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Takeaways from CNBC’s Untold Story of Franchising

December 22nd, 2010

CNBC recently aired a 60-minute documentary called Behind the Counter: The Untold Story of Franchising, which took a look at how franchising works mostly from the franchisees’ perspective. They focused on 5 Guys, Camp Bow Wow, Cold Stone, Dunkin, and the new P & G brands, Tide Dry Cleaners and Mr. Clean Car Washes. It was fascinating to me to watch a smart, business-savvy reporter like Darren Rovell ask questions about why franchisors do what we do.

During the documentary, one CEO was grilled pretty extensively on what Darren Rovell considered to be inconsistent results of franchisees and high failure rates. The CEO created some distance from these failed franchisees by making such comments as, “They didn’t follow the system,” and “We can’t run their businesses for them.”

It was clear the reporter saw the totality of franchisees’ successes and failures as different results which occur within one system. The CEO saw franchisees’ successes as “the system working” and franchisees’ failure as “a failure to work the system.” This exchange made me take a pause and reflect on the question, “What is the system, really?” Does The System merely describe the franchisor’s operating system or does it include everything the franchisor and franchisees do and don’t do which impacts the franchisees’ results? Does The System include the wide range of franchisees’ results (including failure) or does it merely include franchisees’ successes?

I remembered a book I read by Peter Senge called The Fifth Discipline, which altered the way I look at systems. According to Senge’s way of thinking, The System would house all the cause-and-effect relationships, actions and even inactions which work together to produce the broad spectrum of franchisees’ results. All of the below would be part of The System.

franchisor franchisee ying and yang

  • The franchise sales people and process which attracted and awarded both the successful and unsuccessful franchisee
  • The franchise salespeople and process which failed to recruit other franchise candidates.
  • The pressure franchise salespeople feel to approve a marginal candidate because they aren’t hitting growth objectives
  • How first time business people feel when they evolve from a “pay check” mentality to a “profit mentality”
  • The cost of financing and expansion capital
  • What is and isn’t taught during training.
  • The natural tendency of entrepreneurs to resist operating systems designed by third parties.
  • Everyday breakdowns the franchisor, franchisee, and suppliers experience as a result of doing business together
  • Friction in the franchisee-franchisor relationship
  • Why customers do and don’t buy products and services franchisees offer.

Simply put, Senge’s believes The System includes everything that does and doesn’t occur, distinguished and undistinguished, accidental and intentional, which work together to eventually determine whether or not the franchisees’ cash register rings.

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