Beware of franchise making fraudulent claims and using mafia like business practices with franchisees...
Here is my story:
I decided to invest in this franchise in October. I was naive in terms of the legal strategies and politics of franchises, however, I have about 10 years experience running a successful small business with about $6 million in annual sales. I thought I could build territories up to another $6 million business with the potential I saw in this franchise, based on the fact that when I called current franchisees, all were happy and successful.
My attorney didn't recommend that I invest in this franchise, but the legal reasons seemed technical, and I assumed the franchisor would operate in the best interest of building a successful franchise through successful franchisees. His reason was that the franchise had chosen to avoid if at all compliance with some significant provisions of the California Franchise Investment Law and the Franchise Regulations Act, by including waivers of rights I should have under those laws. The agreement even admits not being in compliance with California Law, but states "we intend to fully enforce all of the provisions you sign."
My attorney investigated how this agreement was approved, and found a back door in California, which was used by this franchise. Renewals are also essentially automatic.
Why is this important? Because it is the basis which this franchise uses to mistreat franchisees and escape the consequences of a fraudulent franchise agreement. The total investment to start this franchise as an "Area Developer" is $150,000, (not including vehicles to pull the grooming trailers) the cost to sue for damages when the franchise is repossessed with absolutely no compensation over a disagreement, is much more than that. Essentially, franchisees will make the economically sound decision to NOT sue. As a result, the franchisor gets away with selling and reselling territories, making money when the franchisee goes in, when they are kicked out, and when the territory is resold to another unsuspecting investor. Even though this "waiver" clearly violates California Code Section 31512 (FIL), the franchisor knows it is too expensive for a franchisee to enforce their rights under this law.
I would list all the violations of franchise laws here, but what is the point? The list is very long.
I was the top producing franchisee in Aussie Pet Mobile, my second month in business. Even at this level, I was losing a significant amount of money, and only barely met the minimum sales performance according to the franchise agreement. My analysis of the business at that point led me to believe that there were serious flaws in this franchise model.
The franchisor offered to help me turn it around.in the meeting we had about how to make the business work, I realized a few things. He ignores the REAL cost of doing business, focusing only on cash flow. There is a significant investment in equipment, so equipment depreciation is a significant factor in the model - he completely ignores it. The "grooming trailers" are $25,000 a piece - his cost is about $5,000. When I received them, I realized they may only last two, maybe three years, before they would need to be replaced. Then you also have to have vehicles to pull the trailer (not included in the franchise model-the suggestion is to lease a vehicle, which I did).
Second, he was requiring area developers to use an employment contract that was blatently illegal in California. When I called this to his attention, he revised it, but it was obviously still substantially the same. He only made changes to skirt the illegal aspects of it. The big problem here is that the franchisee is the one that would be held responsible in an employee lawsuit, not the franchisor. If I refused to use the contract, I would be in default of my franchise agreement. The agreement was still questionably legal in California. His motive? My guess is to avoid paying groomers overtime, a key component to success of his cash based model.
At an "Area Developer" meeting, the franchisor stated that he was upset with an "Area Developer" giving a poor reference to a prospective franchisee. He said, "If you can't give me a good validation with a prospective franchisee, let me know and I'll take you off the list." (FYI - Franhcise law requires all franchisees be disclosed. This statement revealed that I had an incomplete list of franchisees when I was considering purchasing the franchise. Only happy franchisees were on the list. This is a blatent fraudulent practice.)
I then contacted the franchisor to sell the territory. I signed a very one sided agreement in his favor, because he used the franchise agreement as leverage, and I had little choice.
When I struck an agreement on my own with the neighboring "area developer" to my territory, the franchisor decided to block the deal since he didn't like the terms (using an independent escrow company). He did so by issuing default notices to both of us, without a word to us about his dissatisfaction. He was exercising his right to repossess our territories for not meeting minimum sales quotas in the sales agreement. (Not a single "area developer" was meeting those schedules, which is his leverage in negotiations with franchisees.)
He then reposessed my territory, because I could not cure the default, and threatened to sue me for the next 10 years of projected franchise royalties. All the while, I had been trying amicably to exit the franchise on friendly terms, and minimize my losses. He wasn't satisfied with that.
I paid an attorney to help me come to a settlement agreement. We eventually did, but it was on terms I am very unhappy with, due to his mafia like tactics. I have suffered significantly more losses - completely uneccessary, since I could have sold the territory, and everyone would have benefited. The franchisor has profited from the transaction, and I am on the brink of bankruptcy now as a result of this fiasco. The other "area developer" is trying to stay in, cured his default, but I have been told through the grape vine that the franchisor wants him out and is using his mafia like tactics to force him out, causing him to lose a significant amount of money as well. He just keeps issuing default notices.
There are now about 3 area developers in Northern CA and 4 or 5 in Southern CA, and 2 in other states, that I have heard about, that are going through the same exit process me and my neighboring area developer went through. The numbers continue to grow. This franchisor is headed for legal and financial problems if he continues these practices.
Do not do business with this company, unless you want to be a victim of unethical and illegal business practices. His "so sue me" attitude is prevelent in any business disagreement, even with customers.
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