Misinformation About Franchisors and Bankruptcy (Updated)

Recently, I pointed out to the franchise community, an article on About.com about franchisors and bankruptcy. Having worked with a franchisor that was forced into bankruptcy, I knew the article was way off-base, the alleged facts entirely inaccurate, and the suggestions directed at franchisees alarming to say the least. I knew I could not sit back with a clear conscience thinking that franchisees may act on this misinformation.

Since then, Dan Daszkowski, the person listed as the author of the article, “How to Prepare for Franchisor’s Bankruptcy” contacted me and explained his position in the matter…

“Hi Paul, Thanks for pointing this out to me. This was totally my fault because I hired a writer that I felt was knowledgeable in this area to write this article and blog post and they obviously were not.

As an About.com Guide I am able to hire subcontractors to write and I only do this from time to time when I feel someone is more qualified than I am to cover a certain topic. Obviously I made a bad judgment call with this writer and I am glad you pointed it out. I have taken down the article and blog post to avoid any further confusion and so I do not mislead any franchisees that are currently in this situation.

I understand your frustration but I think you took it a little far in your blog post “Read Mr. Daszkowski’s bio and tell me if you believe he has the experience and knowledge to render legal advice about franchising, bankruptcy or about anything!” I have deleted the incorrect information from About.com and it would be great if you can delete this post as well. I am fully aware I do not have the experience to give legal advice but the rest just seems like a personal attack…”

Well, here’s my response to Mr. Daszkowski:

My only goal in writing my post was to point out and emphasize the misinformation provided in your article. As information published on the internet has the capability, if not probability, of lasting forever, I wanted to be certain there was no mistake the information provided in the article was inaccurate and that you could not possibly be mistaken for an attorney.

You stated to me that you felt I took the issue a little too far and personally attacked you. I am sorry that you feel that way but I do not regret my actions and statements as they were obviously instrumental in addressing inaccurate information and unwarranted advice that could have been catastrophic to any franchise system facing bankruptcy.

Speaking from experience, I have seen franchisees blindly follow similarly wrong advice as provided in your article only to be ordered by the United States Bankruptcy Judge to remit all withheld royalty payments to the franchisor within five days of his decision. Unfortunately, many of the franchisees had “spent” the monies that should have been earmarked for [eight months] royalties causing a near-catastrophic series of events as they had to come up with thousands of dollars they no longer had in their possession. The potential consequence for not abiding by the order: contempt of court and possible jail time!

When all was said and done, the franchise system unraveled and franchisees that may have survived, even as independents, ended up out of business or ironically, in bankruptcy. As for the brand and trademark, as well as the franchise agreements, as I recall, they were considered assets of the franchisor, and subsequently within the jurisdiction of the Bankruptcy Trustee.

So, [Mr. Daszkowski] thank you for pulling down the article to avoid any further confusion and to prevent franchisees that are currently in a bankruptcy situation from being misled.


Paul Segreto

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4 thoughts on “Misinformation About Franchisors and Bankruptcy (Updated)

  1. I didn’t see the original article, but I concur with your analysis – don’t stop remitting your royalties just because the franchisor is in bankruptcy.

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