Showhomes

Showhomes Franchise Corporation and for-sale Showhomes franchise owners have a vested interest in refuting or deflecting posts like the above complaint... instead of acknowledging the issue, whether it is an allegation of unethical and deceptive business practices, or fraud, and then committing to a change in behavior.

Indeed, let's set the record straight:

1. None of the Tampa area Showhomes franchises are doing well based on their P&Ls. None. One owner said that last year she had a 'profit of just $4,000' before taking a penny out to pay herself.

2. Nationally, Showhomes' August 2012 gross revenues from all their franchise territories was 9% lower than from a year ago.

3. Showhomes Franchise Corporation charges an industry high 10% royalty tax every month based on a territory's gross monthly revenues. AND they also mandate an additional 2% of gross for an advertising fee, another 2% of gross for insurances, and they debit you for the cost of their annual meeting whether you attend or not. Altogether, this comes to about 15% of each franchisee's gross revenue being shipped off to Showhomes Franchise Corporation. For many furniture staging jobs, 15% is your total profit margin.

4. Showhomes Franchise Corporation requires minimum royalty payments of about $800 per month from each new territory sold. In other words, each territory owner has to gross $8,000/month in order not to be hit by a 'higher than 10%' royalty rate for that month, which I already mentioned is the industry high royalty rate. Here's the kicker: the average gross monthly income per Showhomes territory through August 2012 was under $5,000/month. If we can assume Showhomes Franchise Corporation has a trackable business model with contractual consistency across all their newer territories, then it appears that the majority of Showhomes territories are not making minimums and are in fact, in trouble financially.

5. Since Showhomes Franchise Corporation started in 2003, the failure/dropout rate for new Showhomes franchisees has been high, yet the corporation seems unaffected. Why? The answer is the franchisor doesn't realize a penalty for failed territories, only the franchisee does. In fact, the Showhomes franchisor can theoretically make more money if new owners fail and he resells the territory before their third anniversary. Assume a new territory does better than average and grosses $8,000/month for 3 straight years, and then goes under. $800/month x 12 months/yr x 3yrs = $28,800, which is the amount in just royalty payments sent to Corporate. Showhomes Franchise Corporation sold territories in 2011-12 for between $30,000 and $44,000. Clearly, 28,800 is less than the sale/resale revenue from flipping the same territory over and over again within every three year period. It's even more profitable for the franchisor if new franchise owners fail before their second anniversary. This is indeed happening.

Ergo there is a growing motivation to 'sell' if you are a current Showhomes franchise owner, and just as strong a motivation to preempt any issues brought up by 'rock the boaters' until yours actually sells.

Back to the original point of this thread: Bcack confirms that Showhomes Franchise Corporation pays its current franchisees $10,000 to help them sell 'territories'. For a non-insignificant number of Showhomes franchise owners, this is more than the profit they earn working the business in a year. Buyers think they are getting critical decision-making information about the business model before they buy, not a sales pitch made by what are essentially people who are an extension of the corporate sales team. He does not deny the fact this payoff is not disclosed to potential Showhomes franchise buyers. He offers no acknowledgement that this is improper. Bcack instead places the blame on the newbie using a peculiarly twisted logic. He accuses prospective Showhomes franchise buyers (buyers who aren't aware that Showhomes Franchise Corporation pays off current franchisees to help them make a franchise sale) of not doing 'proper due diligence' to miraculously uncover this practice.

@Bcack - putting this Showhomes business practice on "Pissedconsumer.com" will make it infinitely easier for prospective Showhomes buyers to find out about it because they sure aren't being told by Showhomes. Getting paid a referral fee is not illegal, but being on the take and not disclosing it is clearly unethical and a deceptive business practice because of the role you play in getting/closing the sale. Being better informed about who is giving you advice and their background/motivation I think is important. That's the whole purpose of me fully disclosing this practice on this and other consumer protection forums on the World Wide Web.

Let's set the record straight. The $10,000 is a referral fee paid to a franchisee that refers an individual that eventually purchases a Showhomes territory.

Due diligence requires that as many people as possible should be contacted regarding the franchise especially the ones near the territory being considered. To suggest that everyone that you contact will give you misleading information and be unethical is ridiculous.

This is obviously a case of someone who did not do enough or the proper due dilgence. Deceptive/unethical business practices as an excuse for ones own failings does not hold water.