Is confidence in all franchising past the Tipping Point?

March 19, 2010

The CEO and president of the International Franchise Association, IFA announces his retirement.

And then their board of directors announces that it’s looking for his successor?

  • Hello…does anyone talk to each other on the premiere franchisor-dominated trade association any more? Nobody cared on the board of directors enough to do anything until Matt Shay went public?

Don over at Blue MauMau makes a great point in his Importance of succession planning.

It is a healthy sign when a board of directors is strong enough to carry out one of its most fundamental jobs, making sure there is a leadership successor.

In the hidden world of the board room, it is a rare outward sign of possible cronyism or a weak board when it has not carried out this function. A vacuum of leadership in a trade association can be disconcerting to its membership. It can be an incredible opportunity for competitors.

The IFA announced yesterday that it has hired an executive search firm—probably with “urgent”, “critical” and “HELP!” stamped all over the job description packet—to find a suitable candidate to replace its outgoing CEO, Matt Shay. He has given his month notice, April 16.

I added my two cents worth in Excellent point on Leadership continuity.

I suggest every half-baked, local not-for profit plans for their leaders’ recruitment, training and inevitable replacement. Leadership planning is the core competency of any boy scout troop let alone the “brain trust” of everything that goes bump in the night in franchising worldwide.

It seems the IFA Board is in crisis. A crisis, I suggest, that has been triggered by almost no new sales or re-sales in a recession (contrary to past cycles). They denied it first, got angry at scapegoats, bargained with Uncle Tom social medias, sulk/in a funk and then will be dragged unwillingly into accepting a new, higher-quality business model (see death stages).


The elite’s catching on: their dinosaur practices has pushed the industry past the Tipping Point with investors’ confidence.

And they realize they are powerless because the internet’s reputation mechanism lacks an off switch.

John Q. Public investor is waking up (becoming conscious) to the fact that modern franchising is Unsafe at any Brand.

  • This is very good news for franchisees wanting to co-operate with each other and good faith franchisors.

Not so much for the opposite: house negro franchisees and predator franchisors.

Branding franchisees is a Canadian Family Affair

October 1, 2009

BrandingIdentifying what you own is important.

A permanent mark on ambulatory assets is an important initial goal

However, an unintended consequence over time is the accumulated effects of modern franchising on a society. The extended nuclear family is still the dominant source for advice, support and wisdom to individuals. This goes for small business investing, too.

I think franchising has worn out its welcome at many kitchen tables. Common industry practices have overgrazed the SME investment community.

Let’s take a look at some very conservative assumptions for Canada:

  1. 80,000 franchisees,
  2. 5% exit systems in one year, and
  3. 1/3 of exiting franchisees have what they perceive to be a “negative experience”.

Therefore, over 10 years 13,333 individual have had a sour taste that they attribute to an “unfair” situation ((80,000 x .05 x 10)/3). This doesn’t seem too much of a stray problem, especially when you assume they’re a docile and stupid quadruped (sheeple).

Information Sharing: But assuming franchisees are people, and people are social animals, they tend to communicate with others that they care about. And social media such as Facebook, blogs, YouTube, etc. seem to help enable anonymous warnings. Somewhere I read that every person knows 250 people.

So, maybe, there are +3.3 million that think franchising is dodgy. (13,333 x 250)

Or about 10% of all men, women and children who giving, for free, 24/7, an “anti-franchise” message to their family and friends. Battle stories along with life savings scars. Authentic, nitty-gritty, genuine, hyper-sincere detailed stories. Tangible life stories versus self-serving hyperbole.

No wonder there are so many immigrant family horror stories. In their innocence, they actually believe white crime is punished when it happens in Canada. Discovering a network of snakes in suits hiding in plain sight is the 2nd, much more profound existential trauma.

Teach you Children Well: Franchising is an exceptionally powerful teaching technology: the tuition to learn these lessons about modern commercial standards is not without cost. Dairy and beef producers have different management philosophies and practices.

From my experience, branded families are finding their digital voice and starting to be herd.

www Tipping Point: There are Limits to Fooling all of the People all of the Time

February 18, 2009

tippingpointThere seems to be some new and interesting things happening on the financing side of franchising.

There are some questions being asked over at Blue MauMau about why intangible property is being written down. It is reported today that Guidant, a major fianncier, has simply closed up shop while teetering systems seem to be desperate for a source of funds.

All of these I think obscures a fundamental change: franchising has reached it’s tipping point: the momentum for change becomes unstoppable.

Mom and pop investors have concluded that it is Unsafe at any Brand (ie. risks are too high to sink money into any franchise).

I outlined what I see as the signs in a Blue MauMau posting called: Better Quality pushes out Lower in a Functioning Community. This is my reasoning:

I would suggest that this historic need to re-value the worth of franchises’ future earnings is manifesting itself in a new phenomenon: a recession and new franchise sales in a tailspin.

The industry’s “conventional wisdom” is being turned on its head (ie. franchise sales increase during recessions) perhaps by three factors:

  1. very high ratio of new sales v. royalties (reliance on short-term, ponzi-like cash needs),
  2. significant industry portion that would perish under public scrutiny (unsustainable under more perfect information) and
  3. dramatically more unstable system brand life (faster, bigger and more blowups versus “bleeding” systems: akin to global warming effects).

I’m speculating here of course. What would reconcile all of these observations is a technology change that is short-circuiting the traditional command and control structure (top-down).

Web 2.0 and other community technologies offer investment information in a much more decentralized, cheaper and faster method than what it replaces. Maybe the industry’s paper is starting to be seen in much the same way as some mortgages now are: a product of a imperfect information?

The ice on the overall industry’s wings may be caused indirectly from the public’s improve ability to discern sustainable from non-sustainable offerings.

This is very good news for legitimate operators, their investors and the percentage of the industry that they represent.

  • Not so much for the short-cyclers, no matter their size.

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