Hidden Risks: Franchising as a poisoned apple

snakeappleYou know 100% of the time you’re dealing with a snake if they say franchising is safer than independent business.

U.K. predators are still able  to get their media release lies printed as truth.

Comparing franchising with non-franchised businesses is normally an exercise in concealing risk. Hiding risk is exactly what caused the current economic meltdown.

Franchised businesses have unique risks:

  1. usually from several directions,
  2. very powerful because they are unexpected,
  3. many of them at play (hiding in plain sight),
  4. both sudden and slow (blow up versus slow bleed),
  5. unknown by franchisees (most veterans have no idea), and
  6. activated when the investor is least able to defend themselves.

I have identified 344 risk situations that you will face that you would never face in an independent business. There is an old saying: To a blind man, everything is sudden.

These are 8 of them in no particular order of danger:

3.  101 ways to terminate a contract
45.  Churning (serial reselling)
80.  Encroachment (too many outlets put in territory)
168.  Insolvent system renamed and sold to a relative
264.  Right to associate and right to harass
296.  System designed to fail for franchisees
317.  Trial decision always appealed
337.  When the franchisor tanks, so does the franchisee

Note that all of these risks are within every modern franchise. The franchisor decides unilaterally which tool they are going to use, on what franchisee, at this time.

  • Most tyrants keep their serfs compliant by using extreme measures very infrequently.

Sure there’s the occasional Rwandan genocide. The machete’s not needed because the stories are retold of what happens to the minority that stood up for their rights.

This is the role that public stoning or crucifixion played in a previous empire.

If you’d like to take a look at all of the 344 risks I’ve collected over10 years in the Information Sharing Project, here’s the pdf.

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One Response to Hidden Risks: Franchising as a poisoned apple

  1. Carol Cross says:

    You want to bet that at the Franchise Finance & Development Conference that is to be held May 4 – 6, 2009, at the Palms, Las Vegas, Nevada, that the “Franchise Sales Sessions” will deal with how to make constructive earnings claims outside of the FTC Rule and FDD when they “close” a franchise sale.

    Perfect place, Las Vegas, for this conference concerning franchising which is all about what may be the worst gamble a prospective franchisee will ever make —the actual purchase of a franchise and the signing of a boilerplate, non-negotiable, contract that is more often than not a malicious legal trap.

    Those who polish the apples and hide the worm and the rot within are very comfortable in this setting.

    Like

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