The Franchise Owner's most trusted news source


Log In / Register | Jul 22, 2018

Comments regarding this article:

Add new comment


9 Comments

RE: THE BUSINESS MODEL OF FRANCHISING

Could not disagree more with most of what you wrote. You imply that you know of or are familiar with franchising in enough detail to post on a franchisee website, yet it is apparent that you have no understanding of the vast majority of franchising. Deciphering your rhetoric, it appears that you are a frustrated SEIU thug that can not grasp that a franchisee is still an independent business owner. For political purposes, it seems much easier to vilify, divide and spread the class warfare if you could lump all franchisees in a system so you could use the "greedy, international corporation tagline". Unfortunately, the FTC and/or Congress is going to have a very hard time turning mom/pop small business owners into the Huge, Greedy, International Corporations you need to promote your agenda.
For the record, all franchisees and franchisors should oppose a mandated minimum wage hike (although, there will be some Franchisors who pick the most convenient political/feel good approach). Minimum wage is for the lowest skilled worker in the work force. Ironically, you would be hard pressed to find any business operating in the US today with an Average Wage equal to the federal minimum wage. Quite simply, minimum wage is the entry level point, it should not be mandated, changed or assumed to be fair. It is not presumed to be or described as a "living wage". It is entry level. The vast majority of all businesses even those in the "evil franchise world" would be 20 - 30% higher than the federal average wage. The consequences of mandating what should be market driven will only exasperate labor disparities.... Albeit painful, markets always figure a way around mandates and regulations, whether it will be a shrinking of staff, automation, out sourcing or changing operations just like OBAMA CARE and the new "skinny plans" that will be popping up, minimum wage mandate will backfire as well.

kshawma sawant

Councilwoman Sawant, described on her Wikipedia page as a Socialist, is quoted as saying, "In order to be a franchisee, you need to be very, very wealthy." Spoken like someone who has never run a business, never met a payroll, and is largely devoid of any knowledge of the franchise industry. Very, very dangerous.

RE: The Business Model of Franchising

Franchising has had "social consequences for our nation in terms of the lousy jobs it produces that generally provide no health insurance or retirement benefits or paid leave, etc..."

Really care to show us all how that's true?

"But, our Congress doesn't fix the FTC Rule"

The FTC Rule governs pre-sales activities and requires disclosure.

"The Franchise System (the model of business) is designed to send all of the profits up to the top of the international financial pyramid. We, the most successful capitalists, introduced franchising to the world."

Profits are a good thing and so is capitalism.

"Both franchisors and franchisees oppose a raise in the minimum wage because it will hurt both the franchisor and the franchisees in terms of profits ----and it may put a lot of franchisees out of business entirely."

Yes many small business owners are against minimum wage hikes. Some will go out of business.

Not simply public relations

Ed Teixeira's point is correct.

However there is the larger issue of wages in the QSR segment, and multiple documented cases of wage theft at Domino's, Papa Johns, McDonalds and Subway.

The problem is not simply optics. The problem is real and the franchise industry needs to face it and develop business models which do allow for payment of lawful wages without going bankrupt. That starts with realistic price points and cost of goods.

The Business Model of Franchising

The franchisor gets his royalties from the day the franchisee opens the business until the day it closes whether or not there are EVER any profits made by the franchisee who provides all of the hard assets and the employees that comprise the Franchisor's System.
Franchisees who own only one unit will be hurt by any raise in the minimum wage if they are not yet making profits or are trapped in place and have been standing at break-even status for months or years and forced (by the exploitive contract to hang on in order not to lose everything.
This exploitive business model has had social consequences for our nation in terms of the lousy jobs it produces that generally provide no health insurance or retirement benefits or paid leave, etc... But, our Congress doesn't fix the FTC Rule and no doubt figures that lousy jobs are better than no jobs at all --especially in view of the global economy where money has no national borders any more.
The Franchise System (the model of business) is designed to send all of the profits up to the top of the international financial pyramid. We, the most successful capitalists, introduced franchising to the world. .
Both franchisors and franchisees oppose a raise in the minimum wage because it will hurt both the franchisor and the franchisees in terms of profits ----and it may put a lot of franchisees out of business entirely.

Franchisee System?

What in the world is a franchisee system?

Ed Teixeira's picture

Franchise Associations

I would suggest that your association consider the harm the $15 minimum will do to individual franchisees in Seattle.A positive vote is virtually guaranteed to pass today. The entire franchise industry needs to be on top of these efforts.

  • Franchises are still large businesses under the plan. Despite pleas from franchise owners in the city, council members still say owners of franchised restaurant outlets, copy shops and other franchise businesses must have to pay $15 an hour as quickly as large businesses, regardless of how many employees they have.

Believe In A Strong Franchisee Association

A strong franchisee association is vital to the success of franchisees. Providing a united front can force changes that profoundly affect the bottom line. Controlling the supply chain and advertising budget through franchisee co-ops can save franchisees thousands and ensure they benefit from the purchasing power of thousands of individual businesses. It also makes each business more competitive, focuses advertising on profitable products, and ensures the viability of the franchisee AND the franchisor.

While Systems such as Subway grow and prosper using that model there are those that actively seek out and destroy any attempts by franchisees who attempt to organize, that take the supplier rebates for themselves, that use the advertising money to lure more small entrepreneurs into bad systems, and bail on the system when the end is near.


Quiznos is the anti-Subway. Its leadership led by D!ck Schaden is responsible for the biggest QSR collapse in US history. They fought a franchisee association for years and when forced to recognize one after losing a franchisee lawsuit, made sure it was packed with stooges and then ignored it. They took the rebates, overcharged the franchisees, siphoned off the advertising money, and blamed franchisees when the system imploded. The current group of Wall Street "investors" has no restaurant experience and runs Quiznos the same way.

Kumon franchisees don't want to end up in the same situation. A strong franchisee association recognized and in partnership with the franchisor is no guarantee of success either for the system or the franchisees. But it will guarantee that your system will never be ruined by a person like The King Rat, D!ck Schaden, And His Court.

Jim Coen's picture

Well Said Nicole! Franchisee Associations are a must.

No matter how it is put and you did a nice job explaining the importance of a franchisee association.

I have experienced first-hand how a franchisee association can have a positive impact on brand value and brand equity. The brand is the most important asset of any franchisee system. Franchisees and franchisor working together collaborating on ways to increase brand value is a positive force.

Without an independent franchisee association franchisors are often left to their own demise.