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Franchisor Bankruptcy You Don’t Have To Have?

Bankruptcy is always a bad thing, right? Well that isn’t quite correct.  I am prompted by an article from CNNMoney considering some positive outcomes.  All bankruptcies create bad debts but are there operating environments where nudging a franchisor bankruptcy is reasonable?

Constructed bankruptcies that imitate ‘legitimate’ business failure to shed debt and transfer assets to higher ground are usually the only winners in business failures other than those that pick up the cheap buys.  Here Emily Maltby also considers franchise bankruptcies and a handful of positive outcomes for the lucky. CNNMoney  

It doesn’t take much imagination to consider the multitude of flow-on of down-sides relating to a franchisor bankruptcy. I even considered the situation where franchisees are successful and the franchisor suffers from a poor franchising financial model. But they are at the far end of the scale when possibly what was needed was slightly less successful franchisees to ensure that the franchisor survived for the ‘greater good’. 

There won’t be any franchise systems where the franchisee network benefited from the performance of a franchisor while it was in the process of, and leading up to, collapse.  Typically a failure to adhere to contractual franchisor obligations doesn’t mean the franchisor can’t afford to but there may be instances where cuts could be interpreted as a lead up to a possible collapse.  For some that may be good news.  

This may surprise you but most franchisees tied into a life and poverty struggle are not strategic thinkers.  I maintain that in some situations franchisees should contemplate what makes the franchisor revenue tick.  But what concerns me is that some franchisees wanting to push their franchisor over the edge may not consider all outcomes and all creditors.

In saying that I have to admit I see great weight to the argument to push in some circumstances after having seen instances where years of wave after wave of franchisees coming and going … predetermined disasters … and it stops.

Governments conveniently call this, ‘Letting the market decide’.

Of the franchisor bankruptcies I have read I am yet to find one that mirrors another in their makeup of contributing factors and outcomes.  I have met with franchisees that were so much better off and I have met some of those that ended in a big horrible hole.

In the interests of avoiding being castigated as a communist, a fascist, agnostic, republican or a hermaphrodite I would like any interested contributors to read the article from Emily Maltby and explore how and when a franchisee network can best support a troubled franchisor having difficulty maintaining the value and quality of its franchise model. 

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About Ray Borradale

Ray Borradale's picture

Public Profile

Over forty years experience in Small Business and more than twenty-five years in franchising operations as a franchisee and employed by three franchisors, mostly in operations.

I have dedicated more than ten years and over 15,000 hours in the pursuit of quality franchising and exposing franchisor abuse of franchisees while advocating for the introduction of franchise relationship Law and the levelling of the dispute processes between bigger business and small business.


Area of Interest
Franchise Operations