Franchise Blog

One of the quickest ways to become an entrepreneur in most countries is to purchase a franchise business.

These franchising companies are usually set up as turn-key so that, once an investment is made, you can open your business pretty quickly. Also, they have proven systems for operating the business that are typically pretty easy to implement (especially as compared to opening the same type of business yourself without a franchise).

Besides, most franchises, when they start selling in a particular metropolitan area, have already become familiar to the potential customers who live there, so the brand familiarity already exists with the potential customer base.

Now let’s say that several years ago you decided you wanted to own a convenient store in a community that was growing over the next several years in terms of new homes, businesses, and strip malls. After looking at the various convenient store franchises available in the area, you decided to invest in a White Hen Pantry store. And let’s say that, when you assembled your list of store brands in order of your preference (with White Hen at the top), 7 Eleven was toward the bottom of the list.

So then you invested in that White Hen store. You liked their merchandising the best and preferred that type of store over selling slurpees. And let’s say your store did very well over time, regardless of how the parent company fared.

Imagine your surprise as a White Hen store owner when, several years later, 7 Eleven bought out White Hen and changed all of the White Hen stores to 7 Eleven stores. And there you are selling slurpees. Whoopee.

I learned about another company recently that had both company-owned stores and franchise stores. At one point, one vice-president at the company decided that all of the stores should be more upscale.

Never mind how the franchisees felt about this possible change. This VP was able to convince the company that her idea was a good marketing idea, and all of the stores (both company-owned and franchisee-owned) were changed to this new upscale brand.

I’m not sure if they did any marketing analysis of her idea (I can’t imagine they skipped that step!). But the idea to upscale really was not a good idea. The clientele who frequented this type of store did not want to purchase upscale items. Rather, their customers wanted the cheaper merchandise.

After sales suffered for some time, the company changed their focus and went back to the “non-upscale” store they used to be.

My thought was: If they only had company-owned stores, then who cares? Only the company would have suffered. But the fact that they had a lot of franchisees who were forced to go to the upscale model (and lose sales because of it) seems just plain wrong. But, according to the franchise contract, the franchisor had every right to change the store focus.

So, what is the moral of the story?

Know your franchise well before you buy it:

• How much power does the franchisor have?
• How likely is the franchisor to completely change the marketing focus?
• If they change their marketing focus, how likely is that change to succeed?
• If the franchisor’s idea to change (that you are forced to accept and implement) makes you lose money, do you have any recourse?

Keep these questions in mind if you ever consider investing in a franchise business. The franchise business you buy today might not be what the company wants you to own in the future.