FBR Franchise Business Review Promoting Illegal Earnings Claims?
FBR Franchise Business Review claims to be a respected franchise market research. A critic claims that FBR is a franchise lead generation firm that cleverly enables franchisors to circumvent the FTC prohibition against making undisclosed and unsubstantiated earnings claims.
(UnhappyFranchisee.Com) Franchise Business Review, or FBR, claims it is “the most respected source of independent franchise information, highlighting today’s top franchise opportunities — based exclusively on the ratings and reviews from thousands of franchise owners.”
We’re a little confused about how they work exactly, but Franchise Business Review apparently conducts franchisee surveys for participating franchisors.
Negative results, it seems, are never released publicly.
If the franchisee survey results have franchise marketing value, they are packaged into reports that the franchisors can use to boost their credibility or in their franchise sales efforts.
Franchise Business Review offers participating franchisors advertising and lead generation options in connection with its website and a slew of slick, glossy digital publications.
We received a complaint from an Unhappy Franchisee reader (we’ll call him FBR Critic) who sent us a copy of the 2015 Franchise Business Review Multi Unit Special Report, along with this message:
FBR claims to be a research firm. FBR is a franchise marketing lead generation website.
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They are doing with this report what the FTC and certain states do not allow.
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FBR is charging its franchisors for an unlawful earnings claim service. Franchisors mostly would never do this themselves excepting for the aggressive violators.
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Franchisors wouldn’t not even been lawfully able to provide this report to prospective franchisees. No franchise lawyer worth their salt would let their franchisor client use FBR.
FBR Critic pointed out that the FTC forbids franchisors from making Financial Performance Representations (FPRs, aka “earnings claims”) unless they have substantiation for the claims and they are disclosed in Item 19 of the franchisor’s Franchise Disclosure Document (FDD).
The 2015 Item 19 for fledgling franchisor and FBR advertiser You Move Me states “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets.”
However, a “Featured Franchisee” advertorial in the FBR Multi-Unit “Special Report” quotes You Move Me franchisee Andrew Wilson sharing pretty blatant financial performance representations:
What surprised you most about opening your own business?
We did close to one million dollars in sales in the first year, I couldn’t have predicted such success in such a short time. It was an incredible achievement; and indicates that the moving market is filled with opportunity.
What’s next for you and your business?
It’ll be another busy year for our You Move Me business. After doing $1.3 million in revenue in 2014, we’re projected to hit about $2 million in 2015.
For an expanded analysis of Andrew Wilson’s claims, read YOU MOVE ME Franchise Brian Scudamore Making Illegal Earnings Claims?
In the Item 19 of its 2015 FDD, FBR advertiser ShelfGenie includes representations regarding the dollar amount of the average order in 2013, the meeting-to-sales ratio and the cost-of-goods sold… but it declines to include overall profitability of its franchises.
The ShelfGenie Item 19 states “Except for the information stated in this Item… we do not furnish or authorize our salespersons to furnish any oral or written information on the actual, average, projected or forecasted sales, costs, income or profits (the “Earnings Capability”) of a SHELFGENIE Business.”
However, ShelfGenie shares this Financial Performance Representation via the FBR Multi-Unit Franchising “Special Report”:
“I netted 20% out of my business last year,” says Ric Trahan, a ShelfGenie franchisee who owns six units in Houston and two in Austin, Texas.”
…He invested in his first ShelfGenie franchise in 2009. During his first year in business with ShelfGenie, he broke even. By the second, he was profitable….
HomeWatch Caregivers make financial representations regarding gross sales and average staff wages in its 2014 FDD, but does not provide information regarding when and if franchisees break-even.
“If you receive any other financial performance information or projections of your future income,” the FDD states, referring, one would assume, such representations as when and if franchisees reach break-even, “you should report it to the franchisor’s management by contacting Leann Reynolds…”
Yet it is Ms. Reynolds providing a Financial Performance Representation in the FBR “Special Report” on Senior Care franchises:
Leann Reynolds, president of Homewatch CareGivers, says franchisees typically break-even (revenue minus expenses and not counting owner salary or loan payments) in 6-9 months.
Synergy Homecare is another company that opted not to disclose break-even information in its 2014 FDD, but apparently was OK providing it in Franchise Business Review’s Senior Care franchising “Special Report”:
“I was able to break even within 6 months, so the wait time is not long if you launch successfully and begin to grow,” said Synergy Homecare franchisee Mitch Opalski.
About these franchisor representations in Franchise Business Review publications, FBR Critic states that they mislead readers into believing “all franchises make money, whether multi-unit or single unit.”
FBR Critic states:
This is an unlawful way to make a earnings claim.
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This may rise to be criminal conspiracy.
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These are franchisors and franchise marketers who know franchise compliance and who are collaborating to violate the law.
What do you think? Is Franchise Business Review and its franchisor advertisers collaborating to circumvent the FTC Franchise Rule? Or are these statements not, in fact, illegal earnings claims?
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TAGS: Franchise Business Review, FBR, FBR Top Franchises, Eric Stites, You Move Me franchise, ShelfGenie franchise, Shelf Genie franchise, Homewatch CareGivers franchise, Leann Reynolds, Synergy Homecare franchise, franchise complaints, unhappy franchisee
