Franchising as a Scarcity Trap which relies on The Irony of Poverty


Many times, franchisees do not make very good decisions once they realize they are in a difficult position.

They act like animals that are cornered or have been entrapped.

Their base emotions (fear, disgust, shame) take over, pushing out all logic or planning. They react, often stupidly.

Their much-needed higher level facilities cannot be invoked once the perceived loss of their house, life savings, efforts, identities (a successful person, provider, role model) and their core relationships (spouse, children, etc.) is threatened

The situation they are in easily swamps their easily-shaken identity, confidence and trust. This happens across all class, race, education levels: It is an ancient animal response.

Franchising opportunism creates a Scarcity Trap (top-down, master-servant relationship) that can be used to unleash the awesome power of what others have called The Irony of Poverty.

This situation has two very powerful characteristics:

1. The poor have to make better decisions than the well-off behave because they have very little room to recover from a bad decision.


2. The poor’s situation makes arriving at a better decision much less likely than someone who has access to better resources (ie. can’t contract for advice, no peer trust, no information sharing, collapse of imagination, empathy, etc.).

You get hit from both ends.

You are in an environment where the decisions have to be better, but you’re in an environment that by the very nature of that makes it harder for you apply better decisions. A Talk By Sendhil Mullainathan

Working with at-risk franchisees you see these rubbed-raw emotions everyday. They have simply been put into a situation that disables their cognitive abilities.

They are impaired from helping themselves and too afraid to trust anyone else.

You are stuck in a well-laid scarcity trap with seemingly no way out.

One Response to Franchising as a Scarcity Trap which relies on The Irony of Poverty

  1. Carol Cross says:

    Yes, Les! I think it is true that “shame” silences many franchisees —especially since so many of them are so proud in the beginning that they have a “business of their own” and their hopes are high. This is especially true with the Mom and Pop franchisees who are middle age and who feel that they are smart and competent but were not smart enough to protect their own interests. It causes trouble in marriages and relationships and the “constant” stress of a failing business is like a wound that will not heal. Shame and humiliation are terrible companions.

    Friends, who aren’t in franchising, and who don’t understand the nature of franchising tend not to be that interested or sympathetic when the business starts to fail, and how does the failing franchisee, who is fearful and angry, explain that they were “tricked” into signing a binding contract in which they gave away their due process rights to any recourse for the exploitation by the franchisor. I’m sure many franchisees don’t talk about their stress and fears, even with family members, let alone friends.

    The Irony of Poverty comes into play and the isolation worsens the situation for the franchisees.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: