Top Management Story

Writen by Lance Winslow

For nearly a decade and a half, I ran a franchising company, which I founded. I took my existing company and franchised it serving 450 cities, 110 markets in 23 states and four countries. The entire process took about 27 years. I am now retired at age 40 and I have something to say about the modern-day franchise model and how it is being used.

You see, in reviewing franchising models for some 20-years now and having read all the books I find issues with much of the way that the Franchising Model is being used. You know like Boston Market? Krispy Kremes?

In my opinion the economies of scale that franchising brings should be passed onto the franchisees to help them be more competitive and yet it is not. Instead the franchisor soaks it all up, wastes it in inefficiencies and yes it is used as profits too and mind you I am not against capitalism and all. I merely pointing out a fact. And all this is done by the Franchisor, while charging the franchisees more for every thing from straws to plastic cups, rather than passing on the savings of the economies of scale.

I am troubled by this. But that is how the franchising model is being used, meaning the franchisee becomes a locked in customer with a 5-year renewable agreement, which changes at each go around. These modern-day franchise agreements have so many stipulations that the model boxes in both parties into a sea of non-competitiveness. Although this is never how I ran my company; Service Sector, no products, I found it alarming.

Now then in saying this also realize that increased regulations cost both franchisee and franchisor. Still, with all this said and probably my only real complaint of the franchising model and how is being used, I still believe franchising is one of the greatest business models and history of commerce. Please consider this in 2006.