WikidFranchise.org — the world's first franchise wiki
n. 1 an attempt to identify, describe and quantify business risks (franchised v. non-franchised). 2 a free, indexed repository of published, high-quality stories and documents. 3 an independent, non-marketing educational tool and reputation mechanism. 4 a case study archive that allows readers time to decide if mom-and-pop business format franchising fits their investment risk tolerance.
Risk
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 unique because:
- it is very difficult to assess the expected returns (before you sign),
- capital and labor is hard to "get out" (sunk costs), and
- ownership and control of assets is split (creating investor vulnerability).
For these reasons, total franchise risk is unscalable (ie. it is not "low" or "high" but unknowable).
Editor's Choice of Article: Ombudsman asked to probe 'flawed' Bakers Delight investigation
In 2000, I started to collect documents and classify them.
As I did this, patterns started to emerge that were not case specific (ie. it didn't seem to matter which "bad guy", trademark, country, lender or attorney was involved: the result was the same for the franchisee.)
The more I looked, the more patterns began 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. An excess of one-sided power makes franchising, in 2010, Unsafe at any Brand for mom-and-pop investors.
Ways to Access WikidFranchise:
- 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,
- Know who profits even when you fail from your work,
- Learn these basic concepts: Credence goods, Opportunism, Regulatory capture, Negative externalities and Sunk costs,
- Understand why deceit and confusion are so common,
- Read Franchising Opportunism and the resulting lawsuit,
- See how some think franchising is a "Medieval Marriage relationship" or a modern Confidence game,
- Imagine how gag orders, shame and fear conceals negative business outcomes,
- Follow us on Twitter: http://twitter.com/wikidfranchise, and
- Keep current with our companion weblog FranchiseFool: Understanding Franchising by Les Stewart MBA.
What Types of Documents are here? see: WF Policy
Wikidfranchise: An Information Sharing Project for franchisees brought to you by franchisees. Comments are welcomed.
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