Last week an online article was published about McDonald’s aggressive actions to stay ahead of consumer trends by being willing to continually implement both change and innovation. These are attributes that can certainly benefit small businesses and franchised businesses as well, and I applaud the general idea.
However, if you read further into the article (See, McDonald’s Sales Growth Comes at a Price to Franchisee Profit Margins you will learn that McDonald’s profits and increases its bottom line while franchisees on the front lines see a decrease in theirs.)
Unfortunately, I see this as part of an ugly industry trend. Many franchisors are sacrificing their franchisees’ financial well being to their own profit margin, frequently without regarding to the ability of many franchisees to survive the hit to their own bottom line..or just plain staying at or above breakeven. Market encroachment that cannibalizes their franchisees on the ground and in cyberspace are other ways that some franchisors may generate more revenue to the detriment of individual franchisees.
Such actions by franchisors cannot be concealed. Prospective franchisees who go the extra mile on their due diligence (some prodded by yours truly) will learn where their prospective franchisor’s priorities lie. When the chips are down, they discover they will be thrown under the bus. To add insult to injury, these are often the same franchisors whose franchise agreements claim the right to go after the franchisee for liquidated damages or lost royalties when the franchise business fails! Yes that is another ugly trend.
Franchisors–and those planning to franchise–should take heed. People do not want an “invest-to-rent a business” solely for the fun of it. They want and should have a fair return on the business, or alternatively a franchisor who will share or at least attempt to ease the burden of hard times. Certainly they should not have to worry about their franchisor creating the problem.
How about this for a franchise mission statement: “all for one and one for all”?