fairy story

A simple story of franchising folk

Franchising…

…a fairy story.

Long ago, in a land far away, a clever man discovered a new and exciting business idea. The man brought the idea back to his country and, with his partner, opened a business widget centre. He carefully developed the business and nurtured it as he watched it grow.

Before long it was time to expand the business, but instead of simply opening another branch, with all the investment, and the worries that staffing the new branch would have created, he decided to franchise the widget business. The franchised business grew swiftly, but he always retained the original business centre for training, and for the development of new widgets. He carefully developed the franchised business and nurtured it as he watched it grow.

After several years the time came for the clever man to sell the large and prosperous business that he had created. Over the years the man had made lots of friends who worked for him in the business. He sold the business, in bits, to his friends who had worked for him in the business. Each of them owned a bit of the business in partnership with the others. They carefully developed the franchised business, nurtured and watched it grow.

For a while the business went well, but after a little time had gone by the friends realised that if they sold the business, they would get lots of money - and still keep their jobs! So they sold the business to a private equity company - some of them kept their jobs, but some of them didn’t because the private equity company had it’s own business friends that it wanted to run the business. The new men tried to carefully develop the franchised business, nurture it and watch it grow, and it did. It just didn’t do it enough.

The men from the private equity company realised that they didn’t really understand how franchised businesses worked. So they sold the business to a group of companies that thought it knew better. This group of companies decided that a lot of changes would need to happen if the business was going to improve. They sold the original business widget centre and moved the office to another part of the country, so nearly all the people with the knowledge of how the business should work had to leave. The men from the group of companies said that we didn’t need the original centre any more, for widget development, because all of the knowledge was out in the franchise network, with the franchisees - and do you know what? - quite a lot of the franchisees actually agreed with them! So they sold the original centre. The group of companies tried to carefully develop the franchised business, nurture it and watch it grow. It just didn’t.

After several years of trying to push the franchise into prosperity, but failing to develop or successfully innovate within the business, stagnation was setting in and the apparent decline of the business was looming. So the group of companies sold the business to a foreign investor.

The foreign investor bought the business. They installed a new managing director and waited for the profits to roll in. They waited for over a year, but there wasn’t much profit. So the managing director had to leave and a new one, a curiously animated man, was installed. The new man was a man of little imagination, but he did have one talent. He could count. He realised that if he cut back on services to franchisees and lost some of the staff he could make the business appear to make more profit even if sales did not increase! So that is what he did in the first year. He was going to try and do more in the second year, but he realised that there were limits to that particular trick.

Earlier, when the franchise had been successful, it had employed lots more supportive and creative people, but these were the people that the man who could count lost. He preferred other people who could count! Soon over half the people at head office were people who could count! Sadly these people were not contributing to the development of the business, or the creation of new widgets, but they were able to record its decline perfectly. Eventually the foreign investor began to realise that lack of sufficient investment for several years meant that they weren’t making any money. Realising that they could not fund the investment required to save the business they decided to sell - even at a loss.

A new investor was found that was able to buy the business cheaply and invest in new products, technology and business methods. The royalty that franchisees paid was now used in a fair way to fund and develop the entire business. The future prosperity of the franchise was assured…

…I told you it was a fairy story!
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