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This is not just a warning for Australian franchise investors. If you are ready to invest in a franchise brand you should consider what stage of franchise network growth your 'brand of choice' has achieved and what that might mean to any suggested financial success you have been promised.
We’ve all seen the franchising brands that have been around for some time and many experience double digit growth until one day they struggle to open new sites or sell existing sites either after company buy backs or directly from failing franchisees.
It has nothing to do with market saturation. It is a stage brought on by a franchising reputation reeking of danger and sooner or later those franchise networks shrink as complaints grow, ex-franchisees greatly outnumber the size of the network and the dirt becomes public knowledge. These brands should be easy to recognize but apparently without some level of understanding of franchising they can be a terrible trap for the lazy wannabe.
Then there are those ‘new’ smaller brands we hardly notice at all. Some of these seemingly ‘new’ brands have been around for many years but have minimal and then zero growth. The question for the would-be franchisee is ‘why do people buy in?’
OK; even if the concept and model only has something remotely related to ‘marketable’ some of them actually do grow their networks to a reasonable level producing an advertising fund worth pilfering but basically they go nowhere. Business and franchise viability is seemingly optional where marketing spin is all they have to offer. The question for the would-be franchisee is again ‘why would you buy in?’
It should never be forgotten that in a world of many thousands of franchise brands there are very few really large franchise networks and for good reason. A surprisingly high number of those that make it to be a ‘big’ franchise network do not live up to the franchisee’s expectation of a worthwhile long term investment.
For investors in smaller networks the chances of high financial success are miserably low and particularly when the brand is destined to stagnate in its infancy due to a spreading reputation for producing struggling, zero profit or failed franchisees. All franchises promise success and most franchisees believe the promise because they want to believe the industry spin but they don’t understand the level of danger that goes well past losing their initial investment.
Identifying a ‘new’ unproven franchise system within the mass of small franchise systems that will actually produce a worthwhile return on investment is impossible. Many concepts that target small, passing markets or ‘fads’ should be easy to identify but for the gullible buyer and the talent of commission hungry salespeople. Small brands are better left alone on the basis that the foolish investors are gambling their life’s assets as guarantee for what is an uncertain wage with long and stressful hours simply because a salesperson can make it sound so feasible.
But what of those sizable franchise brands at the stage that may last for one or even many years where the consumer advertised brand name alone appears to confuse foolish investors to unwittingly replenish network numbers under threat from hidden franchisee failure rates.
These networks often have no noticeable network growth or shrinkage and virtual stagnation can be sold to would-be franchisees as ‘tough’ franchisee selection standards or consolidation of brand infrastructure. It all sounds so feasible.
Bakers Delights is not alone at this level but for some ridiculous reasons this brand excels in finding foolish investors to replace failed franchisees. Bakers Delight is a leading Australian example of a sizable consumer brand enticing gullible franchise investors.
The Roger Gillespie juggernaut keeps promising the world and somehow manages to convince a constant of new investors that their ‘golden opportunity of a lifetime’ came from poor performers who simply did not follow ‘the Bakers Delight system’. The list of failed franchisees is almost endless in comparison to the size of the network - but mostly the failures are secret.
Probably the main reason that Bakers Delight can stay hidden as an investor’s nightmare is the age old practice of hiding the real numbers for failed franchisees in disclosure documents where they become ‘sales’ to the company or a bargain price purchase by an unwitting investor. The trick is to intimidate franchisees into quietly capitulating and accepting the loss when their turn to exit arrives.
Investors should understand that nothing prompts a giveaway price as much as inevitable bankruptcy if the ‘poor performer’ refuses to cut and run. Bakers Delight have also been an excellent source to reassure the Australian franchising industry that any contest from franchisees is defeated in forced out-of-court, confidential, settlement or in deliberately protracted and expensive litigation until the franchisee cannot afford legal representation. Never forget that a franchisor can expense defence costs and litigation against the franchise advertising fund by simply declaring such need as ‘protecting the brand’.
At Bakers Delight the message to the franchisee network is to capitulate, don’t complain, take the losses or be totally destroyed. They can point to many a fine example if need be.
A different perspective:
Recently I was speaking to a Bakers Delight baker who I had originally met some 5 years ago. He is not aware of my level of interest in franchising and up until the recent conversation I was not aware he was a veteran employee within the Roger and Lesley Gillespie Bakers Delight 30 year old franchise churn.
After 10 years he is now a baker for his 4th franchisee at the same location watching another ‘really nice couple’ diligently follow the Bakers Delight system unaware as yet that they are heading toward the same hell as the previous three franchisees.
I don’t know how they f*+^ing get away with this siht every f*+^ing time. Ray; this siht happens all over the f*+^ing place not just at ‘location’. Its bullsiht! The new ones never believe that the poor bastards before them worked their guts out but then it starts again and you hear the same siht as last time and the crazy f*+^ers lose their ass. Bakers Delight are *ssholes. That Gillespie is a f*+^ing blank.
My baker friend has a narrow perspective but his question is universal to the many brands at the same stage. I told him there was no short answer. In this case, franchisee investors see the size of the network, the advertising and the profile of Roger and Lesley Gillespie and just don’t look any further. They don’t hire advisers with franchising expertise and they had never heard of the term ‘franchise churn’.
Over the last 8 years I have met and/or communicated with more Bakers Delight franchisees than I care to remember. The only real variation of their stories was how quietly they exited or noisily they lost everything.
Bakers Delight is one of Australia’s most highly regarded franchise brands.
The point is that network size doesn't matter - what matters is the level of extreme suspicion the investor embraces throughout any due diligence.
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