AMERICAN ENTREPRENEURSHIP IS IN DECLINE
FRANCHISES HAVE LONG BEEN TOUTED AS OFFERING A BALANCE BETWEEN BENG ENTREPRENEURIAL AND CORPORATE
IT ISN’T WORKING OUT TOO WELL
Though I will freely confess to liking consistency as much as anyone, I have long been skeptical of franchises. By and large, they seem to take the variety out of life and to impose a relentless homogeneity—while treating their employees badly into the bargain. Doubtless, there are exceptions to this, but, if there are, I am not aware of them.
On the face of it, franchising seems like a good idea, in that it allows expertise to spread at speed, and lessens risk,. However, it has long seemed to me that, in practice, franchising tends to end up as something of a perversion of the entrepreneurial spirit.
The best entrepreneurs are rarely in business just for the money. They want to be profitable, of course, but primarily are driven by the idea—and a desire to break new ground. In short, the best entrepreneurs are innately creative.
Franchising would appear to be the antithesis of this. It is somewhat disconcerting to find that it is not particularly financially rewarding either. The statement that “The survey also found that 91 percent of franchisees were in debt, and about two-thirds of them operated at a loss or zero profit,” taken from the following piece is fairly chilling.
This is all of a piece of my core argument—the current American Business Model needs to be re-thought. It clearly isn’t delivering for most workers—and now it appears you can include many franchise owners as well.
I’m not arguing against capitalism as such. I’m debating our current version of it.
My underlying principle is very simple: Does it work? If it doesn’t, let’s try something else.
U.S. Franchise Owners Say They Can’t Make a Decent Living
bloomberg.com · by Leslie Patton · April 30, 2015More than half of U.S. franchisees can’t earn a decent living from their business, according to a survey.
About 52 percent of U.S. franchisees don’t think they make a fair profit, according to a survey of 1,122 franchisees across industries including fast food, lodging and real estate. The poll, released Thursday by FranchiseGrade.com, was paid for by Change to Win, a federation of unions that includes the Service Employees International Union and the International Brotherhood of Teamsters.
Franchisees sometimes face conflicts with their parent companies over rent, royalties and other fees they’re required to pay. Restaurant chains in particular are struggling with pressure to raise wages and provide better benefits for employees.
McDonald’s Corp. said earlier this month that it would increase hourly wages and offer paid vacation at U.S. company-owned stores, putting pressure on franchisees to follow suit. McDonald’s, which is 90 percent franchised in the U.S., is trying to turn around six straight quarters of slumping domestic sales and placate some upset operators.
“We would love to be in a position where we could pay workers more,” Keith Miller, a Subway restaurant owner in California, said during a conference call to discuss the survey results. While fast-food franchisees have been under “extreme pressure” to maintain profit, parent companies have been able to keep money coming in, he said.
The survey also found that 91 percent of franchisees were in debt, and about two-thirds of them operated at a loss or zero profit.
Subway, Burger King, Wendy’s Co. also are mostly franchised in the U.S.
bloomberg.com · by Leslie Patton · April 30, 2015
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