Competition in Franchising; It Gets Ugly
By Lance Winslow
It is amazing the amount of competition and modern franchising today in the United States and starting in the rest of the world also. Competition in the marketplace is good for consumer prices and for customers, but when it gets ugly it serves no freeman. And it is amazing how quickly the competition can get very ugly.
Franchising companies try to expand their brand name through out the regional area in order to compete in the marketplace for the largest percentage of the market here. The franchising is a method of rapid expansion with out huge amounts of capital outlay. A company like Starbucks has all company-owned stores and a company like McDonald's has mostly franchisees or independent business owners and some corporate stores that they own themselves.
Most small businesspeople in any town hate to see a franchise organization come in and compete in their market sector. For instance if you own a hair salon and a franchise hair salon comes in to the shopping center next door to you then you realize you lose business and market here to them. Additionally franchising companies have thousands of stores and their business models are generally more efficient and they also come with a brand name that people know about.
The competition in franchising gets ugly from the very beginning for instance in my over two decade years of experience in franchising I have noticed how many towns we went into with good old boy network's and trying to get the planning commission to approve one of our projects we always noticed that the friends of the local businesses that we would be compete against showed up at the city Council meetings or the planning commission meetings in order to make us look bad or prevent us going into the market.
But this is not the only ugly part of franchising, as other franchise stores it may also be hair salons will attempt to get the information and find out your training methods and your operation manuals and even try to get your vendors to not do business with you or spread gossip in order to limit your credit lines. As a matter of fact amount of dishonesty in competition with something that always had bothered me while I was in business before retirement.
I would expect that competitors would turn to the dark side and cheat as I have been involved in team sports and watched this happen also on the field. But one thing I never understood was why government agencies such as code enforcement and federal regulatory bodies would take sides with the competition and start investigations on your company. It seems that if the government agencies were true to free enterprise and capitalism they would be more like a referee.
Unfortunately this is not the case, because once an investigation is opened on your company they need to justify why they are doing it and are therefore they work very hard to find something wrong so they can give you a fine. In fact they go so far as to send out press releases that they are investigating you, as if to try to get public relations for their own agency. It is as bad as the Donald Trump “Apprentice” show, layer each contestant blames another for something that went wrong. There is no such thing as a level playing field in business the United States of America no matter if it is at the city level, state level or federal level.
If you are in the franchising industry you can expect your competitors to pretend to be franchise buyers and call you up at least once a month and try to get all the information they can from your sales force, secretaries and get a copy of your Uniform Franchise Offering Circular to see what you are doing. Needless to say, in franchising the competition can get ugly. Please consider this in 2006.