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Are You Part Of A Static Or Dynamic Franchise?

Posted on Date: Nov 4, 2014

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[/spacer] If you’ve ever invested in stocks or mutual funds, then you are probably aware of the warning that comes with each purchase. It goes a little something like, “Past performance does not guarantee future results.”

One of the most compelling reasons individuals flock to franchises is the assumption that the franchise will offer a “proven solution” that will nearly guarantee the success of all franchisees. Robert Purvin, Chairman of the AAFD, has thoroughly debunked the proven solution myth, but I suspect that it will continue to persist.

Not every franchise is made equally, but even some of today’s best performing franchises may fail tomorrow if they do not stay on top of changing trends in their market, keep in touch with the needs of their customers, and demonstrate a willingness to change their services, distribution, and business plan in the face of an evolving market.

In other words, franchises should come with the same warning as stocks: Past performance does not guarantee future results.

Franchisees are often willing to invest hundreds of thousands of dollars or even millions to join a hot franchise with big profits. However, this bet could easily sour if the franchise is caught flat-footed in the future by selling outdated products or getting passed by a young and innovative competitor. (Think Fotomat or Deans Film Developing Centers, or Blockbuster Video rental stores.)

Some franchise associations are sparked by franchisees who believe their franchise is not responding to changes in the marketplace. A static franchise that believes its operational model is bulletproof could take down its franchisees as it loses market share. In this instance, it may fall on the franchisees to raise their concerns help nudge the franchise toward awareness and adaptation.

Franchisees are on the ground and have a day-to-day perspective that those working at the franchise central command may miss entirely. In this way, franchisees may be the best “canaries in the coal mine” when it comes to changes in customer appetite, disruptive technology, or dangerous competitors.

If your franchisor isn’t adapting well in a fast-paced and quickly changing marketplace, a franchise association may be an effective way for you and your fellow franchisees to spur the change you need to protect your market share and open the eyes of your franchisor.

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