Franchise Regulations and Franchise Churning - You Decide

By L. Winslow

Franchising in the United States is over regulated and that is a very bad thing for our economy and small businesses, which franchised outlets are. The UK is probably smart for their stance of fewer regulations in franchising in many respects. Instead of over regulation education is much smarter. I am an Ayn Rand fan and a Friedman, Greenspan type economist type. I believe that if there were no regulations that franchise buyers would be much more apt to do more due diligence.

One issue that franchise rights advocates have decided is unfair and needs to be regulated is when franchisors are said to be churning. That is to say failing franchisees who sell quickly to keep from losing more money and the franchisor allows them to transfer and again collecting another large chunk of the franchise fee to allow the transfer. Then there are the third party churning companies or franchise resellers.

The third party churning issues that some Corporate Franchisors engage in, is sometimes questionable and some anti-franchisor groups say they do this to get around disclosures of franchise failures are problematic. Indeed, I suppose damage control to some degree, and well personally, I do not approve of such things, yet I understand the total game.

Often the need to maintain Brand name in the region to prevent "dead zones" for the brand or burning end-customers, as that could become a domino affect and collapse the system. I would not say it is the status quo all the time, but a franchise strategy is for growth, brand and market dominance, as in any business. Think on this.

L. Winslow is an Economic Advisor to the Online Think Tank, a Futurist and retired entrepreneur http://www.worldthinktank.net Currently he is planning a bicycle ride across the US to raise money for charity and is sponsored by http://www.Calling-Plans.com and all the proceeds will go to various charities who sign up.

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