For a few hours sitting in front of the computer, I was wondering what should be the best way to share some of the results of the research and audit we have conducted in the United States within the corporate analysis process for new franchisees throughout nine months of this 2021 for B Restaurant? Upon reflection, I decided that sharing some information in this space could expose some alerts to new investors regarding the acquisition of commercial businesses under the franchise modality in the United States. In this sense, and with the purpose of maintaining the confidentiality of the case, I will continue to refer to the B Restaurant.
It is estimated that in the United States a new franchised store opens every eight minutes and approximately one out of every 12 retail businesses is a franchised business. In addition, U.S. franchises cover a myriad of business activities, such as fast food restaurants, real estate agencies, repair shops, beauty and personal care, cosmetics, education and hotels. More than 50% of franchises have fewer than 50 franchisees and 25% have fewer than 10 franchisees. Only one third of the total franchises have more than 100 units or establishments, finally we could say that food franchises (fast food, restaurants, supermarkets), which is our case, have more than 220,000 franchised establishments and employ more than 7 million people in the United States.
The franchise business model stands out as an economical and fast way to expand business. Among the obligations of the franchisee is normally to acquire the franchiser products. The disadvantages include the fact that the franchisee may use the brand and trade name of the franchise incorrectly, which can damage the image of the franchise. Therefore, he has to control that the quality of products and services is respected. When good results are obtained, the franchisee usually wants to become independent from the franchiser. If the payment of royalties is fixed according to the franchisee's profits, the franchisee may not disclose all the benefits of the business.
Against this background, we accompanied the senior partner Mister MR of the franchiser B Restaurant to Atlantic City, New Jersey, during the third week of November. And later, we flew to the city of Olympia, Washington, where we met with investors interested in acquiring the B Restaurant franchise licenses that Mister M offers.
When we left the meetings, to my surprise, the respective contracts were signed in both cities for the acquisition of the B Restaurant franchises, I must confess that I was left with a bitter taste. How was it possible that Mister MR, did not disclose the real economic reports of the pilot store to the new investors that had been previously warned as a result of the corporate investigation only a week before.
As a corporate lawyer I knew that Mister MR was lying, and that the results did not give good projection to the initial investments of a little more than 250,000 thousand dollars for the new investors. Mister MR, had in his bag half a million dollars to rescue a franchise with fresh money, and continue to show the white books of a fast food business that was on the road to bankruptcy.
On the flight back I could not help but think that we are by no means safe from deceit and falsehood in the business world, was my conclusion; however, the only tangible thing I can recommend with these lines to those interested in acquiring franchises in the United States is the use of the service "BPF Dynamics", which allows in real time and authentic, to determine the healthy stability of the franchises both financially and operationally.
Finally, in Pasadena, California, Mr. MR got off the plane with a big smile on his face and half a million dollars in his pocket. And me, with a strong emotional charge of having felt used.
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