PIRTEK USA & The Need for Franchise Transparency

The FTC intended The Franchise Rule to ensure that prospective franchise owners have access to information, the experiences and the opinions of former franchise owners.  Today, thanks to NDAS, mandatory arbitration & a lack of federal franchising oversight, franchisors can create provide Kumbaya-like images of their franchisee-franchisor relationship while franchisees are prohibited from sharing their opinions… or the truth.

(Franbest.Com)  PIRTEK USA is hyping their milestone of having doubled its number of franchise locations since the Australian corporate parent took over in 2015.

Their press release states:

A growing customer base has prompted PIRTEK franchisees, Tom and Julie Fechter to open their second hydraulic and industrial hose service and supply center in Wisconsin. The new store, PIRTEK Racine, marks a significant milestone. It is the 100th franchise to sign on with PIRTEK USA in the US. The company announced the signing of the franchise agreement for Tom and Julie’s store in December [2020]. This achieved a goal established by the brand to reach 100 franchises by the end of 2020.

The Fechters’ flagship store, PIRTEK Menomonee Falls, was also notable for PIRTEK USA as it was their 50th US location.

The previous owner of PIRTEK USA grew the system to 50 locations over a span of about 18 years.

Glenn Duncan accelerated that growth, opening the next 50 locations in just 5 years.

PIRTEK’s  Glenn  Duncan  Doesn’t  Want  to  [Appear to]  Grow Too Fast

In 2015, Duncan claimed he wanted to be careful not to grow too fast.  In a Financial Review article, Glenn Duncan stated:

“I think the biggest challenge is not letting it run away on us, and getting clouded by expansion and the blue sky that’s out there,” he says.

It’s just keeping the reins on the growth, because when we set up a centre, we don’t want it to fail…”

One thing is for certain:  Glenn Duncan & CEO Kim Gubera are dedicated to creating the impression that their relationship with franchisees is a conflict-free love fest… and that they’ve had NO failures… even though they have.

How  PIRTEK  USA  –  Like  Other  Franchisors  –  Hide  Complaints  from  Prospective Franchisees

The PIRTEK USA franchise agreement requires that all franchisee disputes be resolved through binding arbitration via the AAA in Orlando, Florida using an arbitrator with at least 5 years of franchise law experience.  Arbitration provides not only a strong legal advantage for the franchisor, it is a private proceeding that helps keep the nature of the dispute and allegations away from the public and prospective franchisees.

Additionally, the PIRTEK USA FDD tells prospective franchisees:

Franchisees have signed confidentiality clauses during the last three fiscal years. In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experience with Pirtek USA, LLC.

You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you.

The PIRTEK USA FDD also states:

Exhibit 4 lists the name, city and state, and business telephone number (or, if unknown, the last known home telephone number)  of every franchisee who had an outlet terminated, cancelled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under a  Franchise Agreement during the most recently completed fiscal year, or who has not communicated with us within 10 weeks of the effective date of the Disclosure Document.

As you’ll see, this latter statement does not appear to be true.

While CEO Kim Gubera publicly describes the PIRTEK USA franchise system as a virtual lovefest with ZERO franchise closures in 2020, we have reason to suspect that they’ve failed to disclose material facts in order to further that image.

Kim  Gubera’s  portrayal  of  PIRTEK  USA’s  COVID  support

In November, 2020, Franchise Times featured PIRTEK USA CEO Kim Gubera in a glowing tribute titled “Education, Mentors Fueled Rise of PIRTEK CEO.”

Kim Gubera painted an old-fashioned, Pollyanna picture of herself and the PIRTEK support team stopping at nothing to make the PIRTEK franchisees feel loved and listened to.

Kim Gubera said:

When COVID-19 hit, “We called every one of our franchise owners every single day for eight weeks. We made 2,200 phone calls. During that time, people wanted to talk to people…”

…fortunately we have not had any closures”…

Anonymous sources confirm that, yes, PIRTEK USA regional managers, operations managers and even Kim Gubera called their centers daily.

And they claim that, at first, it was helpful.  There was good information imparted about resources and aid available.

However, after a while the daily calls with the same questions and nothing new to report got routine, and then annoying. According to one anonymous source:

After a while it seemed like someone from above had mandated it so the franchise sales people could say ‘See how caring we are?  We called every day for 8 weeks!

And another:

With PUSA, sooner or later it always comes back to selling more franchises.  That’s the priority.

And what about Kim Gubera’s claim that there were NO franchise closures in 2020?

“We  Have  Not  Had  Any  Closures…”  PIRTEK  CEO  Kim  Gubera

Leading franchise watchdog site UnhappyFranchisee.Com has called Gubera’s claim into question in a new post:

PIRTEK USA CEO Kim Gubera Claim of No Closures in 2020 Questioned

What happened to PIRTEK Bronx & franchisee Asim Iqbal?

In Fall, 2019 PIRTEK issued press releases and a PR blitz heralding its first franchise location in New York.

As of January 8, 2020, franchisee Asim Iqbal’s Bronx location was listed on the PIRTEK website.

By April 14, 2020 the only PIRTEK location in New York had been deleted from the list.

The press release was deleted from the website as well.

The 2021 PIRTEK FDD would list Asim Iqbal as having left the system during 2020.

It stated:  “Reason for Leaving: Voluntary abandonment”

Not a closure?  Voluntary abandonment?

PIRTEK USA franchise

Follow Up Post Cites Possible Closures in California, Arizona, Texas & Virginia

In this follow-up post,

PIRTEK USA, Glenn Duncan Asked About 2020 Franchise Closures questions PIRTEK Chairman Glenn Duncan regarding closures of the following locations:

  • Long Beach / Signal Hill, California (Franchisees Paul Martin & Marian Martin)
  • Palos Verde / Tucson, Arizona (Franchisees Jeff Ohstrom & Debra Ohstrom)
  • Dallas & Fort Worth (Meacham), Texas (Franchisee Jim Lager)
  • Bronx, New York, New York  (Franchisee Asim Iqbal)

Is  PIRTEK  Disclosing  Failed Franchisees as Required?

Unfortunately, sometimes prospective franchisees cannot rely on franchisor’s representations – even those disclosed in the FDD – without their own detective work and independent due dilligence.

The Federal Trade Commission Franchise Rule Compliance guide states:

Item 20 of the amended Rule requires the disclosure of contact information for every franchisees who has had an outlet terminated, canceled, not renewed, or otherwise voluntarily or
involuntarily ceased to do business under the franchise agreement during the most recently completed fiscal year…

The FTC intended for prospective franchisees to communicate with recent franchisees who left the system.

In PIRTEK USA’s case, contact information for these franchisees are not listed:

  • Asim Iqbal
  • Jeff Ohstrom & Debra Ohstrom
  • Paul Martin & Marian Martin

Perhaps that doesn’t much matter, since “former franchisees sign provisions restricting their ability to speak openly about their experience with Pirtek USA, LLC” anyway.

So for the time being, prospective franchisees must be super sleuths… or hire one to do proper due diligence for them.


7-Eleven Asset Protection Under Fire

The website UnhappyFranchisee.Com reports that the 7-Eleven Asset Protection Department is under fire.

7-ElevenThe post 7-ELEVEN Bombshell: Insider Accuses 7-11 of Predatory Franchise Practices,   states that “Former 7-Eleven Corporate Investigations Supervisor Kurt McCord has dropped a bombshell in the lawsuit of 7-Eleven, Inc. v. Karamjeet Sodhi, et. al., alleging that the convenience store giant has a covert team designed to illegally seize franchisee stores for profit and to eliminate respected franchisee association leaders they deem to be a ‘pain in the ass.'”

The “Bombshell” alluded to is the Declaration of 7-Eleven whistleblower Kurt McCord, a loss prevention professional  who served as 7-Eleven’s Corporate Investigations Supervisor for 7-Eleven, Inc. in 2013.

Read his damning tell-all statement here: Certification of Kurt McCord

Read the law firm’s complaint regarding alleged stonewalling by 7-Eleven, Inc.:  Letter to Judge Schneider

Things are really heating up in the war between 7-Eleven, Inc. and its franchisees.

It sure doesn’t look like it’s going to be subsiding anytime soon!

What do you think?  Has 7-Eleven asset protection finally gone too far?


What to Look For in a Franchise

In the long run, there are many criteria to consider when evaluating a franchise opportunity. But initially there are just three main questions I ask in order to determine whether a given opportunity warrants further investigation. In attending a Discovery Day, I want to know:

Is this the right market to get into?

It doesn’t matter if a franchise has the greatest products or services in the world if consumers aren’t ready, willing and able to buy. Are industry sales growing? If so, do credible sources predict that growth will continue? This was one of my main concerns about the Hand & Stone Massage concept: Isn’t massage one of those luxury items that gets cut in recessionary times?

Is this the right concept to meet the market need?

If you determine that there is a market need, then ask: Is this concept designed to meet the needs of both the consumer and you – the operator? The best franchise concepts are streamlined for both operational efficiency and profitability. They are designed to provide value and a superior experience for your customer, and growth through multiple revenue streams for you.

Is this the right management and support team to guide my growth… now and in the future?

This is a critical consideration for several reasons. When you purchase a franchise you are agreeing to follow the systems and policies set forth by the franchisor for the duration of your franchise contract. For that reason, it’s critically important that you are confident that the leadership team has both the experience and judgement to make the right strategic decisions, and that they are truly committed to franchisee success. Additionally, you should consider the franchise fees and royalties you will pay as fees for services rendered and evaluate them on that basis. Does this management team have the experience and expertise to provide value to your business not only in the start-up phase, but on an ongoing basis? Can they provide benefit in excess of the monetary contributions you will make?

NEXT: Part 2: The Booming Market for Massage & Facials

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How the Hand & Stone Franchise Meets the Market Need

Meeting the market need for affordable massage & facials.

So how does Hand & Stone Massage & Facial Spa meet the growing demand for massage, spa and skin care services?

According to presenter and VP Bob McQuillan, the strategy is based on a simple premise: provide a wide range of top quality spa services – therapeutic massage, facials & waxing – at affordable prices and unmatched convenience.

Previous: Part 2: The Booming Market for Massage & Facials

Hand & Stone Massage & Facial Spa locations provide a varied menu of quality massage options, from Sports to Swedish to Pre-natal massage. The signature hot stone massage is Hand & Stone’s ultimate massage experience. In a hot stone massage, heated river stones are skillfully used with massage strokes to add a unique and effective enhancement to the overall massage experience.

Facials and skin care are relatively new additions to the service offering. At Hand & Stone Massage & Facial Spas, certified aestheticians evaluate the condition of clients’ skin and customize treatments for optimal results. Clients can experience a dramatic difference in the quality and texture of their skin after just one visit, and can return for a variety of facials to accommodate needs ranging from basic skin maintenance to acne, rosacea, sun damage, scarring or aging.

The pricing and scheduling system for the Hand & Stone Massage & Facial Spa is designed to provide convenience and value to the spa members and operational simplicity and recurring, predictable revenue flow for franchise owners.

Once new clients experience Hand & Stone through an attractive, introductory offer, they are encouraged to join the membership program, allowing clients to enjoy a 35% savings on spa service packages each month.

While scheduling in advance is recommended, members are welcome to visit on a walk-in basis to better accommodate their busy schedules and to increase their visit frequency. During the Discovery Day presentation, it was clear that there are many strategies and elements built into the system that simultaneously enhanced the health of Hand & Stone Spa members and the financial health of each individual franchise.

In addition, the marketing team has done a great job developing the Hand & Stone gift card program and using industry exclusive promotions like Hand and Stone’s new Spa Party concept to drive new customer traffic.

Next: Part 4: The Powerhouse Team Behind Hand & Stone Massage


The Booming Market for Massage & Facials

The market for massage & spa services is surprisingly huge… and growing.

You may be surprised (as I was) that despite these tough economic times the demand is booming… and strong, continued growth is projected. No longer considered a luxury reserved for the affluent or the splurging vacationer, massage and related spa services have gone mainstream.

Previous: Part 1: What to Look For in a Franchise

According to industry statistics provided in Discovery Day (and which I independently verified), massage is now a $12 billion industry, and has experienced a 15% compound annual growth rate over the past three years. An estimated 24% of all US adults had a massage in the past year. 32 million active spa-goers made 138 million spa visits last year alone

Fueling industry growth is the use of massage for health and wellness reasons, in addition to enjoyment alone. According to industry sources, 85% of consumers believe massage is beneficial to health and wellness. Of the people who had at least one massage in the last five years, 31 percent report they did so for health conditions such as pain management, injury rehabilitation, migraine control, or overall wellness.

According to a recent survey, 13% of adult Americans reported discussing massage therapy with their doctors or healthcare providers. Of those 13%, more than half (57%) said their doctor strongly recommended or encouraged it. More than half of massage therapists (69%) receive referrals from healthcare professionals. Almost one-fourth of adult Americans say they’ve used massage therapy at least one time for pain relief.

According to statistics cited at Hand & Stone’s Discovery Day presentation, as long as your physician prescribes it, 74% of HMOs are now reimbursing their members for massages.

The market for Hand & Stone Massage & Facial Spa also includes skin care, which has an even more compelling story. The skin care industry achieved $18.7 billion in revenue in 2007 and is projected to grow 40% by 2012.

Sources: American Spa Industry Insider, August 2009; Massage Magazine Buyer’s Guide 2009 – AMTA Study; Spa Finder Survey 2009; 2009 U.S. ISPA Industry Update

Next: Part 3: How Hand & Stone Meets the Market Need