...goes a long way, especially when I'm thinking about brands, brand management and the power of brands to build successful organizations and careers.

Tuesday, May 02, 2006

Why do franchisees buy franchises?

I stopped by one of my favorite sandwich shops tonight, a Blimpie owned by one of the most engaging franchisees I’ve ever run into. He and his wife work behind the counter at their two stores because they’ve seen what happens when minimum-wage zombies are put in charge of a business.

It was slow, as it has been every time I’ve visited in the past year or so, and I got to talk to him about his business. Traffic and sales have been lousy for over a year, and the high price of gas has killed store traffic even more lately. He’s spent thousands of dollars redesigning the store in bright colors, and keeps the place spotless.

He went on to explain that the national Blimpie office is in a mess, and has quit supporting the franchisees with advertising. The result is a lawsuit by a bunch of franchisees and subfranchisors. They claim misappropriation of funds and accuse Blimpie and its CEO Jeffrey Endervelt of entering into agreements with Pepsi and a large turkey supplier that resulted in higher costs for lesser quality products. Endervelt recently resigned as CEO, chairman and president, which might have been a good thing to do after last year’s makeover of the Blimpie brand identity.

The local owner said he always believed that a great product and great service was all it was going to take to make a living. In fact, the Blimpie sandwich is arguably comparable to sandwiches from competitors Subway and Quizno’s, and these two Blimpie owners set a high standard for engaging service but they’ve not seen the success they expected. He admits that the price points are a little bit higher than the competitors, and now they are getting beat up by Panera Bread and brown baggers.

The Subway sandwich shops I’ve seen don’t exactly scream "clean," yet the chain has been ranked the number one franchise opportunity in Entrepreneur magazine’s “Franchise 500” rankings for 14 of the last 18 years, and first place since 2001. Note: Blimpe comes in at #88, behind Hungry Howies Pizza & Subs, Panera Bread, Arby's, Carl's Junior, Denny's,Burger King, Hardee's, KFC, Dairy Queen, Popeye's, Church's Chicken, Hot Stuff Foods, Taco Bell, Quizno's Subs, Sonic, and McDonald's.

Of course, like any franchise, Quizno’s has had its own problems with franchisees.

So I wonder why entrepreneurs decide to buy a franchise. Why buy a Blimpie? Are the branding package, the opportunity to learn from other franchisees, the resources and the promise of ongoing support really worth it? Is the instant recognizability worth the restrictions? Can you really believe what you read in the Uniform Franchise Offering Circular (UFOC)?

I’m really curious about the pros and cons of franchising, so entrepreneurs out there let me know what you think.

In the meantime, I may stop by Blimpie again soon and suggest that he start again without the baggage of the franchise, without the expensive overhead, without the high-cost ingredients. He’s learned how to do it. He’s learned how not to do it. And I think he can do it better.

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1 Comments:

Blogger coffeeken said...

Mark,

You touched on the basics of the Pros for becoming a franchisee which is brand recognition, support, advertising support, training manuals and basically what most franchisors refer to as a "turn key" system.

The CONS of becoming a franchisee lies in the entire trust factor that the franchisor will do what you as the franchisee are paying for. In my travels throughout the U.S., I found few that were truly happy with the support they received for the fees and royalties that they pay.

But in fairness to the franchisors, there a good hard working motivated franchisees such as the one you mention in your post, and those that are hard work challenged.

I started a coffee company whose brand is Kicks Coffee Cafe and chose not to become a franchisee but rather launch my own company and build a brand....and yes that is tough and has its challenges as well. The think I like about creating my own is having the flexibility in product mix to deliver to the customer what they want, not what a franchisor in Atlanta says is what they want.

So, there are good and bad things no matter what path one chooses. My recommendation, is that if you are a seriously hard working, intelligent, self-motivated entreprenuer...do it yourself. Learn from others, but roll up your sleeves and get the most reward out of the business you can.

http://www.businessweek.com/investor/content/mar2006/pi20060324_117687.htm

2:34 PM

 

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