Deer: Are We Trade Show Activists?

February 13, 2009

wolfdeer5A good question but a better one is:

Can we afford not to understand how we got roped into a losing deal?

I think you better Get Smart or you’ll find yourself on the wrong side of the next buffet.

  • In confidence games, it’s a fact that more than 50% of the chumps are good for at least a 2nd fleecing.

I took a look at a trade show advertisement this week and the posting was picked up on Michael Webster’s weblog.

Anyone who contacts me is invited to join me in interpreting how a trade show works. Live.

It is a very sophisticated and well-thought out selling environment that is used to qualify candidates; economically but mostly psychologically.

Your lack of awareness of the dangers [ignorance?] is really your admission ticket.

The first step in protecting your family is education.

I’ll be relying on the Six “Weapons of Influence”: social proof, authority,commitment and consistency, reciprocation, liking and scarcity. Bring your copies. You’ll get a tutorial on not only the Science of Persuasion but on relevant cognitive biases (especially confirmation), The Tipping Point, behavioral economics, Theories of Unusual Events and Risk Homeostatis, heuristics (eg. human thinking shortcuts that usually help us but sometimes result in catastrophic errors) and 10 years of intense industry analysis.

Agenda

  1. We’ll go over the basic confidence game role structure and process: house, roper, inside man, shill, chump, fixer, etc.
  2. Why it is so critical to have independent legal advice before you sign (goes double for deals less than $20,000).
  3. The selling value of comparing (anchoring) a new system with the best, most successful franchisor: McDonald’s.
  4. What something called “Prospect Theory” has to say why you will stay in a losing business much, much longer than you could ever imagine.
  5. Why you should only sign when there is an Independent Franchisee Association, IndFA present (versus the lapdog Franchisor Advisory Council).
  6. We’ll decode the hidden messages within the marketing material (worked for an advertising design studio + Ivey MBA + McLuhan disciple).
  7. I’ll explain the role of the current SME loan guarantee program.
  8. Why Canada is a safe harbour for white-collar crime.
  9. How this recession is shattering the conventional wisdom that franchises sell better, the worse the economy gets [HINT: new sales, now, are the worst on record].
  10. Why the hook has to be planted in the male first.
  11. How shame is invoked to silence particularly new Canadians.
  12. Why exceptionally thorough pre-sale due diligence is much more limited than you think and could in fact increase your chance of business failure.
  13. The role of the expert seminar.
  14. Why the most rational and dodgiest should absolutely force a copy of Ontario’s franchise law into your hands.

All of these fraudproofing skills are entirely understandable, applicable to many situations and will last a lifetime. I was taught by the best.

In these days of Bernie Madoff, BIM, CitiGroup, etc., I don’t think you (or anyone you know in the traditional or new media) can afford to turn not to learn more about the Science of Persuasion and applied psychology.

Offer to Sellers: You can join us as well. I will gladly discuss my views in front of anyone, at anytime. These persuasion techniques have been proven scientifically and it’s time that more people understood how skillfully they are applied in franchising.

If I were in your shoes, I’d much rather guarantee us free rein rather than be seen to be resisting evaluation. That old hand-in-the-lens shot sells television shows but is, by its airing, basic proof of guilt.

Consumer education is good and only the fraudsters have anything to hide.

Cost?: Nothing

Just call me at 705-737-4635. Bring the whole family. les.j.stewart@gmail.com

PS: Do me a favour: Sign up to receive each new post (see top right, RSS feed). FranchiseFool is now read in 44 countries. Not bad for a single Canuck in one year, I think.

— UPDATED for Fall 2009


FranchiseFool & Web 2.0: Raising possible Doubt

January 27, 2009

question1I’ve been noticing something funny.

WordPress.com keeps an eye on a statistic called Referrers: “People clicked links from these pages to get to your blog.” (It’s an incomplete measurement but it’ll do for now.)

  • In the last week, FranchiseFool reached 28 countries (Google searches: Jan 20-26).

I don’t care much about the numbers of page views, although every month has seen a positive growth since I started in February 2008. Still, December 2008 was 4,028 views; January probably around 7,000 views. This may or may not be anything to sneeze at. I’ve never traded in volume goods or ideas.

You may notice that I do not allow any form of advertising because I think it’d distract the viewer (and me, for sure) from the central message of FranchiseFool which is:

  1. You’re not alone,
  2. There are lots of people out there who share your uneasiness about franchising, and
  3. many do not have enough technical knowledge to know “why” but are keen to learn.

Mine was always a very narrow focus, a niche market: Those dissatisfied with the normal caveat emptor or all-franchisees-are-stupid thought-terminating clichés (words used to stifle debate by people intent on covering up their guilty feelings) that pass for industry expertise.

As soon as I debug my son’s webcam, with your help, we’ll show what Web 2.0 can do to a house of cards. After all, if what I say is untrue, then what possible danger could we pose to a multi-trillion $, transnational empire?

Immediate Questions Arising (re: below of Referrers per Day)?

  1. Why is Poland so interested in FranchiseFool?
  2. Please someone tell me why one post, lebensunwertes Leben: A Life Unworthy of Life, “outsells” the 2nd most viewed post (Symbols: Strength through Unity) by a factor of 13.9 to 1 (8,783 v. 633)?
January %
20 21 22 23 24 25 26 Total Total
1 pl Poland 3 2 172 40 9 5 1 232 46.0%
2 it Italy 3 4 10 25 11 1 9 63 12.5%
3 uk UK 1 18 7 2 5 3 36 7.1%
4 nl Netherlands 1 24 3 2 3 2 35 6.9%
5 es Spain 8 8 1 2 5 24 4.8%
6 ca Canada 3 4 6 2 5 20 4.0%
7 tr Turkey 11 2 2 15 3.0%
8 br Brazil 1 1 8 2 2 14 2.8%
9 be Belgium 1 3 2 3 2 11 2.2%
10 cl Chile 9 1 10 2.0%
11 at Austria 2 3 5 1.0%
12 ch Switzerland 1 1 1 2 5 1.0%
13 mx Mexico 3 2 5 1.0%
14 de Germany 4 4 0.8%
15 fr France 3 1 4 0.8%
16 ei Ireland 3 3 0.6%
17 ar Argentina 1 1 2 0.4%
18 in India 2 2 0.4%
19 kr Korea 2 2 0.4%
20 py Paraguay 2 2 0.4%
21 tw Taiwan 2 2 0.4%
22 za South Africa 2 2 0.4%
23 bo Bolivia 1 1 0.2%
24 dk Denmark 1 1 0.2%
25 hn Honduras 1 1 0.2%
26 jp Japan 1 1 0.2%
27 pe Peru 1 1 0.2%
28 ve Venezuela 1 1 0.2%
Total 19 22 238 114 44 26 41 504 100.0%

CFA says Bank says Franchises 4 times more successful?

December 1, 2008

waynestateuusdeptcommerce1In a Blue MauMau post called Canada’s Misleading Franchise Success Rate Claims, Lionel Hutz PA quotes Ms. Lorraine McLachlan, president and CEO of the Canadian Franchise Association, as claiming:

McLachlan said that a recent study released by BMO [Bank of Montreal] indicated that nearly four times as many franchises succeed compared to independent small business.

“When you go into an established system, which is the hallmark of a franchise, the probability of success is obviously incrementally increased,” McLachlan said. “The fact that there are more than a couple of locations currently operating using that brand, using that system, suggests that it’s not a flash in the pan and that there is some history that it will succeed.”

… “in economic times such as these, the fact that you are dealing with an established system that has predictable success means that the bank in all likelihood is going to look somewhat more favourably on your application,” McLachlan said. “In many cases, the franchisor will help you work with the bank.”

The full article can be found at The Sudbury Star.

This is problematic because the franchise industry historically has been very loose with their success/failure statistics. Indeed this is what Dr. Timothy Bates of Wayne State University had to say:

Knowledgeable scholars who study franchising issues routinely express contempt for the failure rate statistics publicized by franchisors.

Francine Lafontaine, for example, states ‘one of the major selling points of franchising to franchisees over the years has been the statistics vehiculated by the trade press on the very low failure rates of franchised businesses compared to independent operations. These statistics never had real scientific basis’ (p. 14, 1994).

Such criticism does not deter the industry.
– Survival Patterns among Franchisee and Nonfranchised firms started in 1986 and 1987, U.S. Department of Commerce, p. 6.

I am unaware of any study since that time that would contradict this.

UPDATE

BMO Bank of Montreal: I had telephone conversation with Steve Iskierski, Senior Manager, National Franchising Services for BMO Bank of Montreal. Iskierski was unaware of the basis for this 4 times notion and their is certainly no study that he is aware that BMO has. He was unclear as to why Ms. McLachlan of the CFA would quote that figure and ascribed it to reporter misquotation.

Canadian Franchise Association: Emailed for copy of report. No response.

The Sudbury Star: Left a message for Janice Leuschen. No response.


YouTube says Franchising is slavery

October 28, 2008

YouTube will become a very effective means of information sharing for franchise investors.

This is the first general franchise message [ie. it's not this brand or that brand that is acting in a predatory fashion] to hit YouTube. It reflects the reality that all franchise relationships have the same characteristics, the same tools or potential; everywhere, all around the world.

What makes franchising different than independent business is its ability to ransom your life savings. This is done because, at the moment you sign, your investment instantly changes from 100% liquidity to next to zero [transforms into a sunk cost]. You imagine yourself in control but have lost 100% control of your assets.

New franchisees come to realize quite quickly that they go along with the franchisor or they will be punished. Many franchisees kid themselves; hoping upon hope that their masters will allow them to exit by selling to the next sucker. That rarely happens because the franchisor makes more money the less you make at re-sale.

Over years and after signing a confidentiality agreement, investors realize that it was always this way: the moment you signed, 90% of what they put in was always at the franchisor’s absolute use. The sunk cost nature is the source of a franchisor exercising their discretion in a one-sided manner (opportunism).

  • The franchisee’s near total net worth is tied to the whims of a party that has next-to no penalties if they choose to act in a dictatorial manner.

Soon I think we will have a franchising channel with dozens of trademark correspondents bringing back information that is not constrained by government decisions, coerced confidentiality provisions or SLAPPs.

That is very good news for good systems and not so good for opportunistic ones.

  • And this should be applauded by all stakeholders that want to improve quality, in what we perceive to be a free market economy.

Shouldn’t it?

Thanks to the folks at BakersDelightLies.com for bringing this out.


Risky Business: You Fall when your franchisor fails

October 3, 2008

Running a franchise is like walking a tightrope at the best of times. When the franchisor hits the wall, it’s as if the world doesn’t make sense anymore.

Your supports are gone, in an instant: a senseless act of economic violence.

A recent Wall Street Journal article by Richard Gibson presents 3 not all that helpful suggestions, 1 hypothetical worthwhile observation, and 0 FranchiseLand reality checks (see Be Prepared in Case Your Franchiser Falls).

The 3 next-to-impossible alternatives are:

  1. rebrand to another franchise system (technically possible at any time but legally difficult to do, 99.9% of the time stupid to do while in a crisis, expensive, may increase aggregate and long-term risks),
  2. go independent (the franchisor’s difficulty does NOT free you it only transfers your obligations to another party, raises false hope, breeds moronic thinking and inertia), and
  3. advertise to your customers that you’re still alive (yes: the best of the 3 but, still, a thin stew).

The best part is the value of a well-functioning, prepared independent franchisee association (IndFA).

  • However, all IndFAs are not the same.

Only invest in a franchise that has an IndFA with the following 3 characteristics:

  1. a “rainy day” account of a minimum of $25,000 to take immediate legal action,
  2. a two-year track record of collecting monthly fees from 75% of the franchisee members (you do not buy house insurance as the first responders are driving up to your curb), and
  3. 50% plus 1 of those contributing franchisees have signed an agreement that they will contribute (loan, add equity) over-and-above the monthly commitment when asked.

Contingency planning is the main reason for an IndFA’s existence.

  • Saying an individual mom and pop franchisee can do effective planning is just plain cruel. They have neither the financial nor conceptual horsepower to do anything knee-jerk reactions. Most of time, it’s Bambi-in-the-headlights time.

Unfortunately, these 3 IndFA points are 99% irrelevant because 99% of franchise systems do NOT have an IndFA that meets these 3 characteristics.

In the real world…When the franchisor fails you do too unless you have the $ and cahones to take immediate action. Only then can you overcome the law of gravity.

Remember: If it doesn’t jingle, It doesn’t count.


Symbols: Strength through Unity

September 19, 2008

Michael Webster over at Misleading Advertising Law picked up on my recent posting: Franchising is the latest Big Con.

I absolutely agree with him: the best defense against post franchisor opportunism is a well-funded, professionally managed independent franchisee association, IndFA.

There is no substitute for collective action and only a fool thinks otherwise.

The power of “sticking together” has historically been represented by rods that are bound together, often with an axe in the middle (fasces: from the Latin meaning “bundle”). The English word fascist is also derived from this root.

  • In ancient Rome, the bodyguards of magistrates carried fasces and it came to symbolize authority. On early American coins, the fasces symbolizes the unity of the colonies, strength in numbers (A single stick may be broken, but a number of sticks bound together are invincible).

Fasces show up on seals (state of Colorado, two of them crossed on the seal of the U.S. Senate, the Knights of Columbus, {above), the Administrative Office of the United States Courts, and the fascist party under Benito Mussolini.


United States of AUS: McTurkeys come to their Senses

September 17, 2008

Late breaking AUS Franchise news via Blue MauMau.

The International Franchise Association, IFA has instructed the Commonwealth of Australia on which laws they should and should not have.

McTurkeys instinctively renounced their citizenship and assumed the posture most likely to please Big Franchising‘s head office.

In a predictably subtle grasp of international and constitutional legal matters, an unnamed IFA source is quoted in an article called Washington Trade Lobbyist Warns Against Changing Australian Franchise Law), that:

The International Franchise Association, a Washington D.C.-based lobbying group representing mainly franchisors, is warning Australian parliamentarians debating a tightening of the country’s franchise laws that laws requiring registration of franchisor disclosure documents are outdated and burdensome. The organization also warns that recent removal of foreign franchisor exemption will dampen U.S. firms’ interest to expand into Australia.

The IFA, which represents less than 1/3 of U.S. franchise systems, came out firmly in favour of a disclosure regime.

In a related story, when reached for comment on the fact that

  1. the IFA had taken over her law-making authority, and
  2. her former colony would henceforth be called the United States of Australia,

Elizabeth II, the nominal head of state and Sovereign of Australia responded with her characteristic degree of pith:

…whatever.


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