A recent New York Times article features comments from a Curves franchise owner who regrets not having dumped her four Curves for Women franchise locations on some other poor schmuck when her sales were good.
In a recent post on “You’re the Boss,” NYT editors solicited readers’ stories about businesses that did not survive 2009. The owner of four Curves franchise locations (Joan Donofrio of Concord, California) — shared this comment:
“I made my biggest mistake by not selling my first two clubs when they were raking in the money. I could have made a profit of $700,000. Instead I ended up broke and in bankruptcy court. Not knowing when to get out of a business is the biggest hurdle people make…Not having an exit plan is the biggest peril of all.”
According to the writer, business broker Barbara Taylor, the moral of the story is to make sure that when the music stops, you’re not the moron left without a chair . Writes Taylor: “It can be difficult to let go of your business in good times, as well as bad. No business owner plans to fail, but many — like Ms. Donofrio — fail to plan their exit strategy.”
Really? Donofrio’s biggest mistake was not sticking some unsuspecting buyer with her doomed clubs so they could lost $700K more than she did?
Did it occur to Donofrio that perhaps buying a concept that could not withstand overexpansion and/or an economic downturn was her biggest mistake? Or not taking steps to reverse her declining sales? Or perhaps not organizing with other franchisees to demand more support from the franchisor?
The irony of Donofrio’s statement was not lost on commenter Quasimoto, who responded:
Let me fix that for you.
“I made my biggest mistake by not duping an unwitting bagholder into overpaying for my first two clubs when they were raking in the money hand over fist by preying on insecure women that had access to credit. I could have made a profit of $700,000. Instead my greed landed me broke and in bankruptcy court. Not knowing when to get out of a Ponzi Scheme is the biggest hurdle people make…Not having a greater fool to bail you out of your greed laden binge is the biggest peril of all.”
So what was Joan Donofrio’s second biggest mistake?
Perhaps it was posting her true regrets to the New York Times for all to see.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Recent developments have left franchisees worried and uncertain about their futures. To advocate for greater…
The Building Kidz Worldwide franchise is an opportunity to own a preschool & childcare center…
PAINT NAIL BAR has undergone some significant changes since franchisees contacted us with their complaints,…
U.S. Veterans magazine has removed JDog Brands as its #1 "Best Franchises for Veterans" list.…
More than 400 Veterans & military families who invested in JDog Brands franchises have failed,…
Genevieve McDaniel is a former franchisee turned franchise researcher, franchisee advocate, advisor and fiercely honest…
View Comments
Hold On.
There are two reasons why I can't condemn her so easily, although her bitterness and her desire to have had someone else take her place among us "losers" makes us want to. (losers in the sense of franchise losses).
1. Looking back at the history of the fitness club market, we see that there seems to be a very short life cycle for any fitness club, usually under 10 years. It has been theorized -widely- that because most people only pay for fitness memberships out of guilt, this marketability of a club is based on whim, and therefore the newest flashiest different-est thing out there gets the next wave of business (often confused with the pet-rock theory). Many of us thought that since Curves was so much smarter (and really, as a woman who first joined at 30-something about 10 years ago, it has been so much smarter for me to use Curves for my fitness club needs) we could make it break that cycle.
And we were apparently wrong.
24hr fitness may have broke it, although I think they've just extended their 'lease on life' with "the biggest loser" program selling their memberships.
Gold's is trying to make a "comeback" but it's not the same golds as it was 20 years ago.
The YMCA just doesnt count. They get non-profit breaks and funding.
Who else (major chains) has lasted more than ten years?
No one.
Curves should have been the one to break the pattern, because it is different. But it didn't (and I can blame Gary too... he did plenty of things that hurt our marketability... and he missed some opportunities to help us adapt to the "biggest loser market"- like partnering with weight watchers instead of competing with them).
2. Selling her clubs when they were profitable is a caveat of how business is done. (Almost) Nobody wants to buy any business when it's losing money. I too wish I had sold when I was turning a profit, but I loved working my club and I was enjoying the success. I put that above my business sense.
Yes, it is a matter of who's without a chair when the music stops, but we didn't even know we were playing that game then. And who WANTS to be the loser? Quit blaming her for being human.
Quit blaming her for being human? Gary Heaven is human too. Why do you blame him?
I read through hundreds of comments here from failing Curves owners who are outraged with CI & Gary Heavin, who complain about the closing fees and threats against them by CI for closing their clubs. You would think that the Curves franchise owners are poor innocent virtuous victims taken advantage of by big bad unethical Curves.
Then I read the stories about Curves franchisees not making the contract terms clear to their members, billing their customers' credit cards even after they quit and then selling their franchise to the next sucker by inflating the membership numbers with the people they're stealing from every month.
How many of the Curves commenters here bought resales from other franchisees out to save their own butts at the buyer's expense? Are the Donofrio's and the "another curver" types really any more ethical than CI?
Who are the real crooks here?
Isn't the idea of business to build a business up, then sell it for a profit? Or is it nobler to go down with the ship so that no one else loses money?
Curved Logic makes a good point. Franchisors only do what they are enabled and encouraged to do under current law and regulation and franchisees try to survive any way they can -- even if it means also unloading an unviable business on another franchisees to themselves survive.
CL points out the conflict of interest between those franchisees who are surviving and those who are failing and who have already failed, and those who have bought "used" or "second-hand" businesses either at too high a price or for almost nothing in a fire sale, to either fail or survive at as later date.
The churning and turning goes on outside of the view of new buyers of the franchise because of the lack of disclosure to prospective buyers of the UNIT performance statistics of the franchise system by the franchisors, themselves. New buyers of franchises don't get to look inside of the system to determine the actual health of the system.
The original "sin" of "captured regulators" and inadequate presale disclosure to prospective franchisees compounds the damage that is done to the "players" in the game ---even the franchisors themselves who will continue to sell the often "unviable" franchise to the public to try to maintain their EBITDAs or grow them in the interests of their survival.
If there was transparency concerning the performance of the units of franchise systems, those systems who didn't produce profits and who had a high failure rate of "founding" franchisees (the first owners) of their systems would have to try to correct the problem because they wouldn't be able to sell new franchises to the public if the unhealthy churning was visible to new buyers and to new investors in the franchisor's commercial paper.
If new buyers of franchises, for instance, knew upfront that they had a 20% or 30% chance of failing and that they had only a 40% or 50% chance of ever earning profits, as reflected by the unit performance statistics of the system, would they still buy the franchise? If they did buy the franchise, knowing the odds of profitability and failure, they, of course, wouldn't feel so "defrauded" when they failed.
But, of course, true and actual disclosure of the risk to prospective franchisees would inhibit franchising and stem the rapid and uncontrolled growth of franchised chain systems that is the principal incentive for the franchisors to try to franchise their businesses for sale to the public.
Franchising, at its best, is very risky because of the (known by government) survival rates of ALL small business startups (50% fail sometime within the first five years) and if prospective buyers of franchises understood these grim odds up front before they bought franchises, they wouldn't put so much at risk to earn so little or to fail and lose everything!
It is the hiding of the risk and the government's cooperation with hiding the risk from prospective buyers of franchises through an inadequate presale disclosure scheme that needs to be fixed.
Why is the sale of a franchise investment treated differently under the UCC and Securities Law? Why doesn't the seller, who will profit, have the legal obligation to disclose all material facts to the buyer before the sale?
Read "Franchise Regulation Realities -- Deception or Patriotism" in a Google Search.
http://thegreatfranchisingrobbery.blogspot.com/
I think it's unfair to judge the Curves owner for not wanting to sell her clubs when they were thriving. The same thought torments me nearly every day since we lost our clubs.
I wasn't aware that owners are required to sink with their failing franchises, chained to the anchor.
No one knows what the future holds. Should owners feel guilty about passing a hot potato to another before an unforeseen economic catastrophe struck?
"I think it’s unfair to judge the Curves owner for not wanting to sell her clubs when they were thriving. The same thought torments me nearly every day since we lost our clubs. "
I think you're missing the point.
If you sell a house in good faith and the next day a tree falls on it, you're fortunate.
If you sell a house knowing that the tree is diseased and about to fall on it, and say nothing to the buyer, then you're a scammer.
If a tree falls on your house, you later realize it was diseased, and your reaction is: "I wish I had known the tree was going to fall so I could've stuck some poor sucker with my misfortune" then you're a sleazebag.
If you actually state your misgivings to a national publication with your real name then, imho, you're a stupid sleazebag.
I think it's sad that you are tormented that you didn't pass your ticking time bomb on to someone else so that their family could suffer instead of yours. I'm sure that you're a good Christian and think of yourself as a good person. I'm sure you'd be outraged someone would sell you a business that wasn't sustainable. Somehow it would be OK if you did it to someone else, as long as you had pausible denial.
A decent person might regret having bought the franchise in the first place, and fantasize about a scenario where no one got hurt, instead of a scenario in which you merely passed your hot potato.
If you don't get the distinction I'm sure you never will.
You don't seem to understand. Her clubs were THRIVING at one point. THAT's when she said it would have been a good time to sell. Our clubs were doing well, too several years ago. That's when I wanted to sell.
This woman didn't know her successful club would collapse. NO ONE did. But once the downturn starts, are you saying it's a sin to want to get out? If a buyer looks at the books and decides he or she can turn a striggling club around, who are YOU to tell someone it's wrong to sell?
Are all those desparate owners at McCord wrong to list their clubs for sale? Most are at prices so low that you know they're just trying to salvage what they can.
Have you been through the hell of watching a business collapse, of losing your home and your nest egg? If not, don't judge the rest of us who have.
Curved Logis, if you sell your house when the price is at its peak, are you obligated as a Christian to renegotiate the sale with the now-suffering new owner if the market collapses a few years later? Maybe in YOUR black-and white world.
Judge not . . .
There's NO evidence this owner did anything unethical. Yet you denounce her for regretting not selling her club when times were good. Why? Because you THINK she's a crook despite a lack of proof?
"This woman didn’t know her successful club would collapse."
I'll try this again: She knows NOW. And Now is the time she's looking back wishing she had stuck it to someone else. Did you read the title to the post?
"Have you been through the hell of watching a business collapse, of losing your home and your nest egg?"
Yes, I have. And the only positive thing I gained out of it is the ability that to say I didn't intentionally harm anyone else in the process. I regret having made the decision to start the business, regret many other decisions I made. I don't, however, wish I had put someone else through the hell of losing their home and nest egg. That's what you're saying.
"Are all those desparate owners at McCord wrong to list their clubs for sale? Most are at prices so low that you know they’re just trying to salvage what they can."
There's nothing wrong if they're honestly disclosing the real facts. There's no such thing as buying a Curves for $1. They are still taking on the liability of the lease, the $10,000 closing fee and the tens of thousands of dollars in future royalties. Isn't that what the franchisees are really selling for their rock-bottom prices?