Going Independent: breaking the franchise chain

July 21, 2012

I started renting a Nutri-Lawn franchise in 1992. I built it up to be the 2nd largest fertilizing and chemical application service in Simcoe County.

This is what my trucks like when I was a franchisee.

Long story…I decided to stop operating under that logo so the trucks went “vanilla” briefly in 1998.

Then I put my customers into a new image (Lawn Depot) for 3 years.

Only 3 ways to get out of franchise:

  1. abandon it (leave all sunk and actual investments for the next guy),
  2. sell it (with the franchisor’s approval) to the next franchisee or franchisor or
  3. go independent (just say no).

Lessons learned from franchised  to independent business:

  • kept 95% of my residential customers/sales,
  • achieved 115% of commercial business,
  • customers buy services from people they know and trust (logo on the truck is useless in 99% of Tier 2 franchises),
  • started Ontario’s 1st purchasing co-op for lawn care operators, and
  • dropped 20% of my fertilizer, chemical costs.

I added lawn sprinkler service and installation in 1994. I continue today to serve these customers.

Profitably, with one spouse and without having to lie to support my family.

Glen my next-door neighbour said I went Nutri-Gone.


With rebellion, awareness is born.

June 7, 2010

Since 1998, I have devoted myself single-mindfully to understand and explain franchising. How I went about it was an important aspect.

The nobility of our calling will always be rooted in two commitments difficult to observe: refusal to lie about what we know, and resistance to oppression.

I don’t oppose for the sake of resisting. I simply observe what I see and all things fall out from that.

  1. The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion.
  2. There is always a philosophy for lack of courage.
  3. You are forgiven for your happiness and your successes only if you generously consent to share them.
  4. Always go too far, because that’s where you’ll find the truth.
  5. I rebel; therefore we exist.
  6. The real passion of the twentieth century is servitude.
  7. Every rebellion implies some kind of unity.
  8. Integrity has no need of rules.
  9. Truth, like light, blinds. Falsehood, on the contrary, is a beautiful twilight that enhances every object.
  10. What is a rebel? A man who says no.
  11. The opposite of an idealist is too often a man without love.
  12. The need to be right is the sign of a vulgar mind.
  13. There is but one truly serious philosophical problem and that is suicide.

Albert Camus …one more philosopher…1913-1960


Franchisees wear their corroded self-confidence like a uniform

April 26, 2010

Franchisees frequently huddle together.

They try to minimize risks by forming into the biggest groups possible, assuming fatally that size (not smarts) matters in opposing totalitarian regimes.

  • Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one. Charles Mackay 1814-1849

One is a majority.


You don’t have to live like a refugee

April 24, 2010

There are three ways of getting out of a franchise:

  1. abandon your investment,
  2. sell (deadbeat-to-deadbeat via il duce) or
  3. take your business independent.

I did #3 and my gross margin improved 20% immediately and I lived to fight another day.

There was legal stuff but that was going to happen anyway.

They said it couldn’t be done.

But they were liars about that too (d’oh). Since no one believes them anymore , they send franchisees to smear shit about.


franchise Churning: Sell ’em, Take ’em back and Sell ’em again

December 14, 2009

“I should have bought a fucking Hortons,” so Peter told me.

Maybe yes. Maybe no.

Peter Bell is an original.

He and I were Ontario Nutri-Lawn franchisees in the 1990s. He was in a partnership with a “friend” Marc Thiebaud at OGS, in the Oshawa/Whitby area.

Peter is smart. He didn’t take the legal dead-end like I did. But both he and I signed based on false earning claims delivered by wonky pro forma income statements.

In 1998, from the franchisor’s unusual point of view, Nutri-Lawn had 24 successful Ontario territories (ie. open, paying royalties).

From the franchisee investor another picture emerges. From 1990 to 1997 of the 24 territories:

  1. there were 17 franchisee ownership changes,
  2. 3 were on their 3rd franchisee, and
  3. 11 were on their second.

In 8 years in Canada’s most prosperous province.

Zero bankruptcies because everyone else sold their pig of a business to the next mark. I defied their stupid, hard-to-enforce non-compete clause and took my customers into another company while I fought them in Court. Mine (I think) was the only legal challenge and subsequent, rather high-profile bankruptcy.  Summary

Peter and I both got hung out to dry, but God, we had a few laughs.

Churning: the rapid selling, failure, retaking and re-selling of franchises. Can be intentional or unintentional but the outcome is the same for the investor. Useful to change the logo (old on top).

Lipstick on a pig.

A hallmark of even the bluest of “blue chip” systems.


Paranoid franchise curmudgeon: If we all play our parts…

August 13, 2009

GregHouse * paranoia: a thought process characterized by excessive anxiety or fear, often to the point of irrationality and delusion. Wikipedia

* curmudgeon n. a miser or an ill-tempered (and frequently old) person full of stubborn ideas or opinions. Wikipedia

Dr. Greg House a role played by an actor, called Hugh Laurie. He also fooled around in Blackadder.

A paranoid is someone who knows a little of what’s going on. William S. Burroughs

I am a kind of paranoiac in reverse. I suspect people of plotting to make me happy.  J. D. Salinger

If the national mental illness of the United States is megalomania, that of Canada is paranoid schizophrenia. Margaret Atwood

Terry’s right: I better start reading some more non-fiction and put Innis away for a while.


Support weaker Food Chains: Help yourself by Helping Others (buy franchise-free food)

July 27, 2009

BreaikingChain

What can one person do to help?

All franchisees should support autonomy in supply when they shop for their family’s needs.

And they should encourage all their staff, relatives and customers to do the same.

Ontario has 40,000 franchisees in over 500 different tradename systems spanning fast food, petroleum, coffee, pizza: almost every vertical market. They all seem so different but they’re almost 100% the same in one aspect: the head office (franchisor) forces the local businessperson (franchisee) to buy products only through them. Sometimes the margins charged to the franchisees are extremely high, and act as a hidden franchise fee or brand tax.

Canada’s grocery industry is heavily franchised and these “tied buying” types of  provisions are usually ruthlessly enforced.

  • Grocery franchises have been some of the most active franchisees in pushing for protective legislation. And they’ve been trying to do this (protect themselves AND all Ontario franchisees) for decades and decades.
  • They are unquestionably leaders in franchisee advocacy.

This post follows up on a July 20th posting called Rumblings in Canada’s grocery elite: Sobeys franchisees go independent. Nine banner food stores have decided to go independent  and purchase their goods via a buying group called the Hometown Grocers Co-op.

Thanks to Sarah B. Hood at Toronto Tasting Notes for providing the specific locations of these leading former forced-supply retailers (Local Ontario Grocers Break Away From Sobey’s to Sell More Local Food).

Why not take a beautiful drive into southwestern Ontario, say hello to some true leaders and stock up on food with the following community retailers:

  1. Arthur (L & M Markets),
  2. Chesley (Chesley Grocery Store),
  3. Drayton (Drayton Food Market),
  4. Durham, (L & M Markets),
  5. Elora (L & M Markets),
  6. Grand Valley (Hind’s Foods),
  7. Harriston (L & M Markets),
  8. Lucknow (Knechtel Food Market), and
  9. Palmerston (L & M Markets).

If fellow franchisees fail to support each other, we deserve to continue to pay these high hidden franchise fees that come from the monopoly franchisors force via franchise contract provisions.

Nine freer grocery franchisees should be very good news to all Canadian franchisees BUT should be supported very aggressively.


Rumblings in Canada’s grocery elite: Sobeys franchisees go independent

July 20, 2009

CFIGPeterKnipfelCFIGlogoWikiFranchise.org often adds depth and perspective to a current media franchise industry article.

Let’s take a look at the decades-old, but next to invisible, war of wills within Ontario’s grocery industry.

Last week, the Canadian Broadcasting Corporation reported that Buy-local push prompts Ontario grocers to go independent.

The Toronto Star ran a story last Saturday called Meat cleaves grocer’s tie to Sobeys: Ex-franchisee goes independent to gain right to sell beef, pork, poultry produced locally about 5 Sobeys franchisees taking themselves independent in southwestern Ontario.

That doesn’t seem to be much of a story unless you start looking into the background of the franchisees involved. The current press spin (a desire for more local suppliers) is certainly not the whole story.

In the CBC story a Mr. Peter Knipfel is quoted as saying:

“We actually put it [franchisor non-authorized products] on our shelves because we felt it very necessary for it to be in our community, and that prompted that we get away from the franchise system, because it was not making them [Sobeys] happy,” Knipfel says. “I didn’t want to ruffle any more feathers, so we just decided to part company.”

Grocery franchisors in Canada ruthlessly control what products can and cannot be purchased in their franchisees’ stores. Vendor programs (rebates, kickbacks, allowances) are a very important source of income for Big Grocery in Canada.

WikidFranchiseWhen you search WikiFranchise.org for “Peter Knipfel” you get the following article: CFIG Public Hearing Testimony. It appears that Knipfel was the Chairman of the Board of the Canadian Federation of Independent Grocers in 2000.

He is quoted as their Chairman in 2000 as saying:

…With the consolidation today in the grocery industry and the control that the franchisor has over the franchisee as far as pricing and our profitability is concerned, we need some protection for some fair dealing with our franchisor…

Sure enough, when you hop over to the CFIG’s website Knipfel’s photograph (see above) is prominently displayed as the Feature Story scroll.

That a former Chairman of the CFIG is one of the defecting franchisees is an indication that this story has much more to it than the simple formation a group called the Independent Hometown Grocers Co-Op.

I created WikiFranchise.org to help non-insiders understand the hidden meanings within franchising.


3 Ways to Exit

December 1, 2008

mcdexitnowThere are only 3 ways you leave your franchise:

  1. bankruptcy,
  2. selling it (another investor or franchisor) and
  3. independence.

1. Bankruptcy: Your business and personal bankruptcy (plus your partner, if he/she co-signs for a loan) is something everyone wants to avoid. That’s too bad but that is another topic.

2. Sticking the Next Guy: Through most of the life of their franchise, franchisees are smoking dope when it comes to valuing their business: They cling to the faintest hope that they can get out  with anthing like a positive ROI.

  • This is the only value of your business: What the franchisor decides you deserve. It is a total unilateral decision. (Note to Weasels: Expect to be betrayed.)

You’ll walk away with a stack of debt. Normally, you’ll get 10 to 15% of your total investment and that is gravy given to get you to sign the confidentiality agreement.

3. Independence: This is a much underused option but for some very flimsy reasons.

(a) Franchisees believe their franchisor and lawyer (hello?) that the franchise agreement is some kind of sacred text. It isn’t. And it never was. Economics and making money ALWAYS trumps legalese.

(b) Each franchisee percieves their trademark system is unique. They become experts in its history, the going and comings of their “enemies”; they become full-time amateur psychologists or cultural anthropologists. Yes, all they say is true but that is a serious distraction to the legitimate business goal of making the pig of your operating business fly (ie. start returning a profit for your investment). Anyone seen laziness, immaturity and greed in non-franchised or not-for-profit agencies?

(c) The belief that “Outsiders” could not possibly understand our problems. It is natural to focus on the source of pain and let yourself get tricked into thinking that you are alone in your grief.  Isolating people is a very powerful way to control them. To deal rationally with your challenges, you need to clear your mind of irrational fears. You have them but you must master them or nothing gets done.

(d) Most lawyers are biased because 95% of the legal fees within the industry are paid for or controlled by franchisors. This tends to distort the accuracy of information coming thorough. Believe me, most franchise law experts would NEVER suggest independence as a realistic alternative. They are much too busy posturing to write those threatening letters for their franchisor clients.

I went independent with my own lawn care franchise in 1998 and have helped several trademark systems do the same.

  • Economic Interest: Individual and groups of Canadian franchisees pay me to work with them to pursue alternate business strategies. Business research (focusing on analyzing franchisees’ cost of goods) is a necessity to understand your hidden franchise fees.
  • Many times legal action is never needed. Sometimes it is. I know what to look for it a litigator and what questions to ask as a franchisee-led group effort unfolds.
  • It always starts with one person calling me at 1-705-737-4635.

Franchise systems with 10 to 40 outlets are my speciality.


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