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Log In / Register | Apr 16, 2014

Tombstone Legislation

The term ‘Tombstone Technology’ came about following a catastrophe that took only minutes and claimed a record 349 innocent lives.  Families were left shattered and others were embarrassed.

Turkish Airlines Flight 981 ended as a horrific 800 miles per hour crash in a forest outside of Paris killing all 349 passengers.  That was 1974.

The identical fault had caused a near disaster to American Airlines Flight 96  in Canada in 1972.

Investigative journalist Paul Eddy in Destination Disaster stumbled upon a memo revealing that the possibility was first discovered in the early production testing of the Boeing DC-10 in 1969 and actually failed in 1970 in a ground test.  But it was superficially dealt with ‘because of a combination of economic, regulatory and historical reasons.’

The space shuttle Challenger disaster is suggested to be a another example of Tombstone Technology where a ‘design problem with a heavy layer of politics and the difficulty of shifting NASA from the moon program to the more prosaic space shuttle. It was like asking Ferrari to design buses. Engineers tried to stop the launch ...  why were they unsuccessful?’

OK; to be fair there is no record of franchising taking out 349 investors in any similar fashion.

But franchising does have a long and packed history of disaster stories from folk of all ages and backgrounds with consequences ranging from substantial financial loss to suicide.  Rather than mere minutes the process can take years.

To understand the lack of Tombstone Legislation in franchising worldwide we need to understand the influence of its economic contribution and the ensuing political landscape. 

For this exercise the US is an obvious choice simply because of the size of the market but it should be remembered that franchising industry spokes-people are quick to claim comparative success around the world.  

The absolute accuracy of easily available data is not necessary to establish the following economic trends when considering franchising’s burgeoning political influence.  

Some speculation exists that franchising goes back to before 200 B.C involving rickshaw drivers. However, the US franchising industry pandemic appears to have taken off during the 1930’s and 40’s when hotels and gas stations began offering new dealers detailed systems and strategies.

Then came the phenomenon of Ray Kroc’s McDonalds in 1955 and the world’s small business sector set in motion an evolutionary conception where franchising’s economic contributions were to grow into leviathan proportions through shrewd nurturing.

By the late 1990s franchises generated roughly $1 trillion to the US economy from 3,000 franchisors and 600,000 franchises with jobs for over 8 million people.

In 2001 it was estimated that a new franchise business opened every 8 minutes of every business day. More than 760,000 franchised businesses generated a total economic contribution of more than $1.53 trillion, or nearly 10% of the US private-sector economy. Franchising was generating one out of every seven jobs in the private sector making up more the 11% of the nation’s private-sector payroll. Franchising Funding

By 2005 the International Franchise Association claims;

The overall economic contribution of franchised businesses was $2.3 trillion in 2005, or 11 percent of the U.S economy.  

• From 2001 to 2005 the franchising sector grew at a faster pace than many other sectors of the U.S. economy. Direct economic output expanded by over 41 percent from $625 billion to $881 billion, while economic output of other businesses grew by 26 percent, from $16 trillion to $20.1 trillion.

• Employment generated by franchised businesses grew by 12.6 percent, from 9.79 million to 11 million, compared to 3.5 percent for all businesses, from 132 million to 136.7 million.

• Payroll generated by franchised businesses grew 21.6 percent compared to 15.4% for all businesses.

• Franchised establishments grew by 18.5 percent compared to 15.9 percent for establishments created by all businesses.

• Franchised businesses provided employment for at least 10 percent of the state’s private sector workforce in every state except New York. The average per state is 15.3%.

More recent US data was not located. Suffice it to suggest that the maintenance of franchising's status quo is an economic necessity.

In Australia the currently reported economic contribution from franchising has reached almost 15% up from a reported 11% in 2006.  Canada and other established franchising countries around the world will no doubt proffer similar growth and importance to franchising’s economic contribution.

Franchising’s economic influence can easily be argued to create a total void in reliable statistical data relating to abuse and casualties in franchising including that which doesn’t come from regulators throughout franchising’s ‘civilized’ world. 

There appears to be no serious interest in the issues within franchisee complaints ‘including but not limited to’, a growing contingent of churning franchise models and ‘boofhead’ concepts.

Franchising fraudsters, virtually supported and/or ignored by governments, have excelled in the prospective franchisee market where ‘marks’ are inundated, by any means available, with a stupefying mix of fact, omission and misinformation where the ‘mark’ then passively ignores any logical responsibility to be suspicious.

Of the many ‘civilized’ surveys conducted the end result tends to be a trivialization of the serious level of problems in franchising and the depth of consequences to investors, support agencies and society where typically turnover rates are attributed to ‘poor performers’, ‘stupid investors’ and ‘natural business attrition’.

No matter what, it remains unlawful to cheat the stupid offers little solace within sophisticated and systemic processes designed to eliminate the financial ability of abused and cheated franchisees to access fair remedy. The cycle continues …

In the United States there seems to be a belief from many quarters, including many franchising experts, that the plight of franchisees looking for Tombstone Legislation is long past being worth any effort.  Canada’s FranchiseFools fought the good political fight but for the most part, accepted they were kicking a dead horse.

Now this position has to be extremely difficult to argue against if only because the US, and Canada, has been at this for far longer than anyone else and its franchising Laws and regulation still mostly suck if you are an under-funded franchisee.

Surprisingly there is little suggestion of political corruption. It seems to simply be an acceptance that it isn’t going to change and interested parties best move on and save those who are smart enough to be saved. There is obvious merit in moving forward.

As economies grow franchising’s influence appears to grow faster. The importance of employment growth in franchising cannot be discounted where governments fear damning unemployment figures particularly around election time.

Generation after generation of new franchisees enter the arena without one iota of understanding of their economic purpose.  Escape is blocked for the ‘greater good’. They listened to the ‘word’ and they believe they are the ‘chosen’.  And for many generations; they were, are and will be …. and they are taxed like no others.

Quality franchising has vocal advocates that can easily argue that responsible legislation will only damn the damnable … but governments don’t need to understand quality franchising. They only consider the potential dollars and votes lost. The experts suggest that advocates can argue until daylight saving hits the North Pole and history suggests they are right. 

This advocate argues for political lobbying and loud, outrageous militancy at almost any level. The disasters in franchising are better exposed to a wider audience when the target is legislative intervention.

It seems there is not enough morality or financial reward in politics to do much for all the just causes on our planet. Some might suggest the financial rewards come from doing naught. But the minor fracas from franchising can reach a media that reaches more prospective franchisees and the media thrives on condemning incompetent politicians. 

The lack of Tombstone Legislation in franchising will be encased in a confidence, and certainty, that the growth of the 'statistically insignificant' victims of political immorality, fraud, psychopathy, corruption and/or stupidity will grow ahead of the growth of franchising.

No One is counting. No one knows to what degree there is franchisor fiddle or abuse of power but it sure isn’t even close to the zero/minimal that industry bodies, regulators, judicial outcomes and most politicians would have the sucker market believe.  ‘Vote 1 for Tombstone Legislation

Will there ever be enough franchisee bodies in the forest?  Smart folk do not have to be amongst the very dearly departed.

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