If we forget, We will continue to repeat our mistakes

August 4, 2009

WikidFranchise.orgWe created WikiFranchise.org to house the documents that I have collected and to start a dialogue.

A wiki‘s strength is in its volunteer editors.

Time will tell whether other people find this franchise industry-only indexed archive useful.

It has some merit for teaching and learning about the business risks that sometimes run counter to the overwhelming advertising message to say “yes” to every half-baked concept.

The latest, saddest example I added to WikidFranchise today is from the Washington Times’s Elise Anderson, entitled: Jobless seek future in franchising.

As Elizabeth Winterhalter and her husband, Monte, packed up their house in Glastonbury, Conn., for their move to McLean, they were eager and anxious about trading the pain of unemployment for the promise and peril of something they had never tried before — running a franchise.

Good grief.

I wish the Winterhalter, Dillen, and Prioleau families all the very best as a personal and financial outcome but I hope Ms. Anderson follows up with them in 6 or 12 months. As for the expert that Anderson solely relies on?: Alisa Harrison has been with the franchise industry for a total of 1 1/2 years.

Banks won’t do Franchise loans: It is true that there are no normal or even government-subsidized (SBA) loans to be had now.

The reason: an emerging crisis that implicates the 7(a) Loan program of the U.S. Small Business Administration which has a long and consistently scandalous history.

Predatory franchise loans are becoming visible to everyone: loan brokers, banks, re-packagers and politicians. The public bailout of the franchise industry’s greed is what is freezing everyone in their tracks: not a recession. Pending fraud indictments tend to chill even the shadiest franchising financing scam.

Estimates of a public bailout of $70 to 80-billion will seem quaint if an accurate, non-biased accounting were to ever take place.

Don’t expect to see any breaking news stories about this on Franchise-Chat.com or BlueMauMau.org either: these off-message stories are skimmed off before they hit any franchise RSS feed. Keep the kids busy talking about the evil empires (MBE, Quiznos) or arbitration reform or how franchisees are to blame.

What I do: I took the article, coded it and saved it in WikidFranchise. Here are the business risks I assigned to it:

  1. Cannon fodder,
  2. Desperation causes bad decision making,
  3. False hope,
  4. Financing with 401k money is totally reckless,
  5. International Franchise Association, IFA,
  6. Only one side presented,
  7. Loss Aversion: people dislike losing much more than winning (the same $),
  8. Professional journalistic standards,
  9. Retirement savings gone,
  10. Severance package financing dream,
  11. Sold during time of psychological vulnerability, especially unemployment,
  12. Sold only to people with no small business experience (very naïve),
  13. Success or failure is within the direct control of the individual franchisee,
  14. Unproven business model,
  15. Unskilled and unaware of risks, and
  16. Who pays for the research?

Many families are going through very desperate times and are searching for help.

  • This article is just plain cruel.

I collected the already-published documents to give a sense of history for new investors.

WikiFranchise.org is a revolutionary tool for those willing to use it.

McLuhan and McAdvertising: All franchising franchises franchising

August 1, 2009

McLuhanMcDonaldOne of Canada’s greatest and most controversial thinkers was Marshall McLuhan.

WIRED magazine named him their patron saint; their Holy Fool.

Let’s look at only one of his quotes: All advertising advertises advertising.

Several obvious and not-so-obvious levels of meanings.

The most transparent meaning that McLuhan was trying to get across could be that:

  • by producing something you are encouraging the promulgation of more of the same.

McLuhan just loved puns and word play. As primarily a verbal instructor, engaged in wordsmithing, maybe using his methods can test the merit of the close ties between the words “franchising” and “advertising”.

1. All franchising franchises advertising: certainly Bob Purvin has demonstrated with his analysis of Super Bowl advertisers that franchising feeds the advertising industry in a very direct and substantial way. Required concentration of brand marketing dollars is a hallmark of almost all franchise systems.

2. All franchising advertises franchising: The visible brick and mortar store can conceal the rapidly churning franchisee ownership to the public.

3. All franchising advertises advertising: All non-franchising businesses must take into account the unique ability for franchised chains to concentrate advertising and brand clout. In some vertical markets, non-franchised models are only niche and local players.

4. All franchises franchise franchising: The choice of distribution model is in itself promoted as a near de facto guarantee of less risk and higher ROI for investors. This is routinely repeated informally by salesmen although expressly denied in any written documentation.

McLuhan helped me understand the primacy of:

  • the franchise relationship (the space/closeness, ties between) rather than the
  • physical or visible logos or tangibles.

Franchising is not supported by stone like a Greek column: It is held in balance by tension between cables of words.

Its only permanence is based on the assumptions, language,  and lack of education of those unaware of its nature.

Advertising and franchising together: A technology of persuasion?

August 1, 2009

MemoryModelA quick model.

It maybe simplistic considering the improvements in cognitive psychology in the last 50 years, but I think it will do.

Humans remember by:

  1. perceiving a situation,
  2. via ears, eyes, etc. (not perfect)
  3. into sensory memory (which is leaky) where,
  4. that impression is noticed or ignored (filtered selectively), then arriving
  5. into short term memory which is displaced, decayed, is acted upon or (some of it) and is encoded (imperfectly) into
  6. long-term memory which can be recalled (retrieved) but only
  7. imperfectly, depending on many factors as we’ll find out.

Do you notice how many areas of influence are available to manage our learning and memory processes?

We tend to think of ourselves as biological robots videotaping our lives in perfect accuracy, with 100% flawless memory, especially when we are young.

Human learning is an extremely complex and susceptible to outside influences: most irrelevant or benign, some not so.

I think:

These are critical concepts because they form a logical way of understanding how we learn and remember about our world.

Modern advertising and marketing use an advanced understanding of psychology, every day for commercial purposes.

First-time business owners are unaware and unskilled in this science of persuasion and the industry’s subsequent memory management techniques.

  • I believe franchising and advertising use the same science or technology in their processes and goals .

This may seem a little “out there” but, in your gut, how close do you think Northrop Frye got to this analogy (advertising is like franchising):

Advertising – a judicious mixture of flattery and threats.

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