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ABUSIVE FRANCHISE RELATIONSHIPS
FREEDOM ISN’T FREE
There is a mistaken belief that what franchisees really need in order to
facilitate rationalizing franchise relationships into harmonious mutual
peace and profit making is a collective voice competently expressing
franchisee needs to a “reasonable” franchisor. The reasons that is a
mistake in so many instances is that the abusive franchisor isn’t
interested in being reasonable, believing that the terms of his
franchise agreement relieve him of any such obligation; what the
franchisees want (what seems reasonable to them) would represent a
reduced revenue from the relationship for the franchisor; and, finally,
franchisors believe that once the franchisees sign contracts that
provide for franchisor top down configuration of the business model,
they are not required to “let the inmates run the asylum”.
In such - all too frequent these days - situations, “reasonable
accommodation” is not to be found anywhere in the franchise agreement;
anywhere in the law applicable to franchise agreements; or anywhere in
the “art of the possible” as seen through the eyes of educated ladies
and gentlemen possessed of law licenses. There are a very few
exceptions.
If franchisee existence is to become rationalized, resort will have to
be had to leadership that is not parlor trained, church manners, play by
the rules as they are written, ladies and gentlemen. Freedom isn’t free.
Running your mouth on Internet blog sites, screaming epithets at the
franchisor, never accomplishes anything positive. Moreover, it so
poisons the atmosphere that in response to each epithet blogged, the
recalcitrant franchisor only digs in his heels that much harder.
Today there are a few misled franchisee groups running their mouths on
www.BlueMauMau.org, providing
us with typical examples of impotent whining and name calling on the
part of disgruntled, cowardly franchisees who either do not have a clue
(nor does their leadership) about how to get to YES; are too cheap to
provide resources to retain competent leadership for this kind of
confrontation; who believe, incredulously, that all they have to do is
keep on whining and cursing and eventually the franchisor will “see the
light” and come to Jesus on the subject of giving them what they want;
or all of the above. These groups are doomed to failure. In their
insistence that they are entitled to better circumstances by some
impelling notion of fundamental fairness, they are bogged down in an
impossible regimen. They believe that intractable dictatorships of
franchise abuse can be brought to “justice” by whining and hurling
epithets, and that some divine or quasi divine power, God or the
government, will come to their aid. Could there be anything on this
planet less realistic?
Leadership to facilitate rationalizing the existence of franchisees who
bought into bad deals and are living with abusive franchisors is
different from leadership to facilitate rationalizing life in a good
business model run by a franchisor with a long view to the future
viability of the system.
The tough guy punk franchisors who couldn’t care less if their
franchisees go on line and call them bad names – at least not enough to
change anything – must be dealt with differently.
There is a long human history of victims having to try to overcome
terrible circumstances in which the situation is extremely unjust, and
the rules are drastically skewed against them. None of these vignettes
of history apply to the matter of solving an immediate problem of having
bought into a bad deal with a bad franchisor who really – no matter what
he may say about it – doesn’t give a damn. These guys are in it for
present tense interests only. They didn’t form the franchise system for
long terms durability in the first place. Had they considered long term
interests, the franchise business model would perform in a way that
enables long term durability.
In most of these situations the costs of carrying the relationship – all
costs, not just those in the FDD – is close to or above 20 % of sales.
The franchisees are mostly marginal, and the failure rate is
accelerating. A similar situation may be found in franchise systems that
are really over the hill. Their business segments have become saturated
to the point at which the name on the door does not generate sufficient
differentiation to matter. The name is not worth paying for anymore, and
in many instances it was never worth paying for. The franchisor did not
achieve the ability to make the brand strong enough to have commercial
presence. If you are in a good location – that you had to pick out in
the beginning anyway – and are giving good value, the franchisor’s name
is not contributing anything worth paying for. In reality, when a
franchise system presents this profile and the franchisor is telling
everyone to go to hell, the clearest observation is that the rules
provide nothing that could change this game for the better over any
short term.
Most of the people who seek to be retained by disgruntled franchisee
groups are believers in the gentlemanly art of rational persuasion. They
play by the rules. They espouse irrelevant notions like franchise
fairness standards. No tough franchisor will ever give a damn about
franchise fairness standards, and franchisees lack the resources to
enthuse any government agency to come to their rescue. If it were
otherwise, life would be better for these victims. This isn’t a recent
phenomenon.
Effective leadership of franchisee groups in this situation has to be
able and willing to change the rules – to stretch them so far that they
are not even recognizable anymore – without actually violating any of
them.
One of the rules that must be pushed is the apparent requirement that
you tell the franchisee group you may seek to represent that you agree
with them totally. Much of what franchisees believe is “wrong” is
actually not wrong at all. Many franchisee notions of what should and
should not be permitted are simply misplaced. The examples of these
wrongheaded notions include the basis for determining when a franchisor
must approve a franchise resale. The reality is that a franchisor can
blow up a resale opportunity with virtual impunity under the terms of
the contract the franchisees signed. That the franchisees failed to
recognize the reality of this when they signed on is not grounds for
changing this game. Between the franchisor’s arbitrary right – arbitrary
if for no other reason than the absence of an economically affordable
remedy – to refuse consent to any resale, and the franchisor’s ability
to change the rules of engagement with every new agreement, including
increasing the cost of the relationship itself, the capital value of
your business in any resale context is never going to be what you think
it is. And aside from the legal/economic analysis of this dynamic, there
is the fact that on a “visit” by your buyer to franchise HQ for a
screening interview, any tough franchisor can poison any resale deal
just by his conduct. Tough franchisors ask why they should approve a
resale or buy you out if they can default you under the contract and
just take your business back for next to nothing – at most the cost of a
lawsuit or arbitration that they can afford and you can’t.
Are you starting to get this picture into clearer focus?
Franchisee leadership must know the realities and must have the guts to
tell his prospective clients about the issues where they are simply
wrong and have little or no prospect for success. They must also know
and be able to teach the techniques for dealing with situations where
the franchisees are probably wrong on the law, but can still change the
game by adopting effectively militant relationship management
techniques. Even the transfer scenario can be changed with the right
tactics. But realities must be dealt with as realities, and franchisees
have to be taught what the realities of each situation are.
Confronting tough guy franchisors in a business destroying mode can only
be done through militant resistance.
What does effective militancy require?
It requires that the franchisees recognize when they are dealing with an
intractable franchisor in a business destroying mode. Those two
essential factors mean – in reality – that hiring leadership to reason
with the franchisor is a waste of time and money. These “frat boy”
office gentlemen are no match for a street smart tough guy franchisor.
All he has to do is tell them in some polite and politically correct
manner to go to hell, and the game is over. How go to hell is expressed
includes delay, promises of consideration, propagandistic pretense to
the adoption of fairer methods of dealing, and other nonsense responses
that will never see the day when the talk is actually walked. The
history of the now defunct AAFD franchisor appeasement club is a
vignette on the subject of frat boy nonsense and bestowing BS awards
upon some of the worst tyrants and opportunists of franchising. The AAFD
published carefully parsed standards of franchise fairness that had no
affect whatsoever upon any tough guy franchisor.
Once franchisees recognize that they are in a situation like this, they
have to seek out someone who can show them how to organize effectively
militant resistance and who can protect the organizers from franchisor
retaliation. One of the main barriers to effective franchisee group
action is franchisor retaliation against franchisee leadership. Tough
guy franchisors don’t have to destroy the ineffective leaders of
nonsense franchisee groups. Why bother the impotent? But they will go
after effective leadership, and that leadership has to be invulnerable.
Invulnerability involves the retained leadership resource having the
ability and the sheer guts to make himself the group leader so that the
only place heat can be applied by the franchisor is on him. That
leadership must also be capable of protecting the identity of the group
leaders who are franchisees. The ways in which tough guy franchisors try
to find out who is behind the movement must be known, and methods to
resist that must be mastered. Lessons must be taught about how to be
militant, and they must be taught by someone who is good at it, not by
someone who may have read some books on it but never done it.
The franchisees must be provided with avenues of protected communication
that are impenetrable by the franchisor. The retained leadership must
know how to accomplish that. Password protected channels of
communication are useless. Some Judas franchisee will give the
franchisor his password or forward the communications to the franchisor
in the hope of some inside favoritism. There are Judas franchisees in
every franchisee group, and how to prevent them from imploding the group
is another subject in which the leadership must be adept.
The franchisees must be told at the outset that there will be no
possibility of success unless there is pervasive membership in the group
and financial resources to support what is required. Protestations about
not being able to afford what is called for need to be stymied. The cost
of a pervasively supported franchisee organization is rarely more than
the price of a pack of cigarettes a day. If franchisees can’t handle $
1,500 a year in simple annual dues, paid in advance, they are not
salvageable and will simply be written off. The truth is that the cost
of not joining is far more every year than the cost of joining.
Franchisees who cannot recognize that will experience what franchisees
who elect to go without effective leadership experience. You cannot do
this on nickels and dimes.
The lesson is that tough situations must be met with tough solutions.
Tough solutions cost money, but not a prohibitive amount of money.
Franchisees have to have sufficient intestinal fortitude to do what is
called for, and they must be teachable. When the tough confrontation
stage of franchisee group action is completed and the franchisor has
come to terms in conduct as well as in words, the group can always go
hire some frat boy advisor who plays by gentlemen’s rules. But until
that time comes, leadership that knows how to wage the right kind of
confrontation, to get the tough franchisor to recognize what is going to
happen to rationalize relationship management one way or another, is the
only solution.
Freedom is not free. Cowardice is incredibly expensive. It is bad enough
if you bought into a really bad deal. But if you don’t do something
about it by forming a militant independent franchisee association, it
will eat your guts out until you are in bankruptcy. Thus endeth the
lesson. |
