How not to franchise by the EU!

As a business advisor I often find myself getting involved in advising on franchising as an expansion policy. Only last week a successful restaurant in my locality was discussing precisely this.

Within a short time of discussing the necessary conditions for success, the restaurant owner decided that he needed to do much more and not to succumb to the overtures of others for a share of his success.

For any successful franchise there is a need to establish a clear business model of operation with clear rules of engagement around a consistent product. The financial model has to be consistent and there needs to be regular inspection to ensure compliance. Importantly, growth has to be controlled and exceptions to the rules cannot be made.

The most obvious example of a franchise is probably Macdonald. Whether you love or hate the product, when you order a Big Mac anywhere in the world you know what you will get.

However, if one applies the business model for franchise to the European Union, it fails on pretty well every criterion. For a start, it has never been in a position where it has a consistent product. If you look at the product when it enlarged the number of franchisees from seven to twelve and compare it to the product when it moved to twenty-eight, it is as if it had ceased selling burgers and had moved on to pizza!

The second major mistake was not to have a consistent business model for joining the EU franchise. Although there were apparent conditions for joining the franchise, these were often waived in favour of market penetration.

The same problem arose when it came to the financial model. Although a financial model, based around the Euro, was established after franchising had commenced, this was another area where adherence to the financial rules was waived in favour of market penetration.

So now we see a European Union franchise where franchisees can dictate to the original franchise owners and franchisees are deciding which products they will accept from the franchise owner and which they will not.

In other words, the franchise is a perfect example of how not to do it and the franchise owner is forced to sit up all night with the franchisees in order to produce a menu that appears to show unity. As a final irony, the menu discussion is fuelled by pizza to keep them awake!

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