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(FranchisePick.Com) Despite the fact that Brooke Insurance operates in two of the nation’s most litigious sectors, Insurance and Franchising, they confidently make bold franchise sales claims others avoid. Is the Brooke Insurance franchise really that good?
Other than the bogus franchise vs. independent survival rate statistics that have been bandied about for the past two decades, most franchise companies avoid (at least publicly) discussing “success rates” with prospective franchise owners for a number of reasons. For starters, the term “success” means different things to different people. A franchisor may define “success” as not having closed their doors, or having reached break-even, whereas a franchisee may define success as a 15% or greater return than if they had plunked their money into a low risk or risk free investment, or being able to retire early. Another reason they avoid citing “success rates” is that the FTC and many states agencies explicitly prohibit franchisors from making statements to prospective franchisees that could be construed as promises of success. Citing a 90% success rate could certainly be taken as an indication that the odds for a given franchisee’s success is 9:1 in their favor.
Brooke Franchising Touts High Franchise Success Rate
Those concerns don’t seem to faze rapidly growing Brooke Franchising, Corp., which boasts an 80% – 90% success rate on its website:
The Brooke Startup Franchise Program is an important first step in ultimate business success. Our experience indicates that 80 to 90 percent of those who graduate from Brooke’s eight month startup program will ultimately become successful business owners. Those who survive the eight month startup program have demonstrated they have the right personality to succeed as a sales professional franchisee. Therefore, we believe the most important indicator of business success is the graduation, or success, rate of those in the Brooke Startup Franchise Program.
Most franchisors also avoid making “earnings claims” outside of the required format of Item 19 of the Uniform Franchise Offering Circular (UFOC). Brooke Franchising, Corp. openly posts expected initial revenues on their website as well:
…Startup success rates are determined based on franchisees achieving $4,000 in monthly commissions during the startup program period (or $1,500 in monthly commissions with good prospects to reach $4,000 with a three month extension). Although this commission threshold amount is relatively modest, it must be achieved while setting up an office, completing training and initiating insurance company relationships. Most importantly, by meeting this commission threshold amount, the franchisee has a revenue base from future renewal commissions.
Brooke Franchising: Aggressive Marketing, Unprecedented Growth.
According to the Kansas City Star, Brooke Corp.’s network of more than 800 insurance agencies appears to be headed for its first $1 billion premium year:
Based on the Overland Park financial services franchiser’s record $10.5 million share of those agencies’ premiums last month, “if September’s results continue for the next 11 months, we’ll reach that milestone,” said Kyle Garst, chief executive of the company’s franchising subsidiary, Brooke Franchise Corp….
Brooke executives think that continued expansion of the network, to an expected 1,000 locations, plus aggressive sales by agents will offset the industry trend, Garst said.
Confident Claims or Fraudulent Misrepresentation?
Since 2000, Brooke Corp. has had 12 franchise-related lawsuits filed against the company. According to a recent story in the Insurance Journal, ”Brooke Corp. was recently named in a lawsuit that alleges the company participated in fraud, negligence and violated the federal RICO Act (Racketeer Influenced and Corrupt Organizations Act).”
In the suit, Florida franchisee Arthur Mann alleges that Brooke intentionally misrepresented the yearly agency commissions and failed to fulfill its contractual obligations, among other problems. In the Insurance Journal article, Mann’s Attorney Brett C. Coonrod states that his client’s complaints aren’t isolated:
“My client’s claims are typical of other Brooke franchisees that I have represented and I believe that there are fundamental problems with Brooke’s accounting processes and its business model insofar as that model relates to the treatment of its agents.”
A related article cites claims from Brooke agents that the company and some of its franchising, lending and consulting subsidiaries misrepresented the profitability of the franchises Brooke sold, overbilled its franchisees for support services the company provided, and withheld income from agents.
Brooke founder and Chairman Robert Orr counters that franchisees are given ample opportunity to weigh the potential costs of doing business before they decide whether or not to buy in. Says Orr: “In my opinion, most of the people who are yelling now just aren’t that good handling money.”
WHAT DO YOU THINK? ARE YOU FAMILIAR WITH THE BROOKE INSURANCE FRANCHISE OPPORTUNITY? SHARE YOUR OPINION; LEAVE A COMMENT.
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PS Correction last paragraph is “unviable franchises” not “franchisors” —–Sorry about that?
And what happens to the end consumer? Does a re-insurer take over under state laws when the provider of the insurance goes bankrupt?
Apparently, the problems of the Brooke Franchisor are in full bloom and the Bankruptcy Court is trying to straighten things out, as of this date. Not a lot of money there for anyone, evidently, and this poses great problems for the bankruptcy judges and referees.
Apparently, the commissions of the agents (the franchisees) were held up because of claims by investors (the investor’s banks) that monies owned them under the securitisation agreements were not being paid.
The servicer, the Franchisor, has claimed that they were not paid the servicing fees due under the securitisation arrangement that would have helped them to help their defaulting franchisees?
One thing is clear. It is the franchisees, who form the basis for all of this HIGH finance and securitization activity who pay the ultimate price for an incompetent franchisor who can sell unviable franchisors under federal regulatory policy. And, also, of course, the end innocent investors in securitizations that get high ratings from other incompetents who make money on the incompetent credit ratings. And, also, the banks and the lenders who are caught in this dangerous game —-the new Monopoly or what?
It is appears from a recent newspaper article that this franchisor is being investigated by the FBI for diverting monies that were supposed to be paid to to a special entity involved in the Brooke securitization of its franchisees promissory notes, etc…!
Of course, the securitization protects the franchisor in bankruptcy proceedings from any franchisee creditors —which seems very unfair — but apparently legal!
Maybe Sean saved some prospective franchisees by his EARLY warning. Let’s hope so.
Kudos to Sean Kelly, who brought this to light over a year ago on his blog.
As of yesterday, Brooke is in Chapter 11 with nobody answering the phones.
Bogus earnings claims are a hallmark of bogus franchisors.
Those who heeded Sean’s article a year ago could have saved themselves a lot of money, and a lot of embarrasment in their local community.
We have potential positions available for associate agents representing Nationwide Insurance. If you have an interest, please email your resume.
FOR ANYONE THAT IS THINKING ABOUT DOING BUSINESS WITH BROOKE……DO NOT DO IT. ANYBODY THAT STILL WORKS FOR BROOKE HQ, SHOULD NOT GET HIRED ANYWHERE. ALL THEY ARE LEARNING AT BROOKE IS TO BECOME CROOKS….RUN AWAY FAST.
Sorry John, you DID get warning that Brooke was broke and is nothing more than a ponzi scheme. Several have warned others. You chose not to listen and not to make an alternate plan.
The Brooke people are broke. We just received an E-Mail saying they don’t have the money to pay our commission. Wish we would have had notice, now we will lose everything.
You should try talking to the successful agents. They are happy & making $$! Make smart decisions and you won’t fail!
Can you recommend some we should speak to?
You should try talking to the successful agents. They are happy & making $$! Make smart decisions and you won’t fail!
Just curious … Can anyone tell me:
When Brooke launched its franchise system?
How many franchisees have entered and subsequently left the system?
Of the franchisees who have since left the Brooke system, how many had prior experience as an insurance agent?
I started a start-up agency with Brooke in November 05. They gave me 8 months to make $4k commission. The thing they failed to tell me was that it would take them 4 months to get me appointted with the carriers that I would be writing the majority of my business in. I did make the $4k, however, from there it spiralled down-hill. They started to hide my commissions and tell me that I wasn’t making the grade. I started writing big commercial policies and it would take 3 months for them to show up on my statement, then I wrote some life and health policies for a few companies in town. I know they were issued in March 07, because they are in the Kiwanis with me and told me so. Last week, I moved out of the office and called my DM today. I told her that they had ruined me financially and I will let everyone know how crooked they are. The final straw was when that life and health policy showed on my statement and the commission was 1/2 of what I should be given.
This company needs desperately to be exposed.
No name, others: you should share your stories on the new site http://www.unhappyfranchisee.com, which is dedicated to documenting and exposing franchisee abuse, and warning others.
Visit the site or email them in confidence at unhappyfranchisee[at]gmail.com
I wish I had read this thread as well as the BXXX message board before purchasing my agency. This company has cost me everything and I am sorry to say, I am glad to see that I am not crazy feeling as though I was the only one. This company needs desperately to be exposed. They really pulled the wool over my eyes. I thought that these people were the salt of the earth and could not do anything wrong. Now I am practically homeless, divorced and without my children. All thanks to my belief in this company and the people who work there. Boy was I a fool.
I’m looking for someone to contact me regarding the Brooke Franchise Opportunity. jnk_home@yahoo.com
Are you kidding? It’s done more than that… It’s a total disaster waiting to happen. I had an agency that was making 40k per month when I bought it as a Brooke Franchise. They dragged me along for two years never doing anything for me and lying to my face the whole time. Their accounting is absolutely abysmal. (for example, they automatically pay any invoice sent to them by any carrier, regardless of whether you collected money from the client, and then it’s up to YOU to make sure that the carrier returns the money, and then you have to make sure that you get credited back the money. It’s just another way to make sure you never make any money as the owner. They hold all the strings. It’s definitely setup to get you to fail.
Don’t do it. Run – don’t walk as far away as you can from these people. As of today, 03/06/08 thier stock has taken a nose dive to around $4.00 – it was at around $15 just May ’07.
These people do not do anything that they promise. If you buy an agency from them – the due diligence is performed by an entity that is owned by Brooke themselves – as a result, the agencies are grossly overvalued. They will not disclose actual commission statements.
BEWARE!!!! BEWARE!!!! BEWARE!!!!
IF YOU ARE A POTENTIAL FRANCHISEE… PLEASE STAY AWAY!!!
State Farm, All State, American Family… Brooke? Why would one pay $165k for that name?
The company will lend to ANYbody. Then Brooke claims to extend you a line of credit to cover expenses until you reach profitability, or your loan (usually 18 months) matures. After about six months you will get the news that your commission advance/line of credit has been discontinued. You ask why, and they claim that you need to hit your sales goal consistently. This is the first time you become aware of a sales goal .
They also try to sell you on this marketing coop (50% for approved marketing)… this does not exist. The only marketing that Brooke approves is their inflated Brooke merchandise (.50 pens, 5.00 mugs, etc).
If you need proof visit a couple local offices, you will find that 80% are empty, or have signs on the door asking you to call a number for assistance.
Wes, if you get this get in touch with me.
Chuck Candler
Find out more about brooke go to the Yahoo Finance site and look up brooke by its sticker symbol “BXXX” on the left-hand side of the quote screen is a link to the “message board”. There have been franchisees and employees posting their experiences with brooke since 2005. Read back a few months or years to get a view of this company.