Peter Birkeland's blog

 Are hybrid franchise models a portent of the future of franchising? 

I am curious whether anybody in this community knows of hybrid franchise models in operation, and what sorts of challenges franchisors or franchisees have encountered in them. I am familiar with only one hybrid franchise model, Solana MedSpas, a company in the emerging medical spa industry.

When John Buckingham, the founder of Solana MedSpas, began in 2003 there were few growth platforms available to him. Company-owned units would require significant capital and traditional franchising was onerous and unwieldy because of state medical licensing laws. Because Solana MedSpas believed that the market would grow exponentially in a short period, speed of market entry would prove to be a deciding factor in the success of the enterprise. So, they created a hybrid franchise model. 

 "I have seen myths before in franchising with disastrous consequences"

I was asked recently to write a history of franchising in the United States and while conducting research happened upon an article on the International Franchisee Association website. In that article Michael Seid and the IFA claim that Benjamin Franklin was the founder of franchising.

There was virtually no evidence presented that substantiated that claim and instead the article smacks of marketing hype. In fact, there is a persuasion technique called “transfer” where writers use names or pictures of famous people but not direct quotes to sell their products or services, and a persuasion technique of “appeal to authority” where one mentions an influential or highly regarded person to lend importance or credibility to an argument. Both of these techniques are used, but there is no evidence other than the fact that Michael Seid found documents showing a business relationship between Benjamin Franklin and one Thomas Whitmarsh.

Dr. Jerry Newman packed up his business PhD and took up a secret life in various franchise stores throughout the country, including McDonald's. Interviewed by Peter Birkeland, himself a franchise expert. Dr. Newman shares his insights with the Blue MauMau franchisee community on:

• how to motivate when raising salaries are difficult
• how a few simple adjustments to the franchise owner's management style can invigorate your workplace

Most businesses today have their fiscal year-end match with calendar year-end and if you are a franchisor or franchisee leader you’re probably finishing up right now on reviews, assessing your progress on goals, and thinking about starting the planning cycle all over again. I refer to this process as a “business spiral” because one thing is ending, one is starting, and there is a transition between the two. For a lot of business executives—people who have an active working style with hundreds of emails, numerous meetings, and countless conversations on a daily basis—this transition time can be a shock to the system, an uncomfortable period of ambiguous non-activity, and something to “get through” as quickly as possible.

How do you handle an owner/operator who doesn’t want to grow their business? The person who is either complacent and happy at a particular level, or fearful of growth and the challenges that may emerge? 

This is a vexing problem for a lot of franchisors because nobody wants a market only partially served. The crux of the problem is that as an owner/operator becomes more successful or as the business naturally matures there is a difficult transition to make, what I call the Core Competency versus Do-It-Yourself dilemma. The problem is, what leads to success in the early stages of business development—the hand’s on, day-to-day management—hinders growth as the company matures.  

“Everything looks like a nail.” I’m not sure where this quote is from, but it sure applies to a lot of what we see in business and particularly, in franchising. I am referring, of course, to the folks that only have one tool in their toolbox and no matter what the issue, that “tool” is the solution. 

The Problem of Franchisee Profiling. The Nobel Prize Laureate in Economic Science, Herbert Simon, predicted that a lot of problems would be solved with sub-optimal solutions because of the way that decisions get made in organizations. In an influential article he called the “Garbage Can Model” of decision-making, Simon asserted that in any organization there are problems in search of solutions and solutions in search of problems and they get thrown together in the Garbage Can. What comes out is anyone’s guess and often the matching of problems and solutions is not ideal, logical, or profitable.  

Franchising has become an ever-present feature of the American economic landscape. One-third of the U.S. gross domestic product flows through franchises, and they employ one out of every sixteen workers. But how did franchising come to play such a dominant role in the American economy?

Three factors seem to have fueled the growth of franchising. First, there are people who have some sort of business on a small scale, say, a restaurant or a bakery, and they have designs to expand to a national market. Franchising affords an opportunity for the aspiring entrepreneur to reach a national market in relatively short order, with little capital outlay, and with minimal risk. While there have probably always been people with grandiose ideas, the business owner today can work with a specialist franchise consulting company to take his or her idea or product and make it "franchiseable." These franchise consulting companies essentially sell a "franchise package" that includes the legal requirements to franchise, marketing plans to sell franchises, and business format plans that take an idiosyncratic and unique business and standardize it. Even services that seem to be impossible to standardize, like a haircut, are widely franchised through essentially this process of desire on the part of the entrepreneur, and means through a consulting specialist.