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Franchise Myth Four: The Franchisee Gains a Valuable Asset in the Trade Name and Trademarks of the Typical Franchise

By Published On: April 22nd, 2013

Part Five of a Nine Part Series Exposing Franchising Myths.

Let’s play a little game. Head on over to my friends at BlueMauMau.org, and review their alphabetized directory of franchises. HERE is the link. Take a few minutes to browse and then ask yourself how many companies you recognize. When you’re done, come back over to this article. We’ll still be here.

Done? So, how’d you do? The Blue MauMau directory includes hundreds of available franchises. What percentage did you instantly recognize?

Most likely the answer was very few.  Of those names you did recognize, how many are well known for the excellent quality of their products and services, their great customer service, and their fun and enjoyable locations?

Your list just got smaller didn’t it?

The conventional wisdom – marketed extensively by franchisors – that when you buy a franchise you are investing in a ‘proven’ brand is perhaps the most prevalent myth in franchising.   Franchisees begin to believe that they just need to open their doors, and excited customers will come streaming in.

Well, if the franchise happens to be named McDonalds, Jiffy Lube, Ford or Marriott that might be the case. If your brand is among the hundreds of franchises that you didn’t recognize on Blue MauMau, then there must be some other compelling justification for your investment.

The truth is only a small fraction of top tier franchises have valuable branding. There are about 3,000 franchise systems operating in the United States, and the majority are unknown to most Americans.

But there is a corollary to the myth of an established brand. I call it the myth of the proven system, which contends that there is no such thing as a proven system!  Any business model – franchise or otherwise – that fails to evolve and stay fresh is likely doomed to extinction.  Indeed, my best advice is to seek a franchisor that has an excellent record for staying fresh and modern.  We’ll explore this ‘corollary myth’ in our next blog in this series.

So what can one do to overcome the ‘all franchises are created equal’ myth?  Here are some practical tips:

  1. If your goal is to invest in an established market, stick to the top tier brands, or buy an existing franchise business resale that has a proven history of profits.
  2. If you love a new concept, understand you are starting at the ground floor—your risks are higher and you should be able to negotiate a lower entrance cost and better terms in your franchise agreement.
  3. Evaluate the products, business plan, marketing plan and the franchisor’s record of collaboration and substantial support for its franchisees.  If the track record is favorable, and your franchisor is willing to protect your equity investment, lesser known brands and developing systems may well be worth the investment.

For existing franchise owners who are operating lesser known franchises, our mantra remains: band together with your fellow franchise owners and negotiate for greater collaboration to build strong brand recognition and system evolution.  The AAFD can help.

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The content in this blog post is based in part on Chapter One of The Franchise Fraud, written by Robert Purvin. The Franchise Fraud is available for purchase in print and for the Kindle on Amazon.

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Written by : Robert L. Purvin

Robert Purvin is the Chairman and CEO of the American Association of Franchisees and Dealers, a national non-profit trade association that is dedicated to supporting and protecting the rights of franchise owners. The AAFD's mission is to define, identify and promote Total Quality Franchising practices, and the AAFD supports is mission by: Promoting strong and effective independent franchisee associations as affiliated chapters of the AAFD. The development of the AAFD's Fair Franchising Standards, the most comprehenisve body of negotiated principles of recommended franchise practices in existence. The advocacy of fair and balanced franchise agreements and relationships that respect the legitimate business interests of both franchisors and franchisees for the good of the franchise relationship. The education of franchisees and prospective franchisees by the development and publication of the AAFD Fair Franchising Standards and the promotion of the AAFD Franchisee Bill of Rights.