Don't Always Trust What You Read

You know about all those exciting growth numbers in franchising that you read about? Well, most likely they are bogus - the global targets you read are almost never accomplished and are usually way, way off.  At least that is what Arturs Kalnins, Ph.D., associate professor of strategic management at the Cornell University School of Hotel Administration has discovered about such targets in news articles.

"Not only did the first releases of information remain unauthenticated; subsequent releases reiterated unjustifiable numbers two or three years later. Ironically, publications and reporters never questioned in any one instance the verifiability of the data. It was simply published as is."

Of course, the problem with international franchisers believing what they publish is that they make very bad choices. So, why do franchisers make such outrageous projections? First, it creates an air of excitement for buyers who think this may be the greatest thing since sliced bread. Second, Kalnins observes, "Typically, American companies are engaged with a fee, often a great fee. Initial excitement, a combination of naiveté and enthusiasm often led to overestimation. The fact is real performance almost never pans out."

So what if a franchiser gets their business projections so terribly wrong? Just think what would happen to your franchise if your business plan was terribly off. Dr. Kalnins continues:

'Unrealistic goals lead to poor management practices, inappropriate decisions and ultimately business failure. Businesses have to consider the amount of capacity that is required, the type of advertising to be done. One business purchased outright 100 double-decker buses and painted them in the company's logo colors…' You can only guess what happened!"