British Love Bogus Franchise Myths

Franchise myths have found a home in the United Kingdom. Clive Houlston is managing director of franchisor Mr Electric UK & Ireland and is also on the board of the British Franchise Association. He says:

“Recent research demonstrates that of all the businesses starting today, only 20 per cent will still be trading in five years time, as inevitably starting a new business comes with a steep learning curve, whereas franchising reduces this learning period dramatically as other’s past experience can be used to help those starting out.

“As a result, a reassuring 80 per cent of franchises will still be trading in the same five year period, which highlights the tried and tested franchise formula.” [Franchising Could Safeguard SMEs through Credit Crunch, Birmingham Post]

Of course, "still be trading" could mean that franchise owners have changed hands five times, each losing 90% of her investment. The shop still stands, but now with new management / owner. The phrase certainly cannot mean the original franchise owners retains his business 80% of the time. In the aggregate, that's unrealistic, even if the island nation of Britain were ideal for franchises. Both franchisors and franchises collectively fail at the same rate as small business failures.

Here are the actual small business failure rates.

The trick is to separate the gold from the fool's gold, to find the franchise systems with significantly better success rates.


Related reading:

Error Regina

Last year, Mr. MauMau was assembling a collection of UK myths and some Irish ones to boot. The Brits labor (or as Webster would say, "labour") under a lot of bogus franchise stats.

As I recall, the source of much of this was NatWest Bank and perhaps Mr. MauMau has some of the NatWest material he could post.

Paul SteinbergFranchisee Attorney, New York City, Ph: 212-529-5400

Myth Vs Reality

Is this myth or reality?
A company that takes a big chunk to buy in to the franchise system, sells the franchisee equipment at inflated prices, finds the franchisee a contractor who charges inflated prices, sells food and supplies to franchisees at inflated prices, sells forced ship food and supplies at inflated prices, takes ad money for non-ad purchases and inflates its commissions, grabs all the kickbacks from vendors, puts 3, 4. 5 restaurants in a five mile radius, tries to force mandatory, artificially low prices on its franchisees, sends letters threatening termination to those who ignore illegal mandatory pricing edict, has lost 1,000 franchisees in the past year - 600 closed stores and 400 sold for pennies on the dollar, and now wants to take its roadshow overseas.

This isn't a myth. This is the Quiznos reality.

The Quiznos Reality

is the reality of thousands of franchisees forced to file bankruptcy and the modern day thieves that continue to steal from those still trying to survive.

Quiznos Reality Part 2

...that Brenneman (the so called "Turn-Around King") and his "Crack Crew" have managed to increase our FLPD's, while reducing our ave. ticket and customer counts. All the while congratulating themselves on a job well done during their weekly CEO Info-mercial. The myth is they think Subway is our competitor when in reality, Subway is MUCH bigger and smarter then they will ever be.

Quiznos Reality Part 3

Brenneman promised..."$10,000 in extra profit per unit the first year he was on board, lower food costs, less complicated system, increased communication, more reactive to franchisee concerns"

What did we get? Higher food costs, $2 Sammies, lower dollar rings, $5 large sandwiches, a jokingly run delivery program, an advertising and marketing department that couldn't market a lemonade stand.

All this while stating that they have assembled the best executive team in the industry!

Quiznos Reality Part 4

Brenneman also promised to return 100% of the food, paper and chemical rebates/kickbacks to the Zees. I knew this would NEVER happen and sure didn't. Another example of over-promising and under-delivering.