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:
- 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),
- 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
- 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:
- a “rainy day” account of a minimum of $25,000 to take immediate legal action,
- 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
- 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.