Franchising & Folly platform: Own vs. rent an Idea

September 24, 2009

SethGodinThe more I read about Seth Godin, the more I like his approach.

His post today (The platform vs. the eyeballs) is about owning platforms versus renting eyeballs.

Old media was not the same as old branding. Media companies built audiences and then brands rented those audiences.

Suddenly the new media comes along and the rules are different. You’re not renting an audience, you’re building one. You’re not exhibiting at a trade show, you’re starting your own trade show.

If you still ask, “how much traffic is there,” or “what’s the CPM?” you’re not getting it. Are you buying momentary attention or are you investing in a long term asset?

I only invest in what I own.

This is what I have been doing with this blog (FranchiseFool) and

That there is an element of foolishness in franchising is apparent to everyone in the world except the industry’s elite. Their lack of humour and intensity signals their unreasonableness much more than I could ever do. They’re phoney-baloneys: it’s true. But they prove it themselves to 3rd parties by their rigidity and inability to take a joke.

I would extend Godin’s McDonald’s analysis to all modern business format franchising when he says:

(Compare these examples with McDonald’s, a company that continues to rent eyeballs for a high price and has no real platform to speak of.)

McDonald’s and the industry just don’t get it: faking sincerity won’t work with internet savvy consumers.

Tribes are looking for authentic voices and leaders to solve real problems.


McCruelty: Protesting animal slaughter methods

September 22, 2009

McCrueltyMartin Short is a comic genius.

Andy Dick joins in in this PETA campaign.

I must say.

AUS Inspectors watching McDonald’s low-income pricing

February 26, 2009
CEO Catriona Noble,

CEO Catriona Noble,

FranchiseFool broke into North America this story, earlier today: McDonald’s: Lovin’ the Profits while Targetin’ the Poor.

Leaked confidential papers (confirmed by an anonymous franchisee) indicates that McDonald’s will increase their food prices, disproportionally in lower-income communities.

It seems their research shows that the poorer someone is, the less likely they’ll complain or switch to other quick service restaurants.

ABC News reports in Inspectors to watch McDonalds pricing that at least one state government does not appreciate the use of so-called demand-based pricing by the multinational:

The South Australian Government has fast food chain McDonald’s in its sights over news of a new pricing structure.

It says the food chain must reveal whether it plans to raise prices at selected restaurants, especially those in some lower-income areas.

In the accompanying audio clip, SA Consumers Minister Gail Gago is quoted as saying, if the reports are true, McDonald’s is behaving in an “incredibly appalling and disappointing” manner and she suggests consumers may want to communicate directly with McDonald’s on this matter.

In another article, McDonald’s CEO, Catriona Noble seems to be saying that income levels relate to restaurants and not to citizens and that somehow increasing prices, increases consumer choice:

…prices were not based on socio-economic factors but rather on a restaurant-by-restaurant basis, with customer price sensitivity measured at different outlets.

“We really let the customer speak,” she said. “And that’s exactly what customers have the right to do. (They can say) ‘hey, that price increase is too much for me to handle and I’m going to come to you less often.”

I know of no other metric other than mean household income for price sensitivity.

Ms. Noble could have cleared this confusion up by simply stating that household income is not used for marketing purposes by this corporation. But that may have created a certain legal vulnerability.

McDonald’s: Lovin’ the Profits while Targetin’ the Poor

February 26, 2009

mcdlogoInflation is, what, at near 0 %, if not projected to go negative in 2009?

A world-wide economic recession lasting one to two years is the most optimistic outlook.

And how do the masters of franchising, globalization, and supply efficiencies respond?

They not only identify those they’ve identified to be least able to resist (ie. the poor) but increase prices to those communities.

Some could be consider this a blatant opportunistic  predatory pricing scheme by a brand bully.

Kudos to and  Frances Stewart in Australia for an article called McDonald’s to charge more in poorer suburbs.

McDONALD’S is lifting prices in poorer suburbs where it believes consumers are more likely to accept higher charges without complaint.

Costs were previously based on restaurant overheads and ingredient prices.

But the multi-national fast-food chain is using socio-economic factors to determine charges under a new “demand-based pricing” scheme.

I love Australian franchisees because you know where you stand:

A McDonald’s franchisee, who asked to remain anonymous, said the biggest price rises were concentrated in low-income areas.

“In general, the poorer suburbs will pay more,” the franchisee said.

An accompanying television clip (see McDonald’s rip-off) says that McHappy meals will increase by 16.5%.

And how is this affecting McDonald’s USA where the profits eventually go? Here’s a sample of headlines about Oakbrook’s 2008 results:

I wonder what role “socio-economic factors” and “demand-based pricing schemes” have played in differential within North American communities?

In Canada, 1 in 5 children live in poverty.

Class System: Aware it’s a rigged Game (yes or no)?

December 29, 2008

rouletteThere are two types of people within the business format franchise industry:

  1. those that know [have awareness] that franchising is a con game that pays out like a crooked roulette wheel [pre-determined payoffs to maintain the illusion of a level game] or
  2. those that think it has primarily to do with franchisee hard work, pre-sale due diligence, etc.

The complication is that Class #1 include:

  • control next to 100% of billions of investments,
  • allies of the greatest authorities in every country and internationally (ie. the state, banks, franchise bar, etc.),
  • legions of graduates from the world’s best universities (education must mean adherence to the truth, right?),
  • the most handsome (and therefore presumed good),
  • and have all the trappings of financial success (which #2 assumes that they will be successful by association).

The few former #2 who have become traitors to Class #1 (ie. aware but not profiting from the status quo) and are stilll talking are cranky, paranoid, broke, rude and cynical.

An accurate observer, however, concludes the following: Financial failure or success in business format franchising is mostly luck.

  • But you get a chance to pull the slot machine’s arm, right? Make you feel luckier, doesn’t it?
  • It re-distributes wealth; it has long since stopped creating wealth [90% of the time this statement is 100% true; the 10% where it is false has nothing to do with skill, it has to do with luck).

There are winners but, despite the spin, they have the skill involved in picking the winning lottery ticket. Don’t tell me about the 30 year McDonald’s franchisee: they don’t make those agreements anymore.

BS Differentiating Characteristics

1. Intelligence: Notwithstanding the name-calling, those that lose at franchising are often the smartest ones in the orientation class. The ones forced to the wall often are the ones that realize the game, after they sign and try to rally the troops. Communication skills, persistence, credibility and curiosity are the a sure ticket to franchise bankruptcy.

2. Lack of Adequate Pre-sale Due Diligence: simply an excuse for industry apologists using hindsight bias to force silence via shame. Believe me I’ve met lots of “successful” franchisees who did zero due diligence. Everyone admits that DD is impotent against franchisor opportunism which is played out in 1,001 seemingly random ways.

3. Laziness: Franchisees work like hell and only usually collapse when they hit their own personal wall of mental, physical and financial limits. It takes a long time to learn this foreign language (franchise jargon).

4. Most success is within Franchisee’s means to Control: Almost all of the decision making is taken via the franchise agreement. Tough to argue both sides of an argument at the same time (ie. Franchisee is 100% responsible while franchisor has 100% control of assets). So one-sided that some franchise agreements have been declared an employee:employer relationship by U.S. state Courts and labour departments.

5. Deceit, Gag Orders, Shame, PR, Failure to Acknowledge: Why does the industry spend so much time controlling information (gag orders, use of shame, SLAPPs, 3 Wisemen on Blue MauMau, counterspin, undue legislative influence, lobbying, etc.) when they could simply commission credible academic research to prove that franchising is a legitimate business?

Their failure to fund (which they can clearly do) and hand over information to independent researchers indicates that they want to suppress [not advertise] independent, verifiable, accurate success rates. They are, in a sense, judged guilty by the actions that they choose to avoid.

  • #1 know that their dominant position is fueled by a crap shooting machine, at best.

That you have yet to join that class, speaks of your level of awareness. That’s all.

  1. Persist and continue to ask very simple questions and you will have your eyes opened. And you can teach everyone in your family, too. [Each person knows 250 people so they say and that there are only 6 degrees of separation between all of us on this planet.) OR
  2. Refuse to challenge the conventional wisdom, and continue to be cannon fodder (and descendants) for V2.0.1 of the next scam.

Your choice.

Silencing dissent via Humiliation

December 1, 2008


When you are a franchisee, you quickly learn what is and is not allowed to be said in public.

It goes like this, you can talk publicly:

  • 1,000 hours about increasing your sales but
  • 0 hours about how to increase your profits.

Those are the basic rules (norms, standards) of every trademark system that I have known.

These cultrual values are expressed during the regional and national meetings. This is what the meetings are principally for: the reinforcement cultural values within a group via a type of public demonstration or play.

Franchisors are very attuned to attitudes of dissent. They separate franchisor-friendly behavior which is rewarded and detect of franchisor-unfriendly attitudes and behavior which is punished.

  • They teach the new franchisees what is and is not to be said and done.
  • They encourage mentorship of new franchisees from someone who is “on the team”

One of the ways of showing the master’s pleasure is through the always-present Awards Ceremony. Such juvenile awards such as “Top Franchisee” or “Best Team Player, 2008” are handed out with the obligatory publication of the “grip and grin” photos. No speeches are allowed, however, unless the franchisee is one of the “anointed few: the royal priesthood, a franchisee set apart” (ie. a franchisee who is so deeply co-operative as to be a virtual extension of the current franchisor). These are baubles bestowed upon franchisees who are “on the team” (ie. acting as a franchisor collaborator).

It was no mistake that McDonald’s Canada rewarded the southwestern Ontario franchisee who was the token franchisee on the government-lead Franchise Sector Working Team. Within a month of the law being passed (the law was pushed by franchisors, not franchisees), this four-store operator won a major award: an important symbol to the hundreds of Canadian McD operators of how to properly lick the hand.

  • This franchisee’s policy competence was such that he went out into the hall to call his master whenever a thorny issue like “good faith” was brought up: he needed to hear his masters voice so he could parrot it in the meeting. This behavior was well-known.

It is very frequent that a hopelessly-compromised, compliant franchisee is forwarded as a spokesperson when a law is being proposed. this is where the term “House Slave” comes from: a, by comparison, a well-treated slave that protects his master’s interest, especially against the lower status slaves: the field slaves.

Humiliation is the usual punishment breaching the culture of franchising. The franchisee is felt to be alone (“Funny: You’re the only one who has mentioned this problem.”), the cause of the problem, lazy, overly critical and stupid.

  • To mortify someone is to make them feel deep shame for their beliefs or actions. New franchisees go through a type of “boot camp” (initial training) where their hours of work, dress, key personal relationships, etc. are all changed to fit the new, subservient identity called: a franchisee.

Shame corrodes everyone’s self-view as an autonomous adult. It decreases the person’s ability to resist authority.

The Courts: Guilt by Association This is the role of the Courts play in franchising since the Courts hold a monopoly on the coercive enforcement of the law in our society. Franchisees, lacking the conceptual and educational prerequisites to defend themselves, recoil reflexively at the thought of a lawsuit because they believe that only the guilty are ever sued.

  • The Court’s important and rightful cultural equity (respect for the law) is effectively high-jacked for the purely for the franchisor’s commercial self-interest. Since 95% of legal fees are paid by franchisors, their viewpoint is grossly overly represented (reinforcing the belief that “the Courts” are unfriendly to franchisees).
  • Based on a simple % of lawyers, a franchisee will always NEVER have a case to pursue.
  • The cost of litigation means even the most severe abuses are routinely never litigated.

No wonder I keep getting encouragement to keep writing via minor Ontario court officials: Justices do not like the law being used as a commercial intimidation tool.

  • Modern franchising mocks the law (only the rich can even hope to win) and in that way, is fundamentally anti-democratic.

Franchising as a low-quality religious experience

November 20, 2008

mcdreligionI worked as a manager for a three-store McDonald’s Canada franchisee from 1977 to 1980. We were growing by 30% per year, starting the breakfast program and were awarded a Triple A rating, to boot.

This takes tremendous time, energy and effort to accomplish.

If you push yourself hard enough, you start to get a little off-balance mentally. Distorted thinking creeps in.

As a matter of fact, you end up doing thing as a member of a group that you would never have done, if by yourself.

You start identifying much more closely with corporate identities and your career.

When the crash comes (as it did when McDonald’s terminated Ted and Liz and took the 3 stores away), you see how hollow your blind faith was in a legal fiction called a corporation.

Starting a business takes tremendous energy and focus.

  • So does being a member of a religion or cult.

Franchising is often bough to solve a recurring personal problem such as unemployment, underemployment, career burnout, etc. I bought the deadbeat lawn care franchise two weeks after my lay-off package expired in 1992.

As out society becomes more and more secular, it becomes hareder and harder for people to see franchising for what it is: a false religion.

  • It doesn’t help much that small business is being hailed (inaccurately) as the latest golden calf.

%d bloggers like this: