Myths in Franchising

 "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.

On the surface, this is a relatively minor issue, but it is not a harmless statement. It is not presented as an opinion by Michael Seid or of the IFA, which would be fine, but instead it is presented as a fact. It is a myth in the making, and I have seen myths before in franchising with disastrous consequences.

While I was conducting research for my book Franchising Dreams there was a widely held myth perpetuated by the International Franchise Association and others that the success rate of franchising was 95 percent. I believe that I was the first person to rigorously analyze that statement and debunk it. You will not see any references at the IFA on success rates in franchising today.

What are the consequences of myths?

Well, there were lots of folks who bought franchises because they believed franchising had a higher success rate than an independent operation, and I imagine that, in some small measure, people will be influenced to purchase a franchise because franchising was “invented” by no other than Benjamin Franklin himself.

Even if Michael Seid were completely correct in his assessment of Benjamin Franklin, there is one significant difference: “Benjamin Franklin was to pay one-third the costs in return for one-third of the profits.” I know of no franchise relationship based upon the profitability of the franchisee and it seems that even Benjamin Franklin, clever as he was, did not think to receive payments on gross sales.

Institutions, like people, need to be held accountable for their statements. Let’s hope for better evidence from the International Franchise Association, or that this myth goes away.

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About the author: Peter Birkeland is author of the acclaimed book, Franchising Dreams (University of Chicago Press, 2002), and was named by Fortune Small Business as one of the “Top Ten Minds in Small Business.”  He is the president of the Birkeland Institute, specializing in consulting companies in franchising, distribution, and growth platforms. A Ph.D. from the University of Chicago, Peter also continues to teach business there.