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

July 20, 2009 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 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 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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