Name Recognition and Buying Power Myths

In My Opinion, Menu and Location Trump National Brand Recognition

This is the age of the rehashed food concept, given a new name and sold to unwary buyers as unique systems in which one may be mentored by experts to wealth and independence. 

While I am of the mind that they are all simply junk value/not investment worthy – five to ten year agreements/personal guarantees/liquidated damages clauses/arbitration clauses/covenants not to compete/you sell only what we say – it might be interesting to find out if there are any in here who believe the opposite.

I know who the opposite believers are likely to be – the brokers and consultants who make money only if someone actually buys a franchise – no matter what franchise it may be. But other than the “buy anything, but buy something for Gawd sakes” folks, what do the rest of you think? 

Here are my reasons for why I feel the way I do. 

Few of these “new” concepts currently have name recognition. When you are the first or amongst the first few in a market, you get no name recognition kick start. 

Twenty to fifty stores in a few different markets have no buying power at all. They buy at list. In a system where there might be buying power, but the vendors have to pay the franchisor to sell to you, the buying power value goes to the franchisor, not to the franchisee, and what the vendor is paying the franchisor for is the right to charge you a non competitive price. 

You can’t tweak your menus to vary what you sell to local taste preferences. 

In QSRs, if you have a good product menu and a good location, you promote using a local advert agent and build your customer base within the effective range of your location – usually three miles or less. But you can call it anything you like. If you call it Adolph Hitler’s sandwich shop, that might adversely affect business, but short of that, what does the name matter?

Would it be different in a fast casual operation? I don’t think so. How about in a family tavern concept – what difference does it make – assuming you run it well? You build your customer base just as I indicated above, right? 

And if you agree with this blog, why would anyone ever buy a franchise for any concept in these categories? Why not work in a few as an employee; be a customer in many of them; hire people who have work history in those concepts to do the real work, and go from there? 

Am I missing something? If so, what?