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Franchise consultant and founder of the Continental Franchise Review newsletter Tom Murphy died a week ago last Saturday at age 93, after a short illness. Having known Tom for almost 30 years, I seldom imagined a time that he would no longer be a part of my life in franchising.Two days before he passed away, he called from the hospital to plan our next get-together for lunch, a regular occasion we looked forward to.
When Tom started the Continental Franchise Review (CFR), published from 1968 to 1999, there was a desperate need for a reliable publication that could report the news boldly, without concern of offending those in the franchise community. Franchising in the 1960s was considered to be the Wild, Wild West. There was no regulation nor watchdog groups looking over franchisors’ shoulders. CFR filled a need everyone else ignored.
I first met Tom Murphy in 1985, while I was working for an attorney in Englewood, Colorado. Tom later told me that the day he met me he knew I would one day work for him. He was right. Three years later I ran into him having lunch at a Burger King and he asked me to come in for an interview.
The day I started at the franchise development firm was the day I became captivated with the franchise world. Between work projects, I began reading the gray eight-page newsletters that were neatly stacked on table and counter tops across the large office. I found the news reports on McDonald’s, Taco Bell, IHOP and other systems fascinating. Tom’s hard hitting editorials on the back page seemed to bring the franchise community alive, drawing praise and criticism from franchise executives, who were ready to defend the business model they loved. Whether they agreed or disagreed with Tom’s opinion, they appreciated his candor.
Franchise consultant Murphy wore many hats. One was that of a cowboy. Not only did he have a passion for franchising, he also had a great love for Arabian horses, of which he owned several. Making sure the horses were well-cared for by his ranch hands was a responsibility I hadn’t counted on, but eagerly grasped. While he traveled around the country on business, someone had to take on the job of ranch hand, which I did with the help of his various family members.
When I asked Tom if he was still mailing out the Continental Franchise Review newsletter, he said: “No, it has temporarily lapsed. But that’s a job for you. Hire an editor and get CFR going again.” That’s when my real education in franchising began.
Tom Murphy’s youth was spent as a farm boy on his family’s tobacco farm in Shelbyville, Kentucky. During the Great Depression as the banks fell, his father lost all his money. That was before there was such a thing as federal deposit insurance that guaranteed bank account deposits up to a certain amount.
Tom enlisted in the US Army as a private in 1941 and came out as a captain. He was decorated twice for conspicuous gallantry in combat, receiving two Bronze Stars. His first business experience began after World War II, when he was promoted to chief fiscal officer. He was on a team responsible for reorganizing the bank system for post-war Germany. He subsequently organized and operated a private investment banking company with a seat on the New York Stock Exchange.
When Tom Murphy began his career as a franchise consultant in the early 1960s, he was convinced that franchising was the most sophisticated marketing approach that existed at that time. But he also discovered that franchising had become a spawning ground for unethical and crooked businesspeople. It was a time when many celebrities became involved, lending their name to sell franchises for franchisors. Many were fraudulent.
One antitrust attorney expressed to Tom that there was a flagrant disregard of antitrust by franchisors. Some companies were requiring franchisees buy products that were priced well above the market. It had nothing to do with trademark cultivation, chain efficiency or franchise image but rather it was about the franchisor profiting from sizable kickbacks (rebates, markups) from vendors. While the franchisees' bottom line would erode, the franchisor's profits would swell from those overpriced products, all without the franchisee even knowing the arrangement.
Tom found that just about anything could be franchised, and anyone could raise money from the public to start franchising without a track record or business acumen. He was amazed at how quickly Wall Street latched on to franchising.
As he researched, he found there were no authoritative sources of information on this new marketing approach, and that franchising had not been properly defined. Tom began talking with leaders in the community to determine what was needed as a news source, to keep people informed and to expose the many abuses.
Out of those discussions was born the Continental Franchise Review, an eight-page newsletter, with no advertising, divided into sections—Bulletins, Finance, Trends, Legal—and, last but not least, Tom Murphy’s Publisher Speaks column on the back page.
With a strong editorial board, Tom began publishing CFR in 1968, mailing out 30,000 free copies with an advertisement. A year’s subscription was $26. At that time the International Franchise Association was headquartered in Chicago and was run by an outside company, not connected to the IFA franchisor group. After reading the first copies, the organization responded to Tom with a two-page letter detailing how the newsletter was damaging franchising with its harsh analysis of companies. The association of franchisors said that the CFR was doomed to fail and to avoid any further embarrassment, he should send a draft of each newsletter to the IFA to edit before sending it out.
Tom refused to back down and continued to publish the hard-hitting news bulletin. It eventually won the Boston College Journalism Award, and was presented with The Free Enterprise Award by the International Franchise Association on February 22, 2000.
In 1990, he sold CFR to me, confident that I would continue to uphold its high journalistic standards that his newsletter had become known for. I published it until 1998, when John Hamburger of the Restaurant Finance Monitor approached me about buying CFR to incorporate it into his newly purchased Franchise Times magazine, which he had bought from Crain’s Chicago Business. As franchising entered the new age of the Internet, publishing and mailing a news bulletin to subscribers had become obsolete.
Publisher John Hamburger asked me to join his team as associate publisher, where I would continue writing under the banner of the Continental Franchise Review. But he soon discovered that strong editorials can mix poorly with selling advertisements. When franchisors and advertisers criticized that my reporting was harsh, my job status changed to an outside journalist as an independent contractor. But even that did not resolve the magazine’s dilemma.
After 13 years with Franchise Times, I resigned in late 2011 to continue writing for Blue MauMau and to seek other opportunities. The day I left I felt I had abandoned the esteemed Continental Franchise Review.
While publishing the CFR newsletter and consulting with franchisor and franchisee companies, Tom Murphy began uncovering fraud within systems. He pushed for full disclosure to improve the selling practices of franchisors. Stories became prevalent that many franchisees were losing everything in buying into unproven systems with bogus claims. He felt hundreds of franchise owners were failing due to lack of disclosure.
His push for a franchise disclosure law received mixed reactions, and many franchisors voiced the opinion that they did not want government in their business. Tom had always been of the same opinion, but he knew something had to be done to stop the fraud.
In 1969, he was asked to be the dinner speaker at Virginia’s Commonwealth University. He took that opportunity to unload the research he had accumulated over the past decade. The group talked about failure rates in franchising, unconscionable contracts and abuses in the sale of franchises.
That dinner began the discussion of franchise regulation and full disclosure, and again brought much opposition. As the meetings and hearings continued, Tom then proposed in 1973 the Uniform Franchise Investment Act. After the passage of franchise disclosure laws in Illinois and California, other states followed. The Federal Trade Commission finally promulgated the FTC Franchise Rule in 1978.
Tom continued his efforts to ensure more fairness in franchising, which eventually led him to craft his Franchise Self-Regulation Proposal some years later, which the franchisor community soundly rejected. With increasing news of bad franchising catching the public's attention, the International Franchise Association eventually crafted its own watered-down version of self-regulation under its ombudsman program. An IFA spokesperson later told me that franchisors had no real interest in self-regulating.
Bon Jovi sang, “The more things change, the more they stay the same. The same sunrise, it’s just another day.” As I look back over my 30-year history with Tom Murphy, I think Bon Jovi is right. I still wonder just how much franchising has really changed today, even with all its regulations and codes of conduct. Despite disclosure requirements, there’s still a lack of monitoring and real disclosure. In efforts of good reporting and better transparency in selling franchises, I feel honored to have learned from not only a pioneer but also the best.
(Writer’s Note: During the past decade, Tom Murphy wrote two books. “From Boardroom to Beetle Boards, A Memory of a Consultant” was published in 2002, and “Without A Scratch” in 2010, which is an account of his military career. Tom touted that is what taught him about finance and law, and gave him a background that had tremendous influence on his career. Rightfully so, Tom was very proud of his accomplishments.)
In Memory of Thomas H Murphy, Ellis Family Services. Services will be held in the afternoon of January 29.