I really enjoy writing. And my story of franchise fraud is fairly fascinating. I wrote it up for my recent 29-page submission to the FTC in response to their request for comments as they revise the Franchise Rule. (My comment is still unpublished as of today, December 27th, 2020.)
But it’s such a good story that I think it also needs to be written in a way that flows… in a way that’s fun. I want the world to know how franchise fraud happens and writing the story in an entertaining way will help.
The world is full of too many long, dry documents!
Below is one section of the book I’m working on. The whole book should be done soon. I’ve fictionalized the name of the franchise in this chapter and will be fictionalizing character names throughout the book. That said, the franchise sued me and all details are available in public court documents and documents I’ve sent to Offices of the Attorneys General, the Department of Justice and the FTC. Plus, I already owe the franchisor $363,00+ dollars so I don’t really see what more harm they can do that they haven’t already done.
Even though people with money have most of the power, they don’t have all of it. There is also a lot of power in being able to tell the truth.
For the record, I do plan to use the real names of some of the franchising heroes I’ve met along the way… with their consent of course. Keith Miller has already offered to allow me to use his. These heroes deserve credit for their hard work done to help small businesses and the economy.
CONTEXT: The excerpt below is only one section of my longer book that tells the story of how I came to intimately understand franchise fraud.
The section just before this one tells the story of my Discovery Day at the “Langford Iris” executive search franchise in Texas.
This section tells the story of the FDD conversation I had with the “co-CEO” “Grant Beesley.” What “Grant Beesley” tells me in this conversation isn’t true and item 3 of the FDD “Langford Iris Associates” gave me omitted some important litigation information. The fraud itself is explained later in the book. I explain the fraud to the audience in the order in which I discovered it. Of course, when I was having the below conversation with “Grant Beesley” before I signed the contract, I didn’t know he was lying to me. If I had known, I wouldn’t have signed, of course. So this section shows the fraud happening in action.
The whole experience was a bit like being an investigative reporter “on the inside.”
My phone buzzed. I was back in my New Hampshire living room. The curtains were open and the warm New England sun left dancing shadows of leaves skipping across my dark faux wood floor.
I need Langford Iris to work, I thought. I hope this call doesn’t disappoint.
The call was from Grant Beesley, the co-CEO. I had emailed all the officers a long list of questions about their franchise disclosure document, or FDD.
I’ve been through so many of FDD calls now that I’m almost an expert, I thought.
I always paid close attention on FDD calls. I had repeatedly read that the way to prevent being defrauded was to really know a franchise’s FDD. Every broker I had spoken to had said the same. And the FDD was how the Federal Trade Commission regulated the franchise industry.
“Hello,” I answered. My heart was pounding a bit. That’s weird, I thought. Why am I nervous? My temples were moist. Maybe it’s because I’m so close to signing and because I really think Langford Iris is the one. Maybe the idea of actually making money in the business world rather than donating time to the non-profit world is making me sweat.
“Anne,” came a warm voice on the other end. “This is Grant, it was a pleasure to meet you in person when you came to Texas.”
“You as well,” I said, smiling my broad smile. I really meant it. Grant had a wide and sincere smile himself. I thought of the bizarre tech gadget I had seen in his office on Discovery Day. I quietly chuckled at the image in my head.
“Is now still a good time?” he asked.
“Of course,” I said, as warmly as possible. I liked Grant Beesley — a lot. Out of everyone at Langford Iris, he was the warmest. It felt easy to trust someone who generously shared friendliness and who seemed so authentic.
“Well, let’s get down to it,” he said. “Let’s start with the contract.”
“Oh,” I said, a bit taken aback. “What about the FDD?” This was the first time a franchise had suggested we look at the contract before the disclosure document.
“You sure had a lot of questions about the FDD,” he replied, referring to the list I had emailed the Langford Iris officers. “And I’m happy to go there. Most people want to really focus on the contract, that’s all.”
“Why is that?” I asked.
“Well… because the contract is what you’ll ultimately be signing,” he answered. And when he said it, it made a lot of intuitive sense.
Langford Iris really is new at this franchise thing, I thought. Yet he’s right… It IS the contract I’m signing regardless of what the FDD says. But I know no franchise contract will be fair no matter what. All franchise agreements have those ALL CAPS statements; the dangerous clauses are standard… they’re not negotiable anywhere. All franchise agreements give too much power to the franchisors. If I’m going to buy a franchise, what matters is what they’re going to DO with that power and that’s why I need to know about their attitudes toward litigation. And I’ll find that through the FDD and this conversation.
“But let’s start with the FDD,” he continued after a pause. His voice made it clear that he was appeasing me.
Yup, I thought. The FTC protects me through the FDD and I’m only risking signing an unfair contract because of the FTC’s involvement in all of this. Otherwise I’d be crazy to take a risk like this.
Grant started at the top of the FDD and went through my list of questions, bullet point by bullet point. Each answer satisfied me.
But FDD item 3, “litigation” was the most important to me.
I know what unjust litigation feels like. I know that the the more powerful party — the party with the money and the legal advantages —- almost always wins. I know I’m not the powerful one and I can’t afford to keep losing. I need money to support my children.
[I REMOVED SOME CONTENT HERE THAT WILL BE AVAILABLE IN THE FINAL PUBLICATION]
Jeez, I thought. My life has been such a mess. Things may be better now than ever, but what a mess.
Buying a franchise was my solution.
I cannot do mess anymore. I swallowed. The very very very last thing I want in the world is another ridiculous legal situation. If Langford Iris is unreasonably litigious like my ex and a lot of other franchisors, I’m out.
I’m out, I’m out, I’m out! I yelled it inside of my head with an intensity that surprised even me. My heel tapped against the floor, quickly, as if the trembling in my heart were reaching all the way down into the earth. The wind blew outside and the tree shadows danced heartily and almost ominously along the dark lines in the floor.
“I really want to talk about FDD item 3,” I said aloud. “Item 3: litigation.” I swallowed again.
“Let’s do it,” Grant responded cheerily.
If only he knew the ridiculous life mess that’s going through my head, I thought. But I’m glad he doesn’t. Grant’s a new person and I like him. I want the mess behind me. It’s hard enough that thousands upon thousands of Mormons and ex-Mormons know. I don’t want everybody I work with in the future to know, too. I want a chance at privacy and a happy life.
“I don’t like working with litigious people,” I said, aloud again. “I mean it. This is a huge priority for me. I don’t want to work with you if you’re a company that jumps to litigation to solve problems.”
“That makes sense,” Grant replied stoically.
“I see here that you’ve disclosed two litigations that have concluded,” I continued. “I’m glad the litigation is over. I can read the details in the document. And I’m glad you haven’t litigated against any franchisees.”
“No,” Grant said, “we haven’t.”
“What I want to know from you is what your general attitude towards litigation is? Is litigation something you rely on?”
“No, no, no. Of course not,” he replied. “Nobody likes to litigate. But we’re in business. We have a lot of business interests as you can see by the nature of these two concluded cases. Sometimes in business you have to enforce agreements.”
“But, to reiterate,” I said, “you’ve never litigated against your own franchisees?”
“No,” he said. “If we had, we’d have to disclose that. We did have some problems when we purchased the franchise from the previous owner and had to switch everybody over to new contracts. Some people didn’t want to change. They didn’t like our new leadership structure. But we worked it all out.”
“What do you do to work things out?” I asked. I bit my lip.
“Well, we talk to people of course. We listen to their needs and try to find solutions that work for everyone. Thats the best way to maintain relationships and work together in business.”
I nodded my head. “I can’t accentuate this enough,” I said, “I do not want to work with litigious people. If Langford Iris is a franchise that jumps to litigation to solve problems, I don’t want to have anything to do with it or you. I need to know now.”
“This is really important to you,” Grant said.
“Yes,” I replied. “It’s good to hear that you’ve never sued a franchisee” I continued, “and that’s believable because you only bought this franchise a few years ago, but again, to repeat myself, I’m not interested in being a Langford Iris franchisee if you use the heavy hand of litigation to resolve anything. I have better things to do with my life and my time than work with litigious people. I want to work with you because I believe you are reasonable people, not litigious people.”
“Just like we’ve disclosed here,” Grant said without skipping a beat, “We’ve only ever litigated against big companies with whom we had large-scale business conflicts.”
“Okay,” I said, accepting his answer but not relenting. “Has anyone ever left the franchise without facing litigation?” I scratched the fingers of my left hand through my hair. My fingernails were loud on my scalp and I could hear the taut skin flaking off underneath them. My heart was pounding.
I’m really nervous about signing a contract like this, I thought. Of course I am. Who wouldn’t be?
“Yes,” he said. “There’s one franchisee who got a job offer that was too good to resist,” he told me. “He’s put his franchise on hold for now.”
“So he’s not paying his royalties right now?” I asked, my shoulders raising a bit.
“Nope,” Grant replied. “That’s an example of a time we listened to everyone and worked together. It was better for him to go take the job for now. He’ll come back to Langford Iris later.”
I took a deep breath, trying to calm myself. Grant had said what I’d wanted to hear.
“I have no doubt that troubles will come up, they always do,” I said. “What I want to know is that when they do come up, that you’ll be people I can talk to so we can resolve them in a way that works for everyone.” I sucked in warm air again. I watched the shadows dance on the floor.
“You’re in the right place,” Grant said. “That’s the way we do things. We’re not the kind of people who jump to litigation to solve problems.”
I let out the air in my lungs in a slow and measured sigh of relief.
I believed him.