Government and Franchising

I’ve long maintained that franchising should occupy a special place in the economy. I even wrote a paper about it called The Networked Hierarchy.

I’ll send it to you if ever you have trouble getting to sleep.

It was a long piece but I still think the ideas are okay. The economy is, effectively, made up from some very big businesses – monoliths like the banks, oil and utility companies and small business (just about everybody else!) The essence of what I said was this:

That franchising could become a balancing factor in the economy… it isn’t yet, but it could be with some help.

It’s a balancing factor because it allows people who want to run their own business to do so, but with help and support, meaning their likelihood of success is higher than if they take the plunge on their own.

So what?

Well, think about the recent economic troubles we have been experiencing (and are likely to continue experiencing for some time to come). In an economic downturn the monoliths reduce costs usually by getting rid of people, which means a whole bunch of people lose their jobs and unemployment goes up.

The other large employers are reducing numbers, too, so there’s little chance of getting a new job.

“I know,” says the newly unemployed person, “I’ll start my own business.”

And they do.

But they know nothing about running a business and, no matter how good the idea might be, they end up failing in business between one and two years later.

Hopefully, by this time the economy has recovered and there are some jobs about but there are a whole range of things that the failed business person has to cope with – including the question at interview: “what have you been doing for the last 18 months?”

Answer: “Errrrr… I screwed up a business!”

Franchising offers a check and a balance in an economic downturn. It allows people to get into business but provides them with help and support and success rates are proven to be much higher than going into business alone.

Up until now government seems to have missed the opportunity presented to it.

But the Conservatives seem to have woken up to the power of franchising, the following paragraph appearing in their recent policy paper called Get Britain Working:

Franchises are often more resilient in challenging economic conditions that other businesses. This is partly driven by the fact that their main source of capital tends to be local -from employees and communities – rather than from banks or capital markets. There are currently only 465,000 people employed by or running franchises in the UK. This is compared with over eight million franchise-employees in the US, suggesting that franchising remains under-developed in the UK.’

Now, this is all great but we must make sure of a couple of things:

• That government support for franchising must key on the ability of franchisees to run a business
• That business development processes are as well documented as product processes
• That franchisors who claim that ‘the business is recession proof’ must be able to prove it…

Otherwise we’ll just end up in the same mess all over again.

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