Franchise Forum - Franchise Information

BP is being sued by a number of franchisees throughout the country.

In one case in Illinois, BP won the suit although:

While finding in favor of BP, [the judge] did rule that the company intended to deceive [the franchisee] when it concealed the profit margins on fuel at the suburban stations the company sold to the franchisees in 2006.

BP faces more lawsuits by franchisees in California, Washington and Oregon.

Regarding a class action in San Francisco:

The class-action suit addresses three main claims. First, it alleges the franchisees were required to purchase and install a point-of-service and back-office system that BP initially tested before company-wide implementation and found to be flawed. Tran said the software keeps shutting down, forcing gas stations to be out of service for a couple of hours at a time, resulting in loss of business.

Secondly, the suit claims BP is manipulating gas prices based on time of delivery. According to Tran, BP knows when the prices go up and down, and schedules delivery around those prices, in effect ensuring that franchisees are charged the highest price possible regardless if they need gas at that time. As for the third claim, the suit alleges BP pushes franchisees to use certain vendors.

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According to Blue MauMau, a judge has ordered Coverall to pay triple damages to hundreds of people wrongly classified as franchisees, rather than employees, and the ruling is effective from 2006.

Coverall will also have to pay all the initial franchise fees and other fees.

BlueMauMau

Note: I find it interesting to see a comment from the IFA (Independent Franchise Association) claim there is "Federal regulatory oversight" of the franchise industry. I happen to believe that's utter bullshit.  None of the federal government, including the Federal Trade Commission and the Justice  Department does much, if anything, to address the complaints of franchisees who have been lied to, cheated, and robbed by franchisors.

It's good to see a franchisor held accountable.

A man who bought franchise rights for several Florida counties is suing The Original Brooklyn Water Bagel Co., claiming it's a sham.

A Boca Raton businessman has gone to court seeking more than $2 million in damages from the bagel business, saying he never would have wanted to develop franchises if he hadn't been duped into believing there was a patented process to "Brooklynize" water.

"The water filtration system is not unique and does not render water equivalent to Brooklyn water," said Robert Zarco, an attorney representing Andrew Greenbaum, who bought franchise rights for the restaurant in Broward, Miami-Dade and Monroe counties. "You want Brooklyn water, go to Brooklyn. You want a Brooklyn bagel, go to Brooklyn."

The story

I've seen numerous articles about franchising, some at the websites of major business publications, which are incredibly shallow. It often seems they're written by someone who really knows nothing about franchising. But there was space to fill, and they were ordered to write something, so they wrote a fluff article about buying a franchise.

They almost always say you should investigate the franchise by talking to current and former franchisees. That's an indicator of someone who knows nothing about franchises. Chances are good that existing franchisees won't say anything bad about the franchise -- they probably hope to sell theirs some day, at a profit. So they're not going to say anything bad.  Talk to FORMER franchisees? You'd probably have difficulty locating them and if you did, they might not wish to talk or may be gagged by a non-disclosure agreement, like this one. They CAN'T talk -- or they can't tell the truth.

These amateur-written "how to buy a franchise" articles usually contain comments about the FDD (Franchise Disclosure Document), and these fluff articles often lead you to believe the FDD is a valuable document that you should rely upon when buying a franchise. That's not true.  In fact, an FDD can be creatively written to make it appear the franchise is in better shape than it really is.  While there are certain things which must be included, those things can be written in a creative way.  And there may be important things which are never included in the FDD.  Here's the worst part, and something those fluff articles don't tell you: Many courts have ruled that you can't sue using the FDD to support your case.   So what good is it?  Practically speaking, the FDD is nothing more than another bit of propaganda which the franchise seller can use creatively and which does precious little to serve, or protect, the buyer.

I just wrote comments like those above in response to a fluff article at a major newspaper's website.  My comments were deleted and, instead, comments appear from a franchisor.  I suspect the newspaper gets advertising revenue from franchisors and doesn't allow unflattering comments to appear on its website.

Be alert for all those fluff articles out there: They don't serve the prospective franchise buyer.