Discounted Franchise Fees and Concessions: Are they really necessary?

I’m confused. Many signs are pointing towards the economy rebounding, albeit slower than we would like. The franchise finance situation appears to be improving, although also at a slower pace than we prefer. And, the spirit among franchisors appears to be positive and optimistic. Certainly, more so than this time last year. Yet, we continue to read about some franchisors offering discounts and concessions as an enticement, a lure if you will, to attract new franchise candidates. Does this practice really make sense?

Last year there was a discussion within the LinkedIn franchise groups that addressed the issue of discounts and concessions. The original discussion posed the question, “What kind of discounts or concessions are required now to get a franchisee candidate to move forward?” and generated many responses and different views. The following was my response when my view about getting back to basics was perceived to be fine during “normal times” but was challenged as a solution in more difficult times. Sure, last year should be considered a difficult time. But is that really still the case? In that same thread, there was also a subsequent response from another franchise professional that implied there are too many franchisors. I did address that as well last year, but now have begun to ask that same question.

“Although it’s certainly easier to accomplish franchise growth during “normal” times, the basics need to be in place even more so during tough times. That’s not to say we don’t need to think and act outside-the-box to make something happen. It just means we need to be extra prudent and diligent in our actions and not use the economy as an excuse for poor execution of skills.

If franchisors are to offer discounts and concessions in awarding franchises they need to be extremely careful they don’t oversell or create the perception of desperation. By doing so, they’ll either lose the deal or create a situation whereby the franchisee will not have respect for the franchise system and feel if one or two concessions were made initially, why not more moving forward? And then, there’s the perspective of franchisees already in the system that paid full amounts without concessions. What’s in it for them?

Nevertheless, with reports like Franchise Update’s about poor franchise sales performance and practices, I can’t help believe franchise systems wouldn’t be in better shape if their sales basics were perfected. It has to start with the basics before changing direction or considering revisions to the program.

In any business, just like in any sport, when a slump is imminent, it’s the fundamentals that need to be worked on before anything else should be considered or entertained. Once that’s done, then it makes good business sense to consider other options. At the very least, it should be done simultaneously. If not, what’s going to be the excuse when concessions and discounts don’t work?”

I guess my questions now are, “What have franchisors learned from the economic downturn, and what has been done to improve, not only their franchise sales process, but the weak spots within their systems, to offer a greater chance of success to current and future franchisees alike?” Or, is it just perceived to be easier to offer discounts and concessions?

In addressing the statement about there being too many franchisors, I replied, “Saying there are too many franchisors is akin to saying there are too many businesses of the same kind. What happened to free enterprise and entrepreneurship? Maybe, franchising could be better served by more regulation, licensing and policing, to weed out the weaker (for whatever reason) franchisors and make it more difficult to become a franchisor. Unfortunately, I don’t see that happening because the “big boys” of franchising will squash those efforts in a New York minute. I look forward to debating this topic in a different discussion or forum.”

Have my thoughts on this changed in the past year? Yes, they have. But, more from the perspective of regulation, licensing and policing being absolute last resorts. Instead, my focus is now on dedicating more efforts to education, and specifically, quality of education. To paraphrase Ken Walker during one of his many excellent addresses at the IFA Convention, “We need to continue to prove that franchising can effectively govern itself.”

In my opinion, franchising can accomplish this, but does need to do more in educating franchisors, especially new, and often impressionable, franchisors. And, there’s the key – impressionable! Yes, there are many educational opportunities available for franchisors… more than ever before. But, it doesn’t necessarily mean that more is better as quality over quantity is more effective in the long run. Now, THAT, is something I look forward to debating!

Paul Segreto Nominated for 2011 Statesmen Texas Social Media Awards

franchisEssentials is proud to announce that its President, CEO & Founder, Paul Segreto has been nominated and endorsed for the 2011 Statesmen Texas Social Media Awards.

In this the third year of the awards, there was a record 358 nominations, of which, 25 will be announced as reward recipients. It’s our understanding the awards will be announced the first week of March 2011 with the awards banquet scheduled to take place on Thursday, March 10th at ACL Live at the Moody Theater in Austin, Texas.

Judges for this year’s awards are Austin Statesman social media editor Robert Quigley, food writer Addie Broyles, tech culture writer Omar Gallaga and Cox Media Group social media manager Mathilde Piard.

This event -the only social media awards show in Texas – was created in 2009 by the Austin Statesman in order to recognize those individuals who are using social media in a variety of ways to help others.

The IFA Convention may have ended, but the discussion should continue!

To all franchise pros, it was great seeing you at the International Franchise Association Convention. I’m anxious to hear your thoughts about the event.

Point blank… Did the event meet or exceed your expectations, and why?

Large or small, have you brought something back to your organization from the event to begin implementing right away? Or, at the very least, to insert into your plan for 2011?

As much of the buzz was about social media, did anything change your perception of social media and how you may be able to utilize the same within your organization?

As well, there was plenty of discussion about credit and how it will continue to affect franchise development. Did you leave Las Vegas with any additional thoughts on this topic, and more specifically, did you leave with an alternative solution to this challenge?

Was there anything that was presented or discussed that you disagree with? Or, maybe a better question… Is there any topic that you just believe received too much focus and attention?

Anything else you would like to add would be greatly appreciated.

A Special Thank You to Franchise Professionals Ahead of the IFA Convention!

Are we there yet? That’s what I posted on Twitter about the upcoming IFA Convention in Las Vegas. I truly feel like a kid in the backseat of a long family road trip. I can’t wait to get there. I’ve been looking forward to it for quite some time. But now that it’s within reach, only a couple of days away, my excitement is peaking. Yes, are we there yet? How many more hours until we get there? Well, when we do get there I’m going to do this and that. Let’s just call it the kid in a candy store syndrome.

It is an exciting time in franchising. Riding the heels of the positive Franchise Business Economic Outlook 2011 report, and news about even the slightest loosening of business credit, it’s definitely an exciting time to be a part of franchising.

Year-long improvements at the IFA, a new CEO and President, Steve Caldeira, who by the way was just named to the board of directors of the Small Business Legislative Council, a new and improved website and social media presence, some great new people including Matt Haller complementing some great IFA veterans including Alisa Harrison, Paul Rocchio and Scott Lehr, just to name a few, just lends to the strength of the franchise community. Great work over the past year by IFA Chairman Ken Walker and anticipation of Jack Earl, a multi-unit franchisee, as incoming Chairman further exemplifies the focus of the IFA. Definitely too many to thank on the recent segment of Franchise Today as we only had an hour. But I believe all of you at the IFA and everyone else in franchising knows who you are.

To the many guests my co-producer Joe Caruso has scheduled to be on Franchise Today over the past year, I thank you as well and look forward to meeting all of you in person at the Convention. Again, many to mention but allow me to try…

Many thanks to Steve Caldeira for taking the time out of an unbelievably busy schedule to discuss the franchise business economic outlook, Alisa Harrison for helping to coordinate Steve’s appearance as well as her guest appearance on Franchise Today, and to Ron Feldman and Darrell Johnson for their great insight into franchise finance.

Of course, I can’t forget the many lawyers Joe has scheduled for both our popular legal eagle franchise series and individual segments where we discussed a wide range of riveting, relevant topics within franchising. To Warren Lewis for his great Franchise Sellers Handbook, to Lane Fisher for his fabulous perspective on Franchise Performance Representations, to Jonathan Redgrave for his discussion about the legal aspects of social media within franchising. To Michael Webster, franchisee attorney and strategic chair at the International Association of Franchisees and Dealers, and to Leslie Curran for her insight into utilizing franchise brokers effectively. And, to Arthur Pressman, who took time out of vacation on the Cape to spend an hour talking about franchise litigation. To all the attorneys that appeared on Franchise Today, I say thank you.

On the pr side, I thank Brad Fishman and Rhonda Sanderson for two very candid conversations on Franchise Today. Of course, thank you to my most recent guest, Jack Monson, another pr genius. To Mary Ann O’Connell who is always a pleasure to speak with, to Michael Stone for sharing his vision with the Professional Athletes Franchise Initiative, and to Nancy Weingartner and Franchise Times for time spent visiting with me both on and off the air, always providing compelling franchise news and sneak peeks at upcoming issues.

On the technical side of things I thank BJ Emerson and Jeremy La Duque for their insight into social everything. And let’s not forget the franchisors and franchisees that Joe has brought through our virtual studio including Amy Nichols and Deb Evans, and Dave Melton who shared his experience and success as a Dominos franchisee.

What an unbelievable “who’s who” in franchising that Joe Caruso has brought to the table for Franchise Today. Certainly, I’ve missed some and I do thank you as well. And look forward to meeting everyone at the IFA Convention.

Last, but definitely not least, I do thank my co-producer, trusted advisor, and sometime chaplain and therapist, but mostly friend, Joe Caruso. Without him Franchise Today would not be the leader in franchise media as it is today. I can’t thank you enough.

Utilizing Real-time Social Media at the IFA Convention

On this week’s segment of Franchise Today, Paul Segreto welcomed as his guest, Jack Monson, Vice President at Engage121, a social media and pr software solutions providor.

With the International Franchise Association Annual Convention kicking off in Las Vegas on Sunday, February 13th, attendees will be able to enhance their convention experience with real-time social media. Jack and Paul discussed how to effectively utilize the IFA Mobile Application to create a personal convention schedule, navigate the exhibit hall and interact with exhibitors, download powerpoint presentations from education sessions, and stay on top of breaking news and alerts.

Effectively integrating the relatively new Foursquare, along with social media mainstays, Facebook, Twitter, LinkedIn and You Tube into the mix also lends to an enahnced convention experience. As Engage121 is a co-sponsor of the IFA Convention Tweetup, Jack and Paul also discussed the benefits of attending the event and interacting with fellow IFA Tweeters by utilizing the IFA Twitter hastag #IFA.

Besies the IFA Convention-related links within this post, an additional real-time social media tool mentioned on the show is the new IFA blog site, Fran Blog.

For additional information, may we refer you to today’s post by Jack Monson on the topic of IFA Convention-related Social Media links.

About Franchise Today

Franchise Today is hosted by Paul Segreto, President & CEO at franchisEssentials, and co-produced by well-known franchise veteran, Joe Caruso. Their unique perspective and extensive industry experience provides the foundation for relevant discussions about franchising and franchise best practices. Weekly guests include some of the brightest minds in the franchise world, with specific expertise and experience within various areas of franchising.

Other features include Franchise News, as reported by the leading franchise publications, the IFA Corner, news and events from the International Franchise Association, New Brands in Franchising, a look at up and coming franchise concepts, and “Are You Kidding Me?”, eye-opening and thought-provoking insight into the comical, and sometimes illogical side of franchising.

The team at Franchise Today is dedicated to franchise success at all levels. So, whether you’re a franchise professional looking to grow a franchise concept, needing some assistance in facing today’s challenges or would just like to better understand franchise best practices, then Franchise Today is for you!

Franchise Today airs LIVE every Thursday at 12 PM CST / 1 PM EST with archived segments available on-demand.