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RichardSolomon's picture

I bet you wish you had one in Tronta, right?

Y'all only think y'all are sfistikated.

michael webster's picture

Now that's a Platform

Especially like the "game room" adjoining the carwash.

RichardSolomon's picture

That may be well and good for your traditional mall business

model or plastic frachised ticky tacky me too greasy spoon. I guess I am exorcised/exercised (?) by Joe Maxwell's not becoming a client of mine.

Joe's operation was on the noon news here in Houston just now. Some folks took issue with his model because Joe thinks outside the box and always pushes the envelope.

At Joe Maxwell's you can with one stop get your car washed and detailed; buy guns; get liquor and beer and culturally appropriate wines (Thinderbird, MD 20-20, Nature Boy); get your drugs refilled, including all sorts of lawfully produced but unprescribed pills and elixirs, plus medical MaryJane; and enjoy a nice grilled racoon sandwich on a bun.

Talk about recession proof! Genius often goes unappreciated. Think of what my practice would have become if he had been my client.

michael webster's picture

What are Platforms?

If you have POS system, are located in a mall, take credit, match jobs with people,  or a myriad of other operations, then you are using what economists call two sided or many sided platforms.  Each of the previous examples is a platform, many of which have internet components.  Advertising is the most common known internet platform, because of google's dominance - but there are many other developing platforms.  PEO companies are a perfect example of a service provider that could assist franchisees scale and retain the benefits of that coordination.  If the franchisor tried this, they would face serious control issues and they might lose their legal status as "not employer".

If all zees are smart...

Which ones does the zor take advice from when they have differing opinions?

If all zees are smart...

Which ones does the zor take advice from when they have differing opinions?

Re:Franchisees have better insights into running the business

In the past hundred years there has been roughly the same environment in which franchisees had an edge in managing. It's not a change in technologies that is making it wise to have franchisees in charge of a brand.

What is so amazing is that it has taken franchising so long - over a century - to figure out how to use a built-in resource that allows them to be smarter than their competition.

I suspect the problem is a mind set that acts as blinders. Corporate officers have down played that their franchisees are entrepreneurs and up played that they are standing on a mound of hayseeds, when they have actually been in a sea of senior managers and decision makers. The problem is that franchises are independent. Leading and aligning independent businesses is not taught in business management classes or in the corporate world.

Do you speak business?

What is this guy talking about?

My establishment is not built on the Internet or what is happening in Internet technologies. My customers are rarely motivated on the Internet to visit my business or my competitors. When it becomes more of a factor, I'll shift a few more marketing resources to that venue.

Perry Shoom's picture

Good Summary

But, the new platforms being built primarily on top of the internet favor those franchisees who can use these platforms to complement their existing businesses.

 

Nicely put.  This is the reason why I prepared the White Paper.  It seems to me that franchisees have misunderstood and misused this platform (the Internet) over the past 20 years and need to change their approach in order to create a proper balance in the industry.  What I have tried to do is look at the past from a different perspective so as to understand what has happened - and then to suggest ways to move forward.

Perry Shoom is the founder of FranchiseFacts - a research firm that conducts private and public research for the Franchise Industry.  The 2011 Franchisee Survey is in progress at www.FranchiseFactsUSA.com. If you are a franchise owner or store manager, please participate. FranchiseFacts does not disclose identifying information that may be provided by survey respondents. Your participation in a FranchiseFacts survey means that you can honestly and openly communicate your responses without disclosing your identity to third parties.  FranchiseFacts is an Approved Survey Vendor for IAFD

 

 

 

Franchisees have better insights into running the business

One of the problems with pure franchised chains that have no significant portion of stores, hence no retail skin in the game, is that they lose the edge. They become too removed from the customers of the products and services. That puts them at a considerable disadvantage. Having franchisees in charge allows these chains to tap into those management insights and into practical innovations to customers.

michael webster's picture

Franchisees Coordinating

Perry is right, and shows how easily we slip into the thinking that if there is something wrong with the franchise business model, the problem is in the contract.  Of course this is wrong.

I believe that the next 20 years favors the franchisees who can coordinate their actions on platforms and keep the surplus value generated by such coordination.  The franchisor was the primary winner of the last series of platforms or networks that were built- national highways, national tv, credit cards, national airline bookings, etc.  But, the new platforms being built primarily on top of the internet favor those franchisees who can use these platforms to complement their existing businesses.  The old networks gave rise to marketing/selling largely as branding, while the new platforms work best on marketing to small worlds.  

Perry Shoom's picture

Do franchisees run better operations?

This thread seems to have diverged from the original theme which is that franchisees run better operations.  I'm not sure if that is true or not.  I do know that this thread has diverged into legal areas that most franchisees can only pretend to understand - none of which relate to the topic.

What I believe is that franchisees have many advantages over non franchisees if they choose to work together and capitalize on these advantages.  It also seems to me that the vast majority of franchisees have given up this advantage by choosing not to work as a team.

I've written a detailed White Paper on how I think this has come about.  (Five separate articles on Blue MauMau - fifth with recommendations to be posted this week.  The entire White Paper can be found at http://www.franchisefactsusa.com/articles.php


Perry Shoom is the founder of FranchiseFacts - a research firm that conducts private and public research for the Franchise Industry.  The 2011 Franchisee Survey is in progress at www.FranchiseFactsUSA.com. If you are a franchise owner or store manager, please participate. FranchiseFacts does not disclose identifying information that may be provided by survey respondents. Your participation in a FranchiseFacts survey means that you can honestly and openly communicate your responses without disclosing your identity to third parties.  FranchiseFacts is an Approved Survey Vendor for IAFD

Dunkin' Swamp Gator

Mark says:
"I believe 99.99% of franchisors will try to appeal an unfavorable verdict to death. They can't and won't allow you set a new precedent, emboldening other franchisees to follow in your footsteps. With very few exceptions, franchisors will mount a seemingly endless battle, and with little if any regard to aggregate legal fees. They care little (or not at all) for "truth" or "principles", but rather single-mindedly to prevail."

We litigated with Dunkin' for nearly 3+ years. In the end, the Judge had issued an opinion that gave us some "options". However, Dunkin' wanted our stores at any cost and threatened to endlessly appeal any option we pursued outside of giving them what they wanted.

Our attorneys warned us that Dunkin' could not allow our organization to be viewed as being successful because it would open the flood gates for the next franchisee to believe they to can successfully litigate with Dunkin'. We ultimately cut our best deal and settled; rather than, having Dunkin' unleashed their wrath and setting an example of our organization.

Mark speaks from his experience as a franchisee with Dunkin' Donuts.

Mark proudly states that he, "has NEVER engaged in litigation against a franchisor, nor has has he ever needed to defend himself from franchisor instigated litigation."

I wonder how you were able to avoid legal conflict with Dunkin'? And, why you chose to emphasize the fact you were able to remain litigation free during your career as a Dunkin' franchisee?

Mark Dubinsky's picture

Don't pick a fight with a Swamp Gator...

Richard--

We have not had the pleasure of discussing matters for some time. Long time - no discuss.  In this case, I agree with you nearly entirely. 

Regarding your title,  "Cowards die a thousand deaths. The brave only die once," I might point out that death, regardless of many deaths or only one death, should not not be considered a forgone conclusion or a desirable outcome.  I say don't pick a fight with an 14 foot swamp gator unless you have a 444 Marlin or better, a load of ammo, and a willingness to shoot to kill.  And of course that would translate into experienced, proven counsel (or team of counselors) who is expert at franchise law, antitrust law, related specialties, a winning case, and of course, one hell of a lot of money. Generally, franchisees have difficulty finding the right lawyers to help them wage a winning battle, and even more often than that, underestimate the mountains of cash required to navigate and survive a protracted legal battle.

Moreover, I also strongly advise a franchisee not to engage in such a fight unless you and your team realistically assess the strengths and weaknesses of your (and your opponent's) respective case(s).  Too, even if you wage an aggressive, well conceived battle, you still may not win. Judges and juries are human beings - not machines. Outcomes are seldom predictable and can never be guaranteed.

I think you have to ask yourself this important question before picking up your gun, "What does life look like if I fail to prevail?"  If failure will leave you in utter ruin, then don't fight that fight.  I believe 99.99% of franchisors will try to appeal an unfavorable verdict to death.  They can't and won't allow you set a new precedent, emboldening other franchisees to follow in your footsteps.  With very few exceptions, franchisors will mount a seemingly endless battle, and with little if any regard to aggregate legal fees.  They care little (or not at all) for "truth" or "principles", but rather single-mindedly to prevail.   

In conclusion, I firmly believe far too many franchisees attempt to litigate against their franchisors.  It is absolutely NOT a battle of equals.  Generally, the gator shreds the hunter - and the results are far from pretty. Only the gator and the vultures who get to clean up the scraps are the happy ones. 

Mark A. Dubinsky

-----------------------

Mark Dubinsky has 22 years experience as a franchisee, has served as President of the DD Independent Franchise Owners, Inc., and as a founding Director of the Coalition of Franchisee Associations.  Mark has NEVER engaged in litigation against a franchisor, nor has has he ever needed to defend himself from franchisor instigated litigation.

Carmen D. Caruso's picture

The Never Ending Tug Of War

Michael,

Thanks for the shout out.

Yes indeed, there have been many times when franchisors have reacted to a franchisee's assertion of its express or implied rights under the franchise agreement with new language, intended to negate the franchisee's claimed right, in the next version of the franchise agreement.

Much like a game of tug of war at a summer picnic -- but much more serious for those that have invested in the brand -- the near constant effort by franchisors to restrict "franchisee rights" requires strong pull-back by the franchisees, which can only happen if the franchisees stand together and unite in the common effort.

We applaud the Franchisee Bill of Rights.   The notion that franchisees should not enjoy this basic level of express contractual protection, or legislative protection, is very unfortunate, but realistically it is the prevailing status quo for most of our franchisee and dealership clients.

Therefore, until the day comes when the Franchisee Bill of Rights becomes the industry-standard, we must remain vigilant in defending the implied legal protections that franchisees enjoy under the implied covenant of good faith and fair dealing.  This common law doctrine, a frequent target  of franchisors in their contract drafting, is the "enlightened compromise" developed by our judiciary in the absence of a clear winner in this never ending tug of war.   See  Franchising's Enlightened Compromise on our website, for our defense of this "enlightened compromise" in the ABA Forum.

Best regards,

Carmen

RichardSolomon's picture

Cowards die a thousand deaths. The brave only die once.

Franchisees are very rarely represented by a lawyer with antitrust kowledge. If you don't understand how antitrust works, it will scare the hell out of you. When a lawyer who doesn't know what he is talking about discusses those claims with his franchisee group clients, he scares them too. They don't know when the claims are dangerous and when it is just a smokescreen.

There is also the expense issue. If the franchisees are not capable of providing the resources to maintain a good fight, they shouldn't go around picking fights. So many morons fail to appreciate that calling people names only scares wimps. When they are accused of conspiracy and run from the fight (for whatever reasons), they have not thought out their actions before they took their "stand".

I put a lot of the blame on misinformed/uninformed lawyers. I just took on a new client whose former lawyers told him he had a strong fraud case. The statute of limitations had already run on the fraud claim - - it wasn't really a fraud claim to begin wtih - - he made a lot of money on the deal and therefore had neither injury nor damages to show - - the accusations had already been made when he came to me, and they have now put his really good business at great risk. He had all sorts of notions of entitlement that were not his to begin with, and neither he nor his lawyers had the slightest clue about how franchising works. If they/he ever read the franchise agreement they failed to understand what it provided for.

I wonder how many franchisees are really also the victims of bad lawyering.

michael webster's picture

Sherman Violation

RIchard, I agree with your legal analysis.  However, I know of some franchisee associations who were faced with this explicit challenge, and decided to back away from a more direct approach.

RichardSolomon's picture

I don't believe that group advocacy re others not buying a

franchise would be an antitrust issue.

Neither do I believe a group boycott against the franchisees themselves buying more franchises targeting contract language changes is an antitrust issue. The Sherman Act's prohibition of multilateral refusals to deal applies to those that have for their purpose or effect restricting competition.

Were it otherwise, boycotts in support of non competitive agendas - like civil rights for example - would also be caught up in antitrust issues.

That doesn't mean that the franchisor might not claim that the action is a Sherman Act violation - but claimin aint provin!

michael webster's picture

Subway Ad Fund's Demise

The problem franchisee associations face is that the gains they make can be drafted away - the new contract essentially rolls back all the gains from either negotiation or settlement of a class action.  The Little Caesar's franchisee association recently faced the same problem.  It is a problem that Carmen Caruso pointed out many years ago - even wins by franchisees are simply drafted around.

I am not clear how the CFA's Bill of Rights intends to addresses the problem of clawbacks.

On the other hand, I am very clear -and have been so for quite some time - about how I think an association needs to handle new contracts which roll back franchisee gains.  

They need to go on an approval strike. They need to sufficient voice amongst prospects and renewals, and share of the new social media voice, toconvincingly argue that the new franchise offerings should not be bought, at this time, for this location, until changes to the contract have been met.  (To the extent that anti-trust laws need to be changed to facilitate this organized boycott of future sales, then I would support such a change.  Other partners would have to found who would also benefit from this.)

Finally, this article should be clearer about NAASF, the Subway Franchisee Association, and IPC, Subway's Purchasing Cooperative.  There is no formal relation between the two, NAASF is a no fee non-profit trade association, with less than 5 paid staff, while the IPC is a purchasing cooperative with between 200-500 paid employees.  Here are the board members of NAASF and here are the board members of IPC.