CNBC’s Untold Story or Sensational Journalism: You be the Judge!

Posted on by Paul Segreto

As most everyone in franchising is aware, CNBC recently aired a segment on franchising, Behind the Counter: The Untold Story of Franchising. Well, as I’ve stated on several franchise social media groups and blogs, from my perspective, I believe the show didn’t present any revelation as the title hinted. I don’t believe there was anything that even closely related to the untold story. To me it was just another shot at sensational journalism.

Anyway, all that being said, it did present Five Guys Burgers in a fantastic light. Actually, a bright spotlight within franchising. Maybe even perceived as the model for franchising to follow. Proctor and Gamble’s concepts Tide and Mr Clean looked good as well (to the public – see why below) and I think it will help open the public’s eyes that franchising is more than fastfood. I was happy to see the Dunkin Donuts segment shedding a nice light on minority involvement within franchising. Actually, even though I have spent many years working with Indian franchisees, I was not quite aware how deep franchising goes within the Indian community.

As for the other concepts discussed on the CNBC show, personally, I don’t believe they fared as well. In fairness to them, giving them each an opportunity to [continue to] release statements and present their side of the story, I’ll reserve my comments and thoughts at this time.

A mistake? CNBC issues clarification

Now, a few days since the show aired, CNBC posted a clarification (below) about statements made on the show by Bill Van Epps, CEO of the Proctor & Gamble franchise subsidiary that franchises Tide Dry Cleaners and Mr. Clean Car Washes.

CNBC posted, During an exchange in our documentary with Bill Van Epps, CEO of Agile Pursuits, Procter & Gamble’s wholly owned franchise subsidiary, Mr. Van Epps told us that P&G was basing its royalties on net sales, rather than gross sales. It has come to our attention that P&G’s definition of net sales is what other companies call gross sales. Our documentary calls into question the practices by franchisors and shows the viewer how, sometimes, the difference between the franchise business being a profitable one and a losing venture is in the details. We have removed that exchange from the documentary.

I would like to comment about CNBC’s clarification, which I might add, is conveniently buried on the bottom of the page, and looked to do so, only to find there is no place for comments. So, I’ll post it here.

What about the many viewers that heard the exchange, and/or will hear as they replay the show? This is a perfect case of not being able to put the toothpaste back in the tube. Am I to understand that a long-time franchise professional, Van Epps, didn’t understand the difference between gross and net, to the point that he seemed to jump at making that distinct differentiation between the P&G franchise brands and other franchise brands?

I can’t help think this may have been a strategic statement, but I’ll give Mr. Epps the benefit of the doubt and instead, say that he probably needs to read his disclosure document more closely. As for CNBC, shame on them for not verifying facts before airing the show. Another case in point the show was more sensational journalism than an untold story, and further clarification in my mind why CNBC did not include the International Franchise Association when doing their research for the show.

I have one more question… As franchising is a key component, and probably the cornerstone of small business in America and beyond, maybe a correspondent specializing in franchising and small business should have done the reporting, as opposed to a sports business reporter? But, the precedent has been established, so I may consider writing about my beloved Steelers or Celtics in the near future.


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15 thoughts on “CNBC’s Untold Story or Sensational Journalism: You be the Judge!”

  2. Paul, re whether the IAFD or IFA should have been consulted by CNBC, I would make two points.

    1. The IAFD should be consulted if there is a story about independent franchisee associations.

    2. The IFA represents franchisors, which is a perfectly fine trade association. But, no they are not the fount of all things franchising. No slur on what they do.

  3. Probably the first step would be to address government data. LOL – Good luck with that!

    Regardless of what one may or may not think about the IFA and its position, wouldn’t you agree the IFA AND the IAFD for that matter, should have been consulted for the Untold Story on Franchising?

  4. Michael, I am not sure if I agree the brokers are doing dirty work of franchisors as much as I believe many franchisors are just looking the other way. Nevertheless, I agree there is most likely many illegal earnings claims being made. Again, I believe it’s because most don’t understand disclosure rules, Item 19 provisions, their Item 19 AND how to correctly explain Item 19. Why don’t they understand? For most I believe it’s laziness in not taking the time to learn. For some I believe it’s the easy way. And, for the rest, I believe it’s just their nature to embellish, and yes, lie!

  5. Paul,the IFA should not put out this nonsense:
    ” Yet when you look at government data regarding small business survival rates on a large scale, the statistics consistently show that franchise-owned businesses have a greater likelihood of thriving over an extended period of time than independent small businesses.”

    We all know this is silly.

    The rest of piece is equally silly.

    For a franchise, that according to their 2010 FDD has 107 open, but 68 sold but not open,

    Click to access 005516369.PDF

    this should be a problem. The IFA should not be shilling for Camp Bow Wow by not representing this fact.

  6. Paul, everyone knows that brokers are doing the dirty work for most franchisors – making dubious if not illegal earnings claims.

    Franchisors think that the are protecting themselves with the acknowledgment waivers.

    Not happening – just more costly legal bills for the franchisor who outsourced their sales without taking responsibility for it.

  7. Michael, I believe there are many things we have yet to discuss about the CNBC documentary. All very important. Especially in the realm of franchise best practices. As for Camp Bow Wow’s Item 19 claim, maybe we should ask them to explain as anything I say would be strictly based on assumption.

    But, your question does bring about the thought (probably the necessity) of further discussion about Item 19. I wonder how many franchisors actually know and understand their Item 19? And, I wonder how many franchisors actually know and understand how to correctly (and legally) convey Item 19 to franchise candidates? Even further, I wonder how many franchise brokers and franchise consultants can positively answer the same questions above for each of the brands they represent?

  8. Paul, you missed the critical observation about earnings 19 claim. Camp Bow Wow uses SBA loan preparers, and yet has a totally inadequate item 19 for a bank to loan against. Where did the bank get the necessary financial projections to fund the loan?

  9. Les, I do have an economic bias that favors quality franchising. I think franchising done well, is a terrific distribution model. I am also committed to the promotion of franchising best practices. Happy holidays to you and yours.

  12. Oops sorry I thought the youtube clip of the CNBC exec was referenced in your post but it’s actually the related post “CNBC’s B… Exposed” below yours…

  15. Paul-

    I share many of your concerns about the CNBC special – particularly their misleading discussion around Item-19s.

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