WE INVITE INDIVIDUALS WHO ARE CONSIDERING AN INVESTMENT IN AN MTY FRANCHISE TO CONTACT US AT THIS EMAIL ADDRESS. WE ARE HAPPY TO RESPOND TO YOUR QUESTIONS TO AVOID PUTTING YOU AND YOUR FAMILY AT FINANCIAL RISK. WE ALSO REGULARLY DISTRIBUTE A FREE NEWSLETTER TO A GROUP OF APPROXIMATELY 2,000 MTY FRANCHISEES. WE ONLY NEED YOUR EMAIL ADDRESS TO ADD YOU TO THE MAILING LIST.
CURRENT AND FORMER MTY FRANCHISEES WHO WOULD LIKE TO SPEAK WITH A REPORTER FROM ONE OF THE LEADING AND MOST RECOGNIZABLE FINANCE PUBLICATIONS ABOUT THEIR FRANCHISING EXPERIENCE SHOULD ALSO CONTACT US.
Franchisees are required to deny MTY’s false & misleading statements
Updated February 14, 2022
MTY wants potential franchise investors to believe it places a priority on franchisee success. However, as demonstrated throughout this website, the reality is that MTY knowingly uses kickbacks to target franchisee earnings and savings, which leads them to suffer severe financial problems. MTY publishes a large volume of false and misleading statements to its website used to recruit franchisees (here, here, here, here, here and here) to give the impression the company offers “low-risk, high-reward” franchises that result in an “incredible opportunity for profit”. However, its franchise agreements contain warnings that may be considered legal cover for other franchisors, but should be considered as a far more likely outcome for potential MTY franchise investors.
For example, in recent MTY FDD’s, the company admits its investment opportunities are a “speculative risk” (PDF pg. 15) and pose “substantial business risks” (PDF pg. 232). MTY’s FDD’s also “expressly disclaim” making the many false and misleading statements posted to its own website by requiring franchisees to “acknowledge that you have not received or relied on, any warranty or guarantee, express or implied, as to the potential volume, profits, or success” of the franchise (PDF pg. 232). The franchisee must also “certify” that no person has made such claims on MTY’s behalf. Therefore, on one hand, MTY publishes false and misleading statements intended to induce investors, and on the other hand, the company requires franchisees to falsely certify they haven’t read the false statements.
Even the investor’s family (spouse) that had no ownership in the business may be unable to escape liability for a failed franchise putting the family home at risk (PDF pg. 4) because MTY states as follows.
- Your spouse must sign a document that makes your spouse liable for all financial obligations under the franchise agreement even though your spouse has no ownership interest in the franchise. This guarantee will place both your and your spouse’s marital and personal assets, perhaps including your house, at risk if your franchise fails.
Given MTY’s high failure rate, franchisees should consider that the risk associated with an MTY franchise doesn’t end when the business closes. MTY acknowledges some of these risks (PDF pg. 59) in the following statement.
- You understand and agree that ownership of a franchise and the Franchised Business carries certain risks. These risks include the loss of your initial investment, other continued financial losses such as rent payments due under lease obligations and other contractual obligations, the loss of your time and energy in starting up and running your Franchised Business, and loss of earnings and investment income from your investment in the Franchised Business. You understand and agree that the Franchised Business may make money and may lose money and are entering this business venture with this express understanding. You are not relying upon anything which is not contained within this Agreement or the Disclosure Document in determining and deciding to become a franchisee.
Kickback schemes have been known to cause massive franchise closures in a relatively short time. MTY has complete control over its kickbacks and, despite that franchisees despise them, MTY continues to increase kickbacks. In addition, similar to the Quiznos collapse, MTY is aware that its franchise network is already collapsing. Yet, despite the uncontestable control MTY has over kickbacks and the rising closure rate they are causing, the company claims that the franchisee’s success “will largely depend upon your ability” (PDF pg. 59).
Kickbacks take the success controls from the franchisee and put them in the exclusive hands of the franchisor. A franchisee can work as hard as physically possible and generate a record volume of sales, but cannot overcome an irresponsible franchisor’s kickbacks. Thus, MTY’s franchisees’ success depends on MTY ending its kickback scheme and, as a result, the franchisees are at the mercy of Stanley Ma and his $214M cash grab.
Finally, franchisees should know that MTY’s FDD’s include the following statement (PDF pg. 303).
- Based upon the franchisor’s financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement.
On one hand, MTY requires that franchisees risk all family assets if the franchise fails. On the other hand, the company is engaged in a kickback scheme that substantially increases the likelihood of failure. As a reminder, this all resulted in a $214M increase in Chairman Stanley Ma’s already substantial wealth during the pandemic alone. This suggests that the chairman nor the board members are fulfilling their corporate obligations and therefore may be liable for damages.