Franchises
by Andrew Samtoy
An interesting question has come up: can franchises be considered “locally owned”? Are McDonald’s, Burger King or Starbucks franchises as worthy of a Cash Mob as Caseybots, Forest City Portage, Salty Not Sweet, Visible Voice or Big Fun? Leave your thoughts in the comments!
We are doing a franchise on March 24th, Dog ‘n Suds. It is locally owned and they are struggling, so we thought “why not?” Not sure if everyone agrees it’s a good idea, but I think it’s still helping a local owner and the local economy.
I think the real question is whether a franchise can actually be considered “locally owned” if profits are moving out of the community?
We have several franchises in our downtown district and many of them are locally owned and struggling. As a membership organization, if one of our member franchise businesses request to be included in the Cash Mob monthly drawing we will add them to the list (we randomly pick our “target” business from a list of those who want to participate).
Although they are franchises it is important to remember that the staff are local and the owners/managers are also local. And in many instances it is so difficult to abide by the expensive requirements of the franchise, often to the point where it is barely possible to stay afloat. Point in fact- we lost Ben and Jerry’s twice now because of the demands the franchise placed on the local owners.
So we believe it is important to support all of our downtown businesses if they need the help, and in this economy…they pretty much all do!
Are you picking franchises over stores that don’t send profits out of the community?
No. We have more non franchise than franchise in the drawing to start with. So far we have only had non franchise as we only have two that have actually asked to be included. We will always give the most support to our locally owned small businesses.
Hmm… Very good question. I would say it depends entirely on the store.
Example: Chick-fil-A is not really a franchise, it is a “Joint Venture”. The “Owner/Operator” lives in the community. The employees at that store do not actually work for “Chick-fil-A”, they work for the “Owner/Operator”. The Owner is actually a sole-proprietor. So, if you “mob” a Chick-fil-A, then you are supporting the local economy.
Other franchises may or may not operate in this manner. I guess this is really a decision you need to make on a case-by-case basis.
The way we have been looking at businesses that we want to target is that they must be locally owned and independently operated. That second portion is a critical distinction between a franchise and a non-franchise locally owned business.
Several things happen with a franchise that sets it appart from a locally owned and independently operated business. Franchises tend to get aid from a parent non-local entity for many aspects of their business including things such as marketing, purchasing, finances… etc. In return the francise is required to send a portion of their profits to the non-local parent. Obviously the level of support and profit sent to the parent depends on the franchise.
Franchises are often a great and possibly the only way for local business people to go into business. Their start up costs are offset but they must pay it back over time to the parent. Local francise owners are also often great supporters of a local community, however, in the standards we at Ann Arbor Cash Mob have set for ourselves, they do not meet the full requirement for our Mobbing.
The locally owned and independently operated businesses tend to have the most difficulty as they are entirely on their own. They also tend to keep more of our spending dollars recirculating in our community instead of sending a percentage off to a parent that is in some other non-local location.
This does not mean, we as consumers should not support local franchises, we just feel there are levels of priority and the locally owned and independently operated businesses come first.
Very interesting point – thanks for this!
I agree – thank you for your viewpoint on this.
Well said Paul. Not all franchises are created equally. There are definitely different models that are used by different companies. As has been said, the commonality is that they all have to send a portion of their profits to the parent company. The owners may or may not have invest in the community outside of wages for the handful of workers.
On the other hand, there are local franchises where the headquarters are located in or near the community. That is something that we would maybe consider here in Chicago. It really has to be looked at on a case-by-case basis.
Joanne Forster-Coffin
I think chain stores even when locally owned do not qualify for cash mob. They have franchise support already for help advertising and getting people in the door.
But some franchises are required to pay into an advertising budget…and some advertising is geographically specific, using local talent to produce it. Its not as easy as a yes and no answer across the board.
Thank you Lisa, simple and to the point.
My thoughts exactly.
We need to celebrate and patronize the small locally owned and NON-franchised Mom and Pop type stores.
Franchise-Joint Venture, the same thing, a play on words from a distant corporation who dictates all of the conditions, including what can be sold.
Food, clothing, general merchandise, auto dealers, the franchise list goes on and on.
Totally agree with Lisa and Donald. There are enough small businesses that don’t have the benefit of brand recognition to support them.
The simple math is this: one dollar passed around the community 100 times is a hundred dollars to that community. Every dollar that is funneled up to the corporate bosses is a dollar we should have given to a fully-local business.
There are other criteria to consider by the way, like where that local business buys their supplies. When we CashMob “Store X” which buys it’s produce from local farms instead of distant corporate farms, we get even more bang for our buck.
If we want to be pros about our preparatory research, we must Follow the Money back as far as we can see it. Stores should be rewarded not just for being local, but also for buying local themselves.
This way, we can encourage self-sustaining communities and local business coalitions, versus just great one-off events.
On a related note, I think we should start seriously articulating more criteria/guidelines for the businesses we aim to support beyond just the businesses being local.
Take Chick-fil-A for instance. I am against supporting them, not just because they aren’t fully-local, but also because they get their supplies from factory farms (like most fast food chains).
We don’t like to examine our eating habits when it comes to fast food, but small farms across America have been put out of business by factory farms which pollute nearby air and water, undermine rural economies, and reduce the quality of life for neighbors, not to mention keeping animals in torturous conditions, living out miserable lives in intensive confinement in dark, overcrowded facilities, sometimes knee-deep in feces and conditions so unsanitary that they must be pumped full of antibiotics to stay alive (which we then become immune to).
There are, however, local restaurants which are ethical, pay their employees a living wage, are sustainable, and even give back to the local community. They aren’t everywhere…but where they exist they should be our priority (especially because a business with integrity often has to pay more for better supplies and need all the support they can get).
And this isn’t just about restaurants, btw. It’s about tracing the supply-line back for the businesses we want to support and finding the best one overall.
You guys are amazing and doing such a great thing here. Let’s raise the bar though. Set a higher standard together….
Franchisees are generally not at liberty to make major decisions that could potentially retain/generate wealth within the host community. Could the local McDonalds, for example, swap out the hamburger buns for some produced locally ? Hire a local designer to change the Golden Arches to a nice shade of green? Forego the franchise fee? Those are all examples of important ways that money spent at franchises quickly depart the local community…those decisions (about the marketing, the branding, the sourcing) are all made outside of the local community, to the benefit of some other community (most likely a community of shareholders.) The “local premium” (a term coined by Dan Houston at Civic Economics) means dollars spent at local independent businesses continue to bounce around within the community longer. But Paul’s right. Franchisees are still valued and appreciated.
Franchises are franchises are franchises. I hate it when I travel and see the same stores as in my home town. We need to support the “different”; the stores that give our cities a unique feel.
Please keep in mind that not all parent companies of franchises offer support to their franchisees. I know of one company inparticular that offers no financial, advertising or marketing support to their stores. The owners of these stores are responsible for everything as well as sending a portion of their profits to the corporate office. So, basically, the local owner is paying corporate for use of the sign on their building. These owners do all of their marketing and advertising locally. They also pay rent/lease agreements to local owners. They employee local employees and pay local taxes. The majority of the franchise owners with this company also give back to the community. I do not feel that this is black and white answer. I think that a determining factor should be the percentage of support that an owner gets from their corporate owner. If the support is 0%, then I strongly feel that a franchise owner should be eligible for a cash mob. The particular chain that I am referring to consists of only 14 stores in 4 states so I am not sure that you can even call them a “national” chain. That could also be a determining factor, i.e. How many stores are there nationally? Possibly putting a number limit on how many locations a business has could be a decision maker.
In the case of a company like Taco Bell, McDonalds, Burker King, they are supported nationally with television commercial and newpaper ads/coupons. Smaller restaurant franchisees do not get this kind of support. If a person is asking “Where do we draw the line?”, I think the answer ultimately should be made based on the amount of corporate support that the business receives.
Thanks for listening!
No – thank YOU for contributing!
The whole reason I was so inspired to create a Cash Mob here in Saint John N.B. Canada, was to help/support small local business..they are the ones that struggle the most in hard economic times, these are our neighbors and friends, who thought enough to take a risk and Think OutSide the BOX store!
So I say a definitive ‘NO” to franchises.
take a risk and Think OutSide the BOX store!
WOW, what more can be said, the risk taker takes my dollar.
I patronize the chains, as we all must, but I search out the local merchants who followed a dream with the streak of independence I admire.
If a business claims that they get 0% support, I would definitely call that suspect and also ask, why do you need them then.