Our purpose is to identify hidden business risks for mom-and-pop business format franchise investors
WikidFranchise.org — the world's first franchisee investor wiki
n. 1 an attempt to identify, describe and quantify business risk. 2 a free-content, indexed repository of high quality, already-published articles, public hearing transcripts and documents. 3 an independent, non-commercial, SME business risk assessment tool. 4 a case study collection which allows readers to decide if business format franchising fits within their own personal investment risk tolerance.
Risks Now versus Risks when The Model Changes
Investing is all about balancing return with risk. Rational decisions can only be made when you can quantify, to a reasonable manner, both expected cash flow and the likelihood of achieving that return.
Franchising is difficult because:
- it is very hard to assess the expected returns (before you sign),
- capital and labor is hard to "get out" (sunk costs), and
- risks can increase very much, for many different reasons, without any notice or control by the franchisee over time (ie. new owner. management, etc.).
Editor's Choice of Article: Tony Martin, MPP, Second Reading Debates
As I started collecting documents in 1998, patterns started to emerge.
Findings: Renting a franchise is not a rational business investment because you cannot determine relevant risks. Many may run exceptionally profitable operations for some time but that has nothing to do with your investment decision today. It has (largely) to do with their good luck.
It'd be nice to believe that success in franchising is due to individual hard work and abilities. Unfortunately, the +1,900 business case studies in WikidFranchise does not support that faith statement.
The dice are loaded, your life savings are on the line, and your ability to resolve disputes is next-to zero.
Hypothesis: Opportunistic franchisors achieve a higher ROI than do non-predatory ones. The greater the predation, the higher the returns, at least the short-term. Brands and tradenames are born and killed off to manage reputational effects on selling the next outlet.
Ways to Use WikidFranchise:
- take a look at our Business Risk page & click through to see their case studies.
- scan the Editor Picks page for noteworthy documents and quick comments.
- search by typing in the name of a: franchisor executive, attorney, franchisee, lender, country, or journalist,
- type in a trademark name such as "Quiznos",
- click on the system's name in our revolutionary trademark tag cloud,
- review the Top +30 Risks of Modern Franchising,
- read the most important academic franchise work: Problematic Relations: Franchising and the Law of Incomplete Contracts,
- learn what these are: Credence goods, Opportunism, Regulatory capture, Negative externalities and Sunk costs,
- understand the difficulty in gaining justice in The Price of Law: How the Market for Lawyers Distorts the Justice System (free SSRN download),
- read Franchising Opportunism and the accompanying legal test claim, and
- keep current with our companion weblog FranchiseFool or follow me on LinkedIn.
A thank you to the hundreds of franchisee families and the traditional media who've made this project possible.
- What is a wiki? Wikis in Plain English video
- Project:We'd like to improve the franchising sections within Wikipedia. Any experienced Wikipedia editors willing to help?
