Fortune Article Spotlights Butterfly Life Franchise Woes
(FranchisePick.Com) The Fortune Small Business article on the new changes in franchise disclosure rules (New franchise rule: More disclosure, same high risks) opens with an horror story illustrating why many believe that current regulations regarding the sale of franchise investments do not go far enough to adequately inform and protect franchise buyers. The negative franchise example they chose is one we’ve followed extensively at FranchisePick.com: Fitness franchise Butterfly Life.
New franchise rule: More disclosure, same high risks
A decade-in-the-making revision of the FTC’s Franchise Rule requires franchise owners to disclose more data, but it doesn’t bring the change franchisees say they most need: documented financial projections.
by Ian Mount February 29 2008: 5:17 PM EST
(FORTUNE Small Business) — If Beth Tomei had only known.
In November 2004, the Walnut Creek, Calif., fitness club owner signed a franchise agreement with the Butterfly Life women’s fitness company in hopes of cashing in on the company’s Curves-like business circuit training plan. Soon, however, she realized all was not right: she learned that 12 of the company’s 16 California franchises were failing or had failed, she says; that the start-up costs would be close to twice those claimed in the company’s franchise prospectus; and that the oral profitability claims she’d been given were mostly wishful thinking.
Today, down $450,000 in savings and home equity, she is part of a group of franchisees involved in a class arbitration claim against Butterfly Life.
“If they had been required to disclose more and do it more clearly, I think a lot of heartache could have been saved and would be saved for future franchisees,” Tomei said. A Butterfly Life representative did not return calls for comment.
It seems that Tomei may get her wish. Since 1995, the Federal Trade Commission (FTC) has been studying ways to update the Franchise Rule - the regulations governing the sale of franchises to aspiring business owners - to make it more consistent with state regulations. On July 1, the fruit of 13 years of internal meetings, public workshops and industry comment becomes real when the new and improved Franchise Rule goes into effect.
But while Tomei and other franchisees and franchisee advocates applaud the changes, many say the new rule falls short of being the far-reaching revision needed to protect prospective franchisees from the abuses reported in an FSB cover story two years ago, “Risk/Reward.” Instead they, echo Susan Kezios, the president of the American Franchise Association franchisee group, who wrote in a recent industry trade publication article: “The FTC labored a dozen years to revise its Franchise Rule - only to give birth to a mouse.”
Butterfly Life Franchise Posts on FranchisePick.Com:
February 24th, 2008 George Orwell Returns to Bash 1-2-3 Fit, Butterfly Life Fitness Franchises
February 15th, 2008 Article Scrutinizes Quiznos Rick Schaden, 1-2-3 Fit Franchise, Butterfly Life Franchise, Contours Express Franchise & Fitness Franchise Woes
January 18th, 2008 Butterfly Life Franchise Lawsuit in Forbes
December 20th, 2007 Troubled Fitness Franchise Butterfly Life Lowers Franchisee Royalties
December 18th, 2007 Butterfly Life Chairman Gergley Offers Commissions to Ex-Franchisees
December 9th, 2007 Franchise Pick’s Most Volatile Posts of 2007: A Wrap-Up
September 25th, 2007 Franchise Dreams Becoming Nightmares for Many Fitness Club Owners
September 12th, 2007 Will the REAL Butterfly Life Franchise Please Wave Its Wings?
May 10th, 2007 IS BUTTERFLY LIFE A GREAT FITNESS FRANCHISE?
WHAT DO YOU THINK? YOUR COMMENTS ARE APPRECIATED; YOUR INPUT IS VALUED.
Related Stories
POSTED IN: BUTTERFLY LIFE, xBuyer Beware
6 opinions for Fortune Article Spotlights Butterfly Life Franchise Woes
Butterfly Life’s Golob: Failed Franchise Owners Should Blame Themselves
Mar 2, 2008 at 6:18 pm
[…] (FranchisePick.Com) Related Reading:Fortune Article Spotlights Butterfly Life Franchise Woes […]
The Self-Fulfilling Prophecy of Small Business Failure
Mar 6, 2008 at 10:38 am
[…] Fortune Article Spotlights Butterfly Life Franchise Woes […]
In the Know
Mar 27, 2008 at 10:31 pm
The boys are back in town!! BFL is an exhibitor at the IFE(International Franchise Exhibition) Sean you are speaking there!! Please stop by to see that learned group. Have to go abroad now as sales in the US are….well what sales!
Mr. Golob in the last 12 months your company has been asked repeatedly to showcase a successful franchisee, not one just at breakeven or signing great numbers in 4 weeks because they took their own initiative and did not follow your model. We want someone who has been throughthe first year point of cancellations and is still ahead. We have seen nada.
You definitely have not addressed the 40% failure rate among your franchisees(yes Mark and Tom some people have been keeping count since 2004 even with your well crafted filings with the DOC, trust that is being addressed).
Franchise failure list is forthcoming.
The latest filing with the DOC is riddled with inaccuracies! Incorrect listings, some are listed as former and current all within the same time frame and only one location, incorrect or no contact information. Franchisees listed with the wrong location. And only the reporting of current closures no history! How could a prospective franchisee(foreign or domestic) do due diligence with the misinformation out there? Oh wait that is the point. They can’t!
Now that Mr. Golob through company dollars has settled his sexual harrassment suit he is public.
ALL of the franchisee failures are the zee’s fault.
Mark and Tom, why are you in this position, why overseas, why a 40%+ failure rate. Perhaps Mr. Golod to respond to your canned response of “the zee’s fault”, there was absolutely no qualification of prospective franchisees except “check cleared” Perhaps your intention was never to have a well qualified business, but just a well stocked bank account!
To the person at corporate who wants to “change a life every day” Trust me you have! In more ways than you can imagine. Culpibility rests with all who work in San Ramon. We have knowledge that certain persons at corporate have stated they “will not perjure themselves for the boys” That is nice to know.
Breathe
Mar 28, 2008 at 3:18 pm
In the know…. Are you saying that the people who are employed at BFL Coporate actually support M.G. and T.G. Yikes!
Fool me once
Apr 10, 2008 at 12:35 pm
Been gone for Easter…what a nice break. Where is everyone? Breathe, I don’t know if those at corporate morally support Mark and Tom, but I do know there was an email from Mark where he said that Janet and Denny would follow him anywhere because he brings them the money. If these two women are still there, I hope they can sleep at night knowing they are supporting scammers. They have been with him a long time and know what goes on behind closed doors. Look inside yourself ladies. You only have to answer to one person. You can’t run from your conscience. Ruining other peoples lives is not something I would want on my mind. I do know there were a few corporate people who had the morals, values and “testicles” to break away in the name of a guilty conscience.
sean
Apr 10, 2008 at 1:03 pm
Looks like Butterfly Life and Contours Express will both be recruiting new franchisees at the International Franchise Expo in Washington D.C. this weekend.
http://www.ifeinfo.com/exhibitorlist.cfm
Have an opinion? Leave a comment: