| Licensing, Technology Transfers, |
In every franchise agreement there is a provision that requires franchisees to join an advertising co-op (if one is there yet) so that the advertising resources of market areas may be pooled for more effective use. Supposedly, the franchisees run these co-ops themselves with the help of the local advertising agency that represents them and maybe also franchisor representatives if there are company owned stores in the co-op area. They plan and adopt advertising campaigns, are a good meeting venue to test and demonstrate new products, and, one would think, are one of the more positive franchise system activities. HAH!
What could go wrong with that, you ask. Theoretically, nothing - they are there for a common purpose, a beneficent one at that, with expert assistance (the agency), for their mutual benefit. But every problem known to humankind, even warfare, is common to the advertising co-op.
The regulations of governance (articles, by-laws) never say anything about chaos management - that's not their purpose anyway. Articles and by-laws are seminal documents, memorials to the need to pay a lawyer for documentation you don't need and almost never refer to, and, in any event, would be more useful if they were printed on a roll of toilet paper.
One of the most serious, and probably the most frequently arising problems is the "free rider" issue - the bozo who doesn't pay his share and who gets his adverts in the yellow pages, et cetera, because you can't take anything out of the yellow pages until next year. The same may be said for any annual directory type publications. You can delete the gentleman from any Internet directory and from the chain-wide reservation system (if that is the kind of business it is), but the other co-op members end up paying his bill or circumscribing the annual advert program because of the budget shortfall. And, of course, when one bozo does that, others figure there is no need for them to pay if Bozo ain't paying, so the problem gets worse quickly, especially if the franchisor hasn't the cojones to bust Bozo immediately.
Busting bozo would be the right message to send - it's the only message to send. But franchisors wanna salvage bozos, and so the debts to the co-op get bigger each month, and the other co-op members get madder each month, and the opprobrium gets hotter each month, and the morale - such as it is - goes to hell each month. Why don't franchisors see this for what it is -- an abscess that needs to be lanced? Matters get worse if bozo is a minority franchisee, because bozo will then claim that busting him for non payment is racially motivated, call his local and national racial rabble rousers, and try to make a civil rights issue out of his being smacked for not paying what he agreed to pay when he bought the franchise. Many franchisors are getting afraid of the boycott threats and negative advertising that stems from racial trouble, and so the minority franchisee gets away with free ridership for a longer and longer period of time. Franchisors are winning the civil rights suits brought by or on behalf of these bozos. The boycotts are failing because they only serve to put other members of the same minority out of jobs or hurt other franchises owned by members of that same minority. There's nothing to be afraid of in busting bozo notwithstanding that he may not belong to the best country club in town. This is a business, not a political or social experiment. Run it like it is supposed to be run. Discipline is the only glue holding any franchise system together. Enforce it or lose your organization to anarchy.
Large market advertising co-ops encompass urban, suburban and rural franchisees, whose advertising needs are not identical. As the co-op members tend to be small minded, anything but big picture kind of people, wars develop between the urban franchisees that like television adverts, and the others who like more couponing deals. Why they can't harmonize the program and accommodate each other beats the hell out of me, but ask any advertising representative about the battles that ensue over urban vs. everyone else. It's ridiculous. If someone doesn't step in early when this arises, the animosity spreads to other subjects. In many franchise systems, the urban franchisees tend to include more immigrant and minority franchisees, with the suburban and rural franchisees tending to be more or totally Anglo Saxon - you guessed it - another race war - browns Vs whites - imperialists Vs third worlders. There are many categories of issues that align themselves in this manner. Election of officers is one of them. The answer is that the Articles and by-laws must provide for franchisor take-over of control of any advert co-op whenever normal function is impaired. Why is it that this potentially useful regulation is almost never in that document? Lawyers! Wake up!
The co-op can become the hot bed of seditious conspiracy, the theater in which all the angst about unhappiness with the franchisor is regularly played out each month if there is no governance to keep it on the intended track.
The message here is that this supposedly innocuous and beneficial phenomenon is a potential sewer of toxic flows unless the franchisor keeps tabs on its manner of operation and brings all the force available to bear whenever co-op problems arise. I don't think anyone has ever done a "study" on how many franchise systems were ruined because the advert co-op was misused with impunity, but I am sure there are many.
Copyright 1997 - 2008 || Richard A. Solomon
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 | Licensing, Technology Transfers, |