubble and collapse of the U.S. real estate market in 2006 and 2007, our growth leveled off and then stopped. With the subsequent collapse of the U.S. banking system in 2008 and 2009, the two industries that are the basis of our business had collapsed with the loss of over half of our franchises.

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We bottomed out at 31 units in 21 states at the close of 2012. For that reason, our royalty income fell by more than half and FRANdata accurately determined that Commission Express was not “recurring revenue self-sufficient”. That is, royalty income alone could not cover corporate overhead; initial franchise fee income was also necessary. That was to be expected having lost over half of our franchises. And when did any income become undesirable income?

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Regardless how good or bad we are, we could have avoided being included with the worst franchisors by simply complying with FRANdata’s arbitrary and self serving criteria by providing prospects with a Franchise Performance Representation (which is not required by the FTC and is no guarantee of future success) and providing prospects with a streamlined process to SBA Loans on the franchise registry for which loans we are not eligible.

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Note:By email to us dated July 4, 2014 from FRANdata president Edith Wiseman, “In Commission Express’s case, it is not possible for the franchise business to become SBA eligible because it is in a finance business”. She also stated that “FRANdata did not have a sole source contract with SBA”.

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FRANdata may have ranked Commission Express the third worst franchise in the country, but now you know the rest of the story.

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Note:  Commission Express currently has 47 units in 27 states

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John Stedman

President

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