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by CareyBot

The Help-U-Sell Real Estate franchise company entered Chapter 11 bankruptcy proceedings after a group of regional operators filed an involuntary petition for bankruptcy.

Ashton "Ash" Asensio, who is consulting chief operating officer for Help-U-Sell, said today that the "franchise itself, the brand itself will survive this bankruptcy — no question about that," and "franchisees should not be impacted by corporate’s issues."

John D. LaFountaine, president of the Western Michigan region and Eastern Michigan region for Help-U-Sell, and Garrett Pagon, manager of Help-U-Sell FS3 LLC of Snohomish, Wash., filed a Chapter 7 bankruptcy petition in March, seeking a judgment of $1.04 million from the company. FS3 is an umbrella organization for a handful of Help-U-Sell regional and franchise operations.

It is not the first time a Help-U-Sell parent company has fallen on hard times. Founded in 1976, Help-U-Sell began franchising in the 1980s. The company was purchased by Metropolitan Benefit Life, which expanded the company to a couple of hundred franchises before it went bankrupt. The company was acquired in 1997 by American Pacific Financial Corp. and in 1999 there were 89 franchisees. Help-U-Sell emerged during the latest up-cycle as one of the fastest-growing real estate franchise brands before this latest plunge.

The company estimates that there are about 450 franchise offices in the country — that estimate compares with nearly 820 offices in 2006 and 650 offices in 2007.

Help-U-Sell franchise offices offer flat-fee services to sellers and also offer services to buyers. The company was founded in 1976.

Asensio said, "The real estate market itself was clearly the prime cause" of the company’s financial problems, though some current and former affiliates who spoke to Inman News say they do not believe that the market is the only culprit — and that corporate managers and the company’s support systems for franchisees should share some of the blame.

"As everybody is aware, the market is not the best," Asensio said. "Revenues generated by the franchisees were not adequate to sustain them at the level they were currently operating at. We needed to restructure to have revenues and expenses more in alignment, and that’s what this whole process is about."

Asensio said that bankruptcy proceeds can typically take about six months, though it’s difficult to predict a timeframe. "We’re hopefully going to get to the point where we advertise a sale very quickly," he said. "There’s no question that the brand will remain in place — it’s just a matter of who is ultimately managing (the company)."

Dale Strack, a Help-U-Sell regional owner who was the first Help-U-Sell franchisee in the nation and who had been a part of Help-U-Sell’s management team at two different times in the company’s history, said that the company is making a bid to eliminate the regional director positions and to bring in consultants to work with franchisees.

Strack said some of the regional structure at the company has been in place for nearly the entire history of the company, and he said he is concerned that he is at risk of having his director position stripped away in the bankruptcy proceedings.

"Some of them are totally dependent on the income they derive from franchises" in their regional positions, he said, and some regional directors also operate franchise offices.

Some regional owners "have banned together to get legal representation at these (bankruptcy hearings)," he said.

Asensio confirmed that the company has "a motion before the court to reject the contracts of the regional directors."

Strack said that he believed the company was headed down the path toward bankruptcy as far back as 2006. "The market changed but I don’t think that was a significant factor," he said. Strack and others have cited the implementation of a new company Web site as a problem for franchisees, and he also said management changes may have contributed — the company announced a management restructuring in 2005, with then-president Rick O’Neil and others leaving the company.

Just prior to the involuntary bankruptcy petition in March, industry veteran Steve Ozonian — who had led the company since 2006 — left amid another management restructuring.

Strack said the combination of factors served as "a perfect storm" for Help-U-Sell, and he said he has his doubts about whether the company will be able to reemerge strong from the bankruptcy proceedings. "I imagine this will be a challenging time," he said, for both the company and its franchisees.

Mike Elliott, a former Help-U-Sell franchise owner in New Jersey who had been one of the company’s top producers, left the company last year.

"My thoughts are the same they were a year ago — the management team didn’t listen to the successful franchisees," he said.

He said that he believes that the "theory for the model is right," though there were offices that were not profitable in a good market, adding that he and others spent a lot of money on marketing in relation to the fee income that they brought in.

"I’m not sure how many times a company can go under and keep coming up," Elliott said.

Asensio, meanwhile, said, "I’m very excited about the potential of the company as it emerges. We are the only fee-for-service company I’m aware of with some national presence, and with a solution that should be attractive to virtually anybody who wants to buy or sell a home."

In a July 10 announcement to Help-U-Sell franchisees, the company announced that it "will ‘weather this storm.’ We know that all of these events have caused great concerns and uncertainties to you and we greatly appreciate your continued support and cooperation. This is an opportunity. This bankruptcy will allow us to become a strong and healthy company."

In 1992, Help-U-Sell’s then-controlling shareholder, Mutual Benefit Life Co., was forced into receivership by the state of New Jersey, according to court documents, and that company sold its Help-U-Sell assets to S&S Acquisitions Inc., and in 1996 that company entered into negotiations to sell to Realty Information Systems.

In the latest bankruptcy proceeding, American Pacific Financial Corp. and its related entities claim in court documents that they have "secured interests" in the Help-U-Sell franchise company’s property, including receivables from home sales pursuant to loans that total more than $4 million.

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