Wonderful OP. It’s great to see substantial original content on SDMB.
Agreed. Well done JohnT and thank you. I read your entire article. I knew this type of predatory “own your own business” was common in the trucking world, but was unaware of the type you depicted.
As we’ve seen from this and the student loan business, some type of protection needs to be in place for the (unskilled? gullible? math-impaired?). Not sure what word to use here.
Yes, really interesting.
In the UK the evolutionary niche for such predatory “business opportunities” has traditionally been filled by what are known as PubCos - breweries who bought up pubs wholesale and then leased them to people - very often veterans* - who thought running a pub would be a great way to invest the pension. Of course, the lease was full of clauses very similar to the ones @JohnT lists - requirement to buy the majority of your beer from the brewery at inflated prices, ditto marketing materials, equipment etc.; rent due come what may; etc. etc.
Going by the ever-useful rubric that the purpose of a system is what it does, it became clear that these “tied pubs” were simply a mechanism for transferring money from pension providers to the breweries, with it passing briefly through the hands of the pensioners as part of the transfer process.
There has been a degree of public outcry, regulatory action and legislation to try to curb this which I believe has had some effect, but the basics of the system are still in place.
*Veterans are particularly vulnerable to this because while pub culture thrives in or near army bases, in fact is on a steady decline (driven by Netflix and cheap supermarket booze) in the civilian world, but they don’t know that and so wildly overestimate how much business a typical pub does nowadays.
I’m definitely not a veteran, not am I American, but hell, I’ll weigh in with something I noticed in a former job. I’m not sure I’d say veterans deserve special sympathy, but, well, there are veterans and veterans; I used to work in a security company which was run by an ex-military guy, which employed a lot of other ex-military people.
It was really obvious to me there that the boss was basically using his experience to manipulate the other vets into doing what he wanted, by basically replicating the camaraderie and authority that they were used to. They wouldn’t push for their legally required breaks, they wouldn’t question his asshole decisions- the shouty boss said jump, they’d jump. In conversations with those guys, they all knew people who had utterly failed to cope with outside life, and were either living on the streets or had drunk themselves to death, and the widely stated reason was them just not knowing what to do without someone telling them.
The military does go to an awful lot of effort to prevent independent thought and promote trust, at least in some roles, which really does leave a lot of people very vulnerable to those who know how to take advantage of that, especially when they’ve just left that situation.
When I was unemployed a few years ago I attended a jobseekers’ support group, and a franchise broker came to speak with us. She was engaging and enthusiastic, and insisted that her clients who followed the “book” to the letter – no matter which franchiser they went with – always succeeded.
I pretty much saw it as scam right off, but people who have been out of work for a while are (perhaps like retired vets) confused, discouraged and all too vulnerable to a pitch that promises clear, infallible instructions to success.
This sounds like multi-level marketing, only with one level. Those types of companies prey on the military too, but usually military spouses. Excellent sales tactics on the franchiser’s part (or in the case of MLMs the “upline coach”), with lots of empty promises and non-business talk to pull at their heartstrings. The MLMs suck moms in by promising they can “help their families” and make tons of money while raising their kids. Sounds like this franchise model takes a different path to get to their military marks, in the form of “the book.”
What a shame. For every feel-good story about how people collect money to give an old vet an electric scooter, there’s tons of stories like this, people taking advantage of veterans because the US government left them hanging and they can be ripe for the picking.
And good OP, by the way. Not too long.
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A lot of stuff nowadays, from mortgages to cell phone contracts to end user license agreements for cheap software, involves elaborate paperwork written in deliberately obscurantist legalese. People are conditioned to expect that they won’t be able to really understand the EULA for the latest Windows patch, much less a franchise contract.
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Some people do read that paperwork in detail, and think they understand it, but, again, deliberately obscurantist legalese. In @JohnT’s example, there’s a “$0” topline fee in big bold print which is actually a substantial dollar figure in a footnote.
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Some people do rely on “experts” to guide them through the contract terms. But those “experts” are often not disinterested third parties. They may be the franchise sales rep. Worse, they may be the “lecturers” that JohnT and a couple of other posters have mentioned, who portray themselves as disinterested third parties who just want to help people achieve financial independence.
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I’m also a veteran, and I also don’t think we’re special, but recent military retirees are particularly vulnerable to these kinds of not-quite-illegal scams.
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All sorts of people fall for all sorts of scams all the time. If a scam or scam artist happens to hit your vulnerable areas, you’re vulnerable to their scam. And there are a lot of scam artists out there, and they pitch a lot of scams to a lot of people. Just by the shotgun effect, they’ll eventually find a vulnerable mark.
Clueless people fail in business all the time because they don’t read contracts, don’t understand business fundamentals, are under capitalized, and so on. Think about how many restaurants you’ve seen in strip centers that fail within a few months of opening. Someone flushed $50k, $100k, +++ down the drain because they thought it would be fun to run a pizza joint. They lose everything, but they gain an expensive lesson on what not to do from the School of Hard Knocks.
Franchises can be good businesses, but they need to be run like a business. Too many people get swayed with stories of easy money and jump in like it’s a hobby. Some franchises will require the buyers to have a certain amount of liquid assets on hand above and beyond what is necessary for the franchise. This can ensure the franchise has sufficient capital to start, but it also ensures that people aren’t foolishly putting 100% of their assets into the franchise.
There were some stories a few years back about how bad Quiznos was for franchisees. Like the story in the OP, it was almost impossible to turn a profit. If a store was profitable, the owner was making the equivalent of minimum wage. They themselves had to work crazy hours in the store since there wasn’t enough profit to hire enough managers. And they had to buy all the ingredients and equipment from Quiznos, which were pricey and ate into profits.
Part of the problem is that they are getting it looked over by a business advisor of some sort. Specifically, a business advisor who’s in the franchiser’s pocket.
And yeah, the OP was long, and I didn’t read all of it, either. But it was easy enough to skim through and get the gist, and if I found myself curious about any of the details, well, they were right there. It might be better formatted if it had internal hyperlinks to footnotes with the tables etc., but I don’t think a message board post supports that.
Is it just me that’s fainly amused by the combination of people saying ‘the OP is too long and complicated!’ and people saying ‘why don’t people fully read contracts?!’ in this thread?
Just sayin’…
To me, it’s why wouldn’t you hire your own lawyer to read through the contract and tell you what’s in it? (And, yea, I just skimmed the OP and looked at the helpful summary afterwards—almost like hiring my own lawyer! 
) But, seriously, I’m an intelligent and educated person and I wouldn’t trust my own self with any significant contract m, and I’d have a lawyer look over it. Don’t we all do that when buying a house, for instance?
If I were going to invest all my savings into opening a franchise thread of the SD, you’d have a point.
Midwest here - I didn’t have a lawyer look over the contracts for either of my home purchases, and I don’t know anyone who has (although it isn’t the sort of thing that comes up in conversation). I guess the assumption is that reputable real estate broker is going to handle all of that as part of their 6%.
Ok, we had a separate lawyer look over all our property purchases (Chicago)
Also in Chicago, and had a lawyer look over the contracts when we bought our house. IIRC our broker strongly advised us to do this.
Excellent work @JohnT
Here my take on the business model.
Water damage remediation is a legitimate business. It is also very involved and implicated. It might be the right choice for certain people looking to start a business.
Someone that has worked in construction doing casualty remediation, for example. Someone that knows how to remediate water damage, someone with experience dealing with insurance companies. Someone that knows what materials and equipment they need to purchase and where to get them. If you have this experience, starting a water damage remediation business might be a not bad idea.
The usurious services that these companies are selling their franchisees are intended to replace experience. Don’t know what equipment to buy? We’ll package it and sell it to you, at a huge mark-up. Don’t know how to do your job? We’ll sell you extensive……and very expensive training. Don’t know how to run a front office or do your own payroll? Don’t worry, we’ve got you covered.
If you want to start a competitive water damage remediation company, do it yourself. If you don’t know enough about water remediation to do so, think of something else to do.
With fast food franchises, at least you are buying a brand that has a following, has a value. There is nothing obscure about what the business does, they make food and sell it over a counter. Not so with water damage remediation. To me, this company has attempted to package a specialized skill and turn it into something anyone can do - if they have enough money.
It really is disgraceful.
@Tabco did make a good point, one I had intended to make. Unlike most of the services PUR-O-CLEAN requires their franchisees to buy, the insurance software package is legitimate.
I also congratulate JohnT on his effort, which is deserving of exposure on a major website/magazine, whatever editing might be necessary.
San Antonio, in one recent 21-year period reported about $14.7 million dollars in damage from flooding, or about $700K per year. I see that there are a minimum of 15 businesses in the immediate San Antonio area advertising flood remediation. So, even if everybody affected by flooding used those services, and divided up the business equally among them, each would stand to earn around $50K annually.
Of course people are going to do a certain amount of the work themselves or write off losses, and floods are irregular events so that you might go years without one. In any event, the business model sounds…shaky.
There’s three groups when it comes to entrepreneurship.
There’s one group that was raised to believe that entrepreneurship is always and inevitably a bad idea: people that set off on their own inevitably end up losing everything. They are warned against it from childhood, and told over and over again that the only prudent path is a boring job in a high demand industry. Your best plan is a practical degree with the name of job in the degree itself (engineer, accountant, teacher, doctor, lawyer). Very risk adverse.
Then there are a group of people who have an absolute fantasy of striking it rich working for themselves. They don’t know anything about business or have any practical skills, but they are convinced that someday they will have a “shot” and everything they do between now and then is just killing time and paying the bills. They are the ones who take stupid risks with no chance of success.
And then you get people who actually start small businesses, or support themselves with various entrepreneural enterprises. This is very often a family thing, because it seems to take being raised in a family of entrepreneurs to have the skills and the confidence to make it work. They don’t have pie in the sky expectations, they just make plans and work toward them. Sometimes they fail, which the “dreamers” don’t expect, but when they do, they don’t lose everything and spend their remaining lives in poverty and shame, which is what the “find a boss” group thinks will happen. They often regroup and try again, and generally find something that lets them build a life they are okay with. They take calculated risks, and generally its not a disaster.
I was raised in the first group, but I’ve come to appreciate that the last group does really exist, and it works out for them. The idea that anything other than a stable job with a predictable pension is inherently foolish is as incorrect as the idea that some day your ship will come in, sign here for easy pickings.
Franchises are clearly preying on the second group, and that’s shameful. But I do wish so many parents didn’t work so hard to make sure their kids were in the first group. Some risk tolerance, backed with hard work and lots of research, is not a bad thing.
Those are the 2nd type of franchisers, those that draw money from operations and not the franchise opportunity itself. McDonald’s and KFC and many others understand that a business, at its heart, is a machine which you input capital, do a lot of shit, and the output is more capital than what you inputted. Their franchises are designed to generate this surplus capital, so much that the franchiser gets paid and the franchisee earns so much they want to buy more McDonald’s franchises.
That’s why I put in that footnote that one of the big signs of an actual money-making opportunity is if people are buying multiple, similar franchises. It’s a key indicator that the franchise is making significant money for the owner.
Puroclean just drains money from the franchisee via these binding agreements.
I would also note that McDonald’s isn’t interested in military veterans. They are looking for people with significant net worth, in the millions, before they even consider you for a franchise. In short, you have to show experience in business operations before buying a McDonald’s business.
Check this out:
That’s a serious business. And that $45k franchise fee? It’s LOWER than the Puroclean franchise fee!
So, I banged this out in 4 hours. Actually had a deadline (had a fried chicken dinner date), so didn’t even spend my full editing time polishing it, removing the things that didn’t stick out in the text-entry box.
And I posted it here specifically for these type of comments.
And will use your (not just you, Mordecai, but all of you) criticisms to make this better prior to posting it on my Substack.
Thank you all for you comments - think of it as y’all being my editor(s). They are wanted and needed. Just be kind.
(That’s not an invitation to take it apart line by line, y’all. 
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