Our objective is to explain the range of business risks that mom-and-pop business format franchise investors face before, during, and after being a franchisee.
WikidFranchise.org — what is left after you wiki a franchise case study (ie. the document was run through a wiki; the story was wiki-ed => wikidfranchise)
Risks Now versus Risks when The Model Changes
Pre-sale due diligence is good but it is not enough protection. Due diligence takes a photograph of an ever-changing business risk environment.
Mom-and-pop franchisees are always at a severe disadvantage regarding information and economic power if and when the franchisor decides to unilaterally exercise their discretion in a one-sided way.
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 +2,300 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 in the short-term. Brands and tradenames are born and killed off to manage reputational effects on selling the next outlet.
Ways to Use WikidFranchise:
- new: find out what are the most popular documents retrieved at Wikid Fame,
- 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 unique trademark tag cloud,
- read the most important academic franchise work: Problematic Relations: Franchising and the Law of Incomplete Contracts (introduction la version française),
- read Franchising Opportunism and the accompanying legal test claim, and
- keep current with our companion weblog FranchiseFool or the NEW FranchiseBanker.ca.