EmbroidMe

I am so disappointed the work I had done at my local store was so bad it ruined my daughter's stocking for her first Christmas that was a gift from her great grandma. When I asked for a refund or to have it fixed, not only did the owner refused, he was rude and said there was nothing he could do about it and he was not in the habit of giving refunds. I am not in the habit of paying for shoddy work that I could do better myself. Something that was meant to be a lifetime heirloom is only meant for the trash. 60 dollars down the drain but far more in sentimental value.

EmbroidMe knowingly misrepresented the amount of capital required during our investigation phase. Current documents show estimated capital requirements being nearly four times what was represented to us upon our discovery. EmbroidMe also over exaggerates estimated first year revenue. Their training manual and discovery documents suggested first year sales should be in the neighborhood of $320,000. EmbroidMe rushes prospective new owners into their start up class, suggesting new stores will be open and ready for business almost immediately after returning from their two-week training session in Florida. I was rushed into training in October of 2005, with a commitment from EmbroidMe to have our store open in November, well before the holidays. Our store was not ready for occupation until early February 2006. Using their own numbers, EmbroidMe caused us a loss of $42,500 in sales, which was a loss in earnings of at least $12,750.

EmbroidMe sets new owners up in class A retail space. This space gives the EmbroidMe store very high visibility, but is extremely costly. EmbroidMe uses this model to promote their brand awareness over the cost effectiveness for the store owner. At a cost of over $3,000/month, the EmbroidMe model actually cost us, and every other owner, current and past, well over $65,000 over the course of our three year run. EmbroidMe saddles the owners with an equipment package that is overly excessive and costly. I fully understand the franchisor benefits from this arrangement with Brother International and it is good business for them. My issue is this is another example of how their model is so one sided to their benefit, making success for the franchisee almost impossible. New stores do not need the amount or caliber of equipment provided. Now that I am in the industry, I am aware that equipment can be sourced at 20% to 30% of the cost of that issued by the franchisee. On an equipment lease of $150,000, my buyout in April of 2009 was still above $100,000. I had paid Brother International over $100,000 during our three-year run of owning our store, and still owed over $100,000. This for an equivalent equipment package that could be purchased for under $50,000.

EmbroidMe tells its owners that they are getting the best prices in the market place from vendors. The truth is that most, if not all of EmbroidMe's Medallion vendors, actually pay EmbroidMe a percentage of sales to be promoted to new owners. The net effect of this program is that EmbroidMe gains the benefit from owners using their suppliers and that, as an owner of a franchise of the supposed market leader, we got the same pricing as most any company that has an ASI#. I have an example of a new screen printer, with absolutely no credit history or purchasing power, getting the exact same pricing as EmbroidMe stores.

EmbroidMe charges owners a royalty fee which is split between a National Marketing fund and fees back to the franchise. As an owner, I was told that some of the resources we could expect in return for the royalty were field support and a fully operational Point of Sale software package. A package that, by the way, I also paid a $50 per month license fee. The quality of the field support was laughable and well renown in the industry. Many of the field support staff had no ability or experience in our industry and certainly little to no business experience. The only two things you could count on was a monthly call to retrieve store sales and an annual visit that only served as a check off to a requirement in the franchise agreement. These personnel added no value to the owners. The point of sale software when I started in 2006, FAS manager, was almost unusable. An initial upgrade to a program called EME Boss was an improvement. There were however major holes that an upgrade promised to repair. The promised repair was well over a year in delivery, not arriving until after we closed our doors in April 2009.

EmbroidMe corporate personnel are trained to educate owners in need of operating capital to take advantage of a little known loop hole in the IRA tax laws. Funds can be pulled out of an IRA or 401K and deposited into a C corporation tax free, as long as they are re-deposited back into the 401K fund at the time the business is sold or closed. I believe this practice takes unfair advantage of owners that still believe the EmbroidMe model is going to produce a profitable business, one that in any case, will hold some value at a point in time. I believe this is an irresponsible practice in light of the fact that most stores either close outright or are sold with a fire sale mentality. They know that store owners are not building wealth, but if these funds are accessed, the doors stay open a little longer, thereby ensuring royalties and other fees are paid for a longer period of time. Personally, I lost the entire value of my $450,000 401K plan, with the thought that at least some of it would be recovered upon sale of our business.

In February of 2008, I contacted corporate EmbroidMe, Ray *, regional VP, to let him know we needed to pursue the sale of our business. Even though our 2007 sales exceeded $500,000, the overhead in place, the cash flow needed and the labor and effort involved to do that much volume showed me that this was not going to be viable long term for my family. EmbroidMe corporate, in response to my request, added me to their Franchise Advisory Council and invited me to a corporate meeting in April of 2008. My attendance at that meeting confirmed my concerns. Even after only two years, our sales volume was one of the highest in the country and in private conversations with other owners, I confirmed that the model was succeeding only were a family had a separate primary income source, and the store itself was not looked upon to support a family. At best, this might be a decent second income.

After several months of little to no activity regarding potential new ownership, as well as several changes in regional corporate representation, it became clear that we would in fact have to close our doors. We continued to operate the business in good faith, generating sales of over $600,000 in 2008. I began laying off employees and attempting to renegotiate building and equipment lease payments. On the few occasions prospective new owners were brought into the store, an issue that had been a problem for me all during my relationship with EmbroidMe surfaced once again. I was told directly by Regional Vice President Tom F. to misrepresent the facts regarding the financial details of the business. Either by not discussing certain issues like cash needs or operating profit, or to simply ignore specific questions. This was a practice witnessed many times by myself and my key employees over the years when Pete *, Mike * or Tom * brought prospective new owners through our store. This is a practice that most any store owner current or past will verify.

In October 2009, I received a letter from Brother International asking for $17,000 in payment to resolve our lease. In that letter was a list of items listed as not received by EmbroidMe at the end of our relationship. The list was fraught with errors showing once again the attention to detail is not shown by your corporation. Ex-UFG employees started a new business, Financial Advisors, Inc., for the purpose of settling franchisee/franchisor disputes without the use of legal representation. The company has a stated advantage of settling disputes outside of the law, thereby allowing the franchisor to avoid listing the disputes in their disclosure documentation.

My story is typical of results echoed by most owners, past and present. Store closure rates are among the highest in the franchise industry. Most of us have lost our life savings, leave with serious debt. In my case, well over $500,000 has been last forever. Mostly we are upset with the fact that UFG knowingly continues to push a business model that is not positive for the owners. Day to day operating profit is not there and resales are typically fire sales. Even in our case where our top line sales were among the highest in the country. This industry can be profitable under different models, I have shown that myself since leaving the franchise.