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.
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Potential buyer, Curved Logic thinks the seller of that Curves is a bad person.
I think that Curved Logic only pointed out that a franchise is not a bargain even at pennies on the original investment costs when you consider the obligations the new franchisee is assuming ---that is, the lease obligation and the "long term" contractual obligations to the franchisor under the franchise agreement.
I'm sure Curved Logic understands the principle that "never an ill wind blows that doesn't blow someone, somewhere, some good" or something like that and "potential buyer" may want to test the winds! -- at his/her own risk! to try to earn a living or realize profits.
We didn't look to sell our failing The UPS Store but the AR brought a buyer to us when we notified Corporate that we were losing thousands of dollars every mointh and had exhausted our startup costs and would be closing down. Of course, failing franchisees give their businesses away to lessen the debt and to get out from under the personal guarantees on the franchise and the lease, and the franchisors are happy if there is someone standing by to take over the business, and that the business continues to feed them royalties, commissions, and fees.
http://thegreatfranchisingrobbery.blogspot.com/
Potential buyer
Yes Curves International does now run a credit check on any new buyers and have also changed the regulations to when you sell a curves the seller is still obligated for one year if the new owner fails. So even if the owner finds some sucker to buy the club their still on the contract and liable to the franchisor for one year after the sale. Before anyone buys a franchise from Curves International they need to read the franchise agreement and have a lawyer go over it for them as they have come up with a new very prohibited contract which from our understanding is very legally binding where the old contract will not hold up in court. They have included closing procedures as well as penalties if you are not in compliance with the contract and can be fined 200 dollars per day for each violation. You would be be nuts to even consider buying a Curves franchise at this time. Walk away at any cost as you will be in the same position as all the other owners on this site if you buy one. At least you have been warned before hand so you know what you are in store for if you purchase one. Buyer beware.
Carol,
You are obviously totally against all franchising as a result of your experience with ups and I can certainly understand your feeling but not all franchise's are the devil. If the franchisor is honest, ethical and has a good management team I still believe they can be good investments. On the other hand I would like to see more regulation of franchisor's to keep the dishonest ones honest. How about starting a group to push for legislation in that direction. With your energy, writing ability and determination you may be able to be the driving force to get it done.
Thanks Unhappy! The only reason I post is to try to stir up interest of franchisees to do their own research and to push The Congress --their elected representatives, to do something about the ineffective and captured regulatory policy that permits franchisors to sell often unviable and unprofitable franchises to the public without disclosing the material risk, as known to the franchisor.
What, then, is the purpose of regulation? Did government lie to the public when they indicated that the purpose of the "special" regulation of franchising in 1979 (and not licensing?) was to mandate that franchisors disclose "essential" information that would permit prospective buyers of franchises to assess the risk of the investment and compare it with other investments.
If you will read Robert Purvin's (AAFD) public comment to the FTC and if you will really read the American Business Law Journal Article "Franchising Fraud, The Continuing Need for Reform" you will understand that the "flaw" in regulation and the "no private right of action" for franchisees is a premeditated subsidy of the franchisors that is unfair and immoral public policy that destroys many innocent good faith buyers of franchises who would have not bought these franchises to begin with if the real risk had been disclosed to them.
I am just one person with no clout or personal influence -- but if enough franchisees actually understand the premeditated incompetence or deception in regulation and the fact that there is NO true pre-sale disclosure concerning risk when buying a franchise because of the ineffective FTC Rule, and generally no legal recourse because the law has been stacked against franchisees to implement federal regulatory policy, maybe something will be done? Maybe!
I am not against franchising if the flaw in the rule is fixed and prospective franchisees really understand the risk of being a first owner of any particular franchise as demonstrated by the financial performance of the "founding" franchisees of the system that they are joining. At least sites like "Unhappy Franchisee" provide the opportunity to "warn" others who may then warn others and "word of mouth" will impact franchise sales and the "honest" franchisors will ask for more effective presale disclosure????
The Committees of the Congress already understand that there is a serious flaw in regulation and protective legislation has been proposed but the prospective buyers of franchises don't know they need a Political Action Committee and have no PAC and money to overcome the influence of all of those who profit from the ineffective regulation and who defeat any bills to level the playing field.
http://thegreatfranchisingrobbery.blogspot.com/
Carol you maybe just one person but it appears you have the time, intellect, and drive to be the founder of a group pushing for legislation to change the laws and get more regulation on the books. Every organization needs a leader and I for one nominate you and in my heart I know we can get enough franchise owners to join in and give us the strength to get some action in congress. Where and how do we start Carol. Should we start a letter witting campaign to certain congressmen or senators or start a phone in campaign? Instead of all of us posting our thoughts lets take this to the next level were we can really make a difference. Don't ever underestimate you clout or your influence Carol as a lot of the posters here and on all of these unhappyfranchisee.com/ site's read and listen to you. We are ready to take action and just need a leader. Do I hear any seconds to having Carol nominated as head of our action committee.
Unhappy! I would be happy to head a PAC that would lobby for effective franchise legislation but I already know that any PAC would not have the money and couldn't raise the money to counter the influence and lobbying of The Congress and The Courts by the International Franchise Association and other special interests, like the bankers, and the Mall Developers, etc.. and the ABA itself. ..
The head of the American FranchiSEE Association, Susan Kezios, has even testified to the Congress and she has not been successful in getting t he "flaw" in the FTC Rule removed. The AAFD has tried to make franchising better for franchisees, as well, It's not that the Committees in Congress don't know that uninformed franchisees are being exploited and defrauded under existing regulation
The reality is that the "sheared lambs" --the franchisees -- generally fade away into obscurity when destroyed financially and those who are still standing know that any new regulation concerning pre-sale disclosure is too late to do them any good and they have no time for altruism because they are trying to make a living.
The reality is that effective regulation would reduce the pool of prospective franchisees and no elected representative wants to do this because it is not "politically" expedient. The vote to not fairly regulate franchising can be defended as serving the "greatest good."
The blood of franchisees in great numbers would have to flow through the House of Representatives and the Senate before they would acknowledge that there is a problem in the regulation of franchising.
The only hope is that "word of mouth" and constant posting by failed franchisees will spill over into the main media who will perhaps find that there is enough interest to expose the franchise model and the subsidy of franchising to the public who will then demand the government to fix the flaw in the rule. (You will perhaps understand, Unhappy, that the Courts and the Arbitrators don't recognize that there is a flaw in the regulation of franchising.)
Prospective buyers of franchises don't know or understand that they need a Political Action Committee because they believe that government has already acted on their behalf by regulated franchising and requiring the franchisors to disclose the risk in the pre-sale Rule governing the sale of franchises to the public.
In any business, be it a franchise or regular startup, every owner needs to know when to get out. Everyone has their strengths and weaknesses. When Curves was new, there was not a lot of "work" required to build and maintain the business. Owners got complacent and did not spend their money advertising, marketing, etc. to keep members. Then, the memberships when down because of lack of work and also the economy did not help. This is a classic business problem and not one unique to Curves. Some people do better in a "startup" phase instead of "maintenance".
Doreen says "In any business, be it a franchise or regular statup, every owner need to know when to get out."
Obviously, this is true! But, more importantly every owner really needs adequate presale disclosure to determine whether or not they should get into the business in the first place. The reality, according to published data, is that 50% of all small startups will fail out of business sometime in the first five years and this reality is ignored by the policy makers and the regulators.
Curves is surviving today because they expanded internationally and because enough of their units have been churned over in resales to keep them standing until things get better.
This is a "classic business problem" for those who buy franchises without full disclosure of the risk as demonstrated by the financial performance stastistics of the units within the franchisor's system.
The churning of units in large franchise systems is not visible to new buyers or to investors in the franchise systems because of ineffective regulation of franchising. The franchised chain organization depends upon its ability to hide the risk in the presale process in order to survive in both good and bad economic conditions and regulatory policy supports this goal.
http://thegreatfranchisingrobbery.blogspot.com