The Folly of Buying a Franchise

Why bother to buy a franchise?

Why should someone pay for a company name and expertise when they can probably duplicate the same entity at no franchising cost?

There are some questions to ask yourself about the possibility and logic of a franchised business.

Whether it is easily duplicated or entered into by a competitor. Or: It does not have a highly recognized brand name or special management expertise to offer.

The royalty you pay on sales, that cover whatever management training and materials you may get, will probably represent about half your net earnings.(See Earl J Weinreb NewsHole® comments.)

The Tricky Franchise Route in Business

Why bother to sell a franchise? And why buy a franchise?

If you have a successful business, it’s easy to think it can be franchised. But why should someone pay for the company name and your expertise when they can probably duplicate the same entity at no additional franchising cost?

There are some questions you can ask yourself about the possibility and logic of franchising your business. You cannot successfully franchise your operation if:

It is easily duplicated or entered into by a competitor.

You don’t have a highly recognized brand name.

You don’t have special management expertise to offer.

It’s hard to service or manage operations from your site.

You must realize, too, that the usual upfront fees and the royalty you take on sales, that cover whatever management training and materials you may offer, will probably represent about half a franchisee’s net earnings. That fact is bound to eventually infuriate him, assuming he becomes successful. There is no telling what the fury may be if he fails after investing in your advice.

So he may eventually cheat you or form groups with any other franchisees you may have, to sue you over contract terms.

If you want to franchise your business, can you finance and constantly control the finances of your franchisees? That is most important, should you do decide to franchise. It is the most important binding link you can have to the prospective franchisee. (Earl J Weinreb NewsHole® comments.)

The Usual Government Fraud

We hear about business fraud but there are checks and balances by boards of directors and independent audits. When an event occurs, the publicity and media extravaganzas, along with government finger-pointing and publicity, tend to make up for smaller, relative numbers.

Government fraud is taken for granted but is far more prevalent where politicians and bureaucrats take it as a given because they are so “underpaid” on the job.

There is a formula for how government grants are used. There always is a euphemistic allowance made for “waste.”

And there is always an understatement of projected cost. It’s a rare government project that ever meets its original cost estimate.

There is usually some figure allotted to account for missing funds. Or at least a few percentage points devoted for investigation of fraud.

That is because of the psychological nature of government jobs. You don’t have the same checks and balances than in private industry, despite the public image the media provides.

Government projects are always ramped up. Very few are ever terminated. Sunshine laws are passed from time to time but appear ineffectual. Once on the books, laws and agencies they breed have a life of their own. (Earl J Weinreb NewsHole® comments.)

Form Your “Benefit Corporation” to Ward Off Hecklers?

Seven states have come up with or are ready to legislate the abiiity for companies to incorporate so-called “benefit corporations.”

These allow the governing board of directors to consider environmental and social goals while doing conventional business.

These objectives fly in the face of good business practice while being a good business citizen. After all, the primary function of any business is to make a profit by filling a consumer need, all the while providing jobs for workers at wages and benefits the company can afford, for its purpose and existence and its continued growth. It’s understood it will also be a good corporate citizen.

The “benefit corporation” hocus-pocus is to avoid hecklers and provide dubious public relations. (See the Earl J Weinreb NewsHole® comments.)

Uninformed Voters Hurt Themselves

Too many voters have no idea of the main issues that govern the way they vote.

The reason has to do with being lazy. They often make little effort to get down to the nitty-gritty of important issues.

And secondly, they depend too much on what they pick up from the inept and slanted media.

I can give many examples; my daily blogs and books, and website go into them. One example: The true unemployment rate of about 17% we never get. Much of the media repeats a fictitious number of about 8.5% that eliminates important statistics. (See the Earl J Weinreb NewsHole® comments.)

Venture Capital Success and Luck

There is a good reason why VC funding is so haphazard. The VC “experts” actually haven’t the foggiest idea of which entrepreneurs to select and fund. Those VCs who have made big money were often merely lucky; they also picked lots of losers.

The payoff for VCs is generally the ability to sell stock in the venture to others, even when there are no profits to be made.

Some deals have been referred to as legalized Ponzi schemes. (Earl J Weinreb NewsHole® comments.)

Venture Capital Success

Venture capital success s often a case of being lucky, or knowing the right people. However, you must have basic planning to get into the game. To ask for funds, a game plan or budgeting proposal is essential.

Incubators were a fad for a time, for very early stage venture funding. They proved a flop in the past. Incubators required lots of hand-holding for entrepreneurs. The problem was, too many students and teachers often had no ability at the required levels. The eventual dot com bubble showed how futile that effort was.

Angel capital is now used for early-stage startups, Classic venture capital is for the level after you generally have some vestige of business operations.

Getting VC funds is usually a sort of lottery, should you have no connections. Those who get funds generally have those, or have gotten funds for earlier ventures. (Earl J Weinreb NewsHole® comments.)