The Game of Franchising: Believe and Succeed

August 31, 2009

AndyKarufmanDid ya hear: Andy’s alive!

Yeah it’s true. Really.

Man on the moon and they still can’t commit to a reasonable expectation for cash flows?

Hey baby, Are we losing touch?

If you believe there’s nothing up my sleeve, then nothing is cool

Pseudos: from foolish stern to foolish bow.

Man on the Moon, R.E.M.

Mott the Hoople and the Game of Life. Yeah, yeah, yeah, yeah
Andy Kaufman in the wrestling match. Yeah, yeah, yeah, yeah
Monopoly, twenty one, checkers, and chess. Yeah, yeah, yeah, yeah
Mister Fred Blassie in a breakfast mess. Yeah, yeah, yeah, yeah
Let’s play Twister, let’s play Risk. Yeah, yeah, yeah, yeah
See you in heaven if you make the list. Yeah, yeah, yeah, yeah

Hey Andy, did you hear about this one? Tell me, are you locked in the punch?
Hey Andy, are you goofing on Elvis? Hey baby, are we losing touch?
If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool

Moses went walking with the staff of wood. Yeah, yeah, yeah, yeah
Newton got beaned by the apple good. Yeah, yeah, yeah, yeah
Egypt was troubled by the horrible asp. Yeah, yeah, yeah, yeah
Mister Charles Darwin had the gall to ask. Yeah, yeah, yeah, yeah

Hey Andy, did you hear about this one? Tell me, are you locked in the punch?
Hey Andy, are you goofing on Elvis? Hey baby, are you having fun?
If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool

Here’s a little agit for the never-believer. Yeah, yeah, yeah, yeah
Here’s a little ghost for the offering. Yeah, yeah, yeah, yeah
Here’s a truck stop instead of Saint Peter’s. Yeah, yeah, yeah, yeah
Mister Andy Kaufman’s gone wrestling (wrestling bears). Yeah, yeah, yeah, yeah

Hey Andy, did you hear about this one? Tell me, are you locked in the punch?
Hey Andy, are you goofing on Elvis? Hey baby, are we losing touch?
If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool

If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool
If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool
If you believed they put a man on the moon, man on the moon
If you believe there’s nothing up my sleeve, then nothing is cool

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Tied buying creates a Hidden franchise fee

August 8, 2008

This is an interesting article from Kiwi’s Sunday Star Times.

Journalist Greg Ninnesson reports in Marriage made in Hell for upset pizza franchisees that some of Hell Pizza’s franchisees are not pleased with the new mandatory supply arrangements.

No wonder: A monopoly is bad for the whole economy because it leads to inefficient allocation of capital and unjustified profitability [economic rent] based in deceit.

A meeting of several dozen franchisees held in February expressed dissatisfaction with the supply arrangements for their ingredients and other goods.

Previously, each franchisee bought ingredients such as flour, cheese, meat and vegetables directly from independent suppliers on a contract basis.

But in February, TPF set up its own supply and distribution operation and its outlets were required to buy most of their ingredients through that.

The franchisees were concerned about the transparency of the new supply arrangements and the effect it could have on rising food costs.

Maybe forming an independent franchisee association would be a good first step. But you better chip in a few $1,000 each [to start] for the best franchisee-only lawyer you can find.

  • Compare the cost to a 1% increase in your Cost of Goods per year. [You don’t honestly think this is the start of the blood-letting, do you?]

This is how I coded the article as it went into the Information Sharing Project:

  • Advertising fund put into general franchisor’s coffers,
  • Advertising fund use disagreements,
  • Franchisee revolt,
  • Franchisor owns more than one system (subsidizes loses from cash cow)
  • Gouging on supplies,
  • Monopoly,
  • Profits from one franchise system sucked out to subsidize another one,
  • Supply margins are a hidden added royalty payment,
  • Must buy only through franchisor (tied buying), and
  • Veil of secrecy.

Kickbacks, listing fees, volume discounts, co-op $, etc. are a beautiful thing to behold: If you are the franchisor.

  • Were you promised that volume buying through a franchise would actually save you money?

See the American Franchisee Association‘s, The Twelve Worst Franchise Agreement Provisions which include:

  • Sole Sourcing Requirements
  • Lack of Accountability of Advertising Fund
  • Kickbacks

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