Suckers at All Investment Levels

Here is the actual body copy of an email I received over the weekend.

Nick, we recently acquired the Master Franchise rights for a concept and I was wondering what kind of services/consulting you recommend for me?

Also, of course, what would be the fee for your services?

I answered by offering to discuss the man's predicament, but as is the case with many folks who request something via email, there was no courtesy return of ‘thank you' or "I've changed my mind". Does this give you a clue about the emailer's potential for success? Hint: you might want to own some communications skills if you want to sell things.

Anyway, this isn't the first, nor will it be the last time that a ‘master franchisee/regional developer' contacts me with the basic question of ‘Uh, what do I do now?'

Now, I really do understand how people make bad investment decisions when buying a franchise, especially at the unit level, and even more especially when the focus is a ‘blue collar franchise' and a job. By way of example, today I gave an interview and the question was ‘should laid off auto workers use their separation cash for a franchise?' Man, how many times have I answered that question given different twists on the scenario? Of course I warned, as always, about the risks of investing without first developing a personal entrepreneurial plan. I know that most will never listen to my advice, but I offer it anyway because a small percentage of people will ‘get it'. I also know that many unemployed folks ‘buy a job' and a certain percentage will be stung.

But I continue to expect more insight and savvy among larger scale investors—although I know that I shouldn't.

How can a person justify buying the development rights to a state or region without knowing anything about franchising, or at least satisfy themselves that the franchisor has a plan and the ability to teach them how to succeed? I don't know, so I can't give you an answer, but I'd bet it has something to do with the way the sandwich tastes or the signs sparkle. Ya, it's probably something like that combined with incredible salesmanship.

I think that higher level (inexperienced, first time) investors must share an impairment with the laid-off person who is honestly trying to be employed again; that impairment being a naked trust that ‘franchises are good'. But in addition, these ‘regional' folks might be easy prey because the salesman can really work the ‘sugarplum' angle. Yes, I think that's it. No need to prove a thing - just get out the map and ask them how big a chunk they want. "You can be a franchisor just like us!" 

The next chapter will have to deal with the entire fascination today with selling half the country to a ‘master franchisee' while the franchisor is still operating just one unit. Oh, I forgot, the point is not that someone is selling junk it's that there are plenty of suckers available to buy junk.