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Log In / Register | May 25, 2012

Reality

After actively participating in franchising forums for some time now I have made a few observations I wish to share.

One of the areas of consternation appears to be over the often trumpeted chorus of: If the zor had only disclosed XZY I would not have gotten involved with the offering.

After examining this premise for some time I have come to the conclusion that this is simply poppycock.   The reason I state this is there is often a very elaborate machination of psychological factors at play in the prospective zees own head that work against vested self interest.  The Good Barrister, Webster, has a website in large part dedicated to revealing some of the manifestations of this complex interaction of psychological factors.

The reality is, there is very little in franchising that is actually hidden from a prospective zee, the FDD is a defacto roadmap that indicates all the ways you can be exploited, the FA certainly spells it out in no uncertain terms.  Are there areas that are hidden, certainly there are, but on the whole the game is on the up and up.

What appears to be happening is that wounded franchisees are glomming onto something, anything that gives them an instance of plausible denial in which the can extricate themselves from culpability in their circumstances.

However there is a factor of human nature they are failing to consider.  They were most likely examining franchising for a reason, it was most likely not happenstance.  And their very motivation for examining franchising is most likely the key component of the psychological factors at work that are keeping them from seeing things as they really are and instead allowing their minds eye to filter the information based on their innate desires and the beliefs they want to be true, thus obscuring, twisting, and distorting the reality before them.  

Add in the fact that there is salesman in this process and you have what amounts to a prefect storm.  The stronger your need or desire to engage in franchising, businesses ownership, being the boss, whatever, likely the greater your psychological disadvantage.  Every trained salesman out there has access to a wide body of research, techniques, and methods to artfully and skillfully circumnavigate regulatory barriers that are often erected and go directly to the motivating factors that are deluding your senses.

In other words while you may think if you only new XYZ you would never have gotten involved in the concept, most likely once you showed resistance because of XZY, a new factor, ABC would have been introduced to the equation and your defenses would be overcome, because innately you want to be sold, innately you wanted to believe, because you were searching for something, and ultimately a franchise became the concrete manifestation of your internal desires.

Here is a simple exercise you can do to prove the point.   Talk to your wounded zee dejour, get them to identify the factors that would have prevented them from getting into the franchise if only they had known.  Make that concrete, then get the FDD and FA and review it and come up with your own list of show stoppers.  Guess what, you just found the new boogey man.  I have now done this with a couple of ex-zees and they were sheepishly embarrassed but they understood my point.    

The point of this missive is not to berate or belittle franchisees but rather to try and free them from their anguish by getting them to realize that human beings are frail creatures; we self delude.  And the odds are because you wanted to get involved in franchising, for whatever reason you most likely would have ignored what ever red flags were raised.   If you question that, think about your inter-personal, intimate relationships. How often have we ignored the red flags regarding that man or woman that makes our heart goes pitter-pat despite what is so obvious to others?  It is human nature in all its intricacy and glory.

Finis.

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If XYZ equals ....

If your "XYZ" is equal to transparent profit\loss financial statements from corporate owned stores representing low, medium and high volume areas that demonstrate that the business model is sound, meaning, that it doesn't cost $5 to sell a $3 ice cream... then I agree. 

I think, if the "franchise" world is going to trumpet the "proven concept" horn they should be required to show the "proven" part.  That can easily be done by opening up the books to existing and would-be franshiees.  I think each franchisor should be required to have 1 "control" corporate store for every 100 franchisee stores that serve as THE financial model for the system.  And I don't mean a training stores that are subsidized by corporate funds to keep them open, I am talking about stores with the express purpose to "prove" the business model to be successful.

Think of the headaches that the franchisor could avoid - to all the whining self-serving franchisees out there - the franchisor could simply point to a control store and it's transparent financial statements and say "you see, this business model can return 18% on an annual basis".   Additionally, the franchisor could pass each of the "profit-expanding" ideas thru the control stores and then let the NAB chew on the profitable results.

Somewhere on BMM, I thought I read from Quiznos person who said that the franchisor open a bunch of corporate stores to show the franchisees that they could be profitable.. then he said they were closed a few months later.  Not sure if that was true or not... but the general concept is a good one.

Perhaps most franchisors can do this, or already do this - I don't know, but I do know that the Cold Stone business model could not do this because I lived the business model for 5 years and the numbers just don't add up. 

Eventually, this would "weed" out the bad business models and elevate the good ones and over time the hallowed franchising mantra of a "proven concept" would be redeemed in the eyes of the public.

Howard R. Morrill's picture

Mostly Yes; a little No

Lots of truth in this, I agree.  Particularly self-deception.

I do take limited issue with this:

"The reality is, there is very little in franchising that is actually hidden from a prospective zee, the FDD is a defacto roadmap that indicates all the ways you can be exploited, the FA certainly spells it out in no uncertain terms.  Are there areas that are hidden, certainly there are, but on the whole the game is on the up and up."

A truthful and complete FDD may be fairly meaningful to you and me and the other veterans, but we know how to read an FDD after all these years and we also know generally what further information we would like to have.

few takers

I don't think you will get very many responses.  Easier to blame the evil Zor.  And NO DOUBT there are Zors whose business model depends more on selling franchise fees today up front, than making a few percent slowly year after year from successful Zees.

The tirck indeed is to figure out why otherwise intelligent people fall for these pitches.  Until then, P.T. Barnum was right.

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