Where Half-Truths Begin

They are everywhere on every continent. They grow it and manipulate it and adapt it. I'm talking about the creators of the misinformation that promotes franchising and hides the real risk and what to do and look for.

You expect industry representative organisations to promote that industry and that is fair enough.  But look at franchising this way; if franchising was a large fish market where any percentage of those that purchased were guaranteed to be poisoned would you expect at least an absolute warning and perhaps a little government intervention. 

Advantages of Franchising

'10.          The franchisee taps into the bulk purchasing power and negotiating capacity made available by the franchisor by reason of the size of the franchised network.'

Disadvantages of the Franchise System

'6.            The franchisor's policies may affect the franchisee's profitability. For example, the franchisor may wish to see his franchisee build up to a higher turnover from which he gets his continuing franchise fee, while the franchisee may be more concerned with increasing his profitability, which does not always necessarily follow from increased turnover.'

Adapting (pdf)

‘Franchisees and franchisors are involved in a business-to-business contract, covered by a sector-specific code -- the Franchising code of Conduct. The relationship is much more akin to a business partnership than a business-consumer relationship. To try to overlay a consumer code on top of the Franchising Code is a recipe for costly, unproductive confusion.

We need any legislation to be clear that it does not apply in business-to-business relationships, or we need an accompanying memorandum to any legislation which clearly notes that a franchisor-franchisee relationship is not included in the application of the revised law.' (p1)

The Warning

‘.. you must not enter into self-employment and franchising if you are not prepared to risk losing your investment. There are no guarantees of success in any form of small business, and even though franchising is by far the most successful form of small business, it is still a business venture with the many of the same risks inherent to any other business venture. That risk must be fully understood and appreciated.'

FCA comments on ‘Opportunity not Opportunism' (pdf)

‘It is contrary to the structure and purpose of the Code to have the franchisor endeavour to advise the franchisee on risk issues.' (p2)

‘The FCA submission outlined how submissions alleging "churning" in franchising were effectively addressed by the March 1 requirements to provide details of former franchisees and a territory or site statement with information as to previous franchisees.' (p3)

This is the new, improved version from an organistaion under pressure following the recent federal franchising inquiry.  They are under presure to mainatin their control of franchising education and misinformation. 

Readers of this article who know anything at all about franchising might initially consider the descriptions of the downside of franchising as understated.  I will say it is a lie.

While the content of these Franchise Council of Australia pages are substantially true one must consider what makes for a good lie.  You cannot build an effective and believable lie without basing it in truth.  But it is the manipulation and interpretation of fact and the monstrous black hole of omissions that make all this information and the entire website and the organisation a sucker-creating lie.  They hide the real level of risk and the extent of the potential consequences of failure.  They set people up to be poisoned.   And they are on every continent.