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The Franchisor

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Franchisees as Consumers

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Abstract

The role, identity, qualifications and characteristics of franchisors is ­discussed in this chapter. The impact of franchising on the economy of a nation is identified by reference to Australia, France, New Zealand, the United Kingdom and the United States. Franchisors are compared to SMEs and franchisees. Their roles as suppliers operate at two levels: supplier of the franchise system and also of stock and plant. In the second supplier role franchisors’ ability to create monopolies is explored. Possible approaches franchisors adopt to managing risk are also identified.

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Notes

  1. 1.

    Do the numbers stack up? Lesley Parker, November 2, 2011, Sydney Morning Herald quoting ACCC Chairperson, Rod Sims. http://www.smh.com.au/small-business/franchising/do-the-­numbers-stack-up-20111102-1muio.html#ixzz1fqKnikkU

  2. 2.

    John F Love McDonald’s: Behind the Arches, (Bantam Books, 1986) 115

  3. 3.

    According to Spencer, 20 of the 30 countries with franchise-specific legislation have regulated by means of disclosure requirements. Elizabeth Crawford Spencer, The Regulation of Franchising in the New Global Economy (Edward Elgar, 2010) 218

  4. 4.

    Daily Telegraph, 16 March 2012

  5. 5.

    Advertisement on http://www.franchisebusiness.com.au/c/Dymocks

  6. 6.

    France’s Banque Populaire collaborates with the French Franchise Federation to produce annual surveys of franchising in France. The survey is now in its eighth year and can be accessed at http://franchise-fff.com/presse/les-communiques-de-presse-de-la-fff/240-enquete-annuelle-sur-la-­franchise.html

  7. 7.

    The NatWest bank combines with British Franchise Association to conduct an annual survey of franchising in the UK. Highlights are available online at http://www.natwest.com/business/­services/market-expertise/franchising/natwest-bfa-survey.ashx#1

  8. 8.

    This was a figure calculated before the Global Financial Crisis bit deep. It includes product and business format franchises and franchisor-owned and franchisee-owned outlets. Of these, xxx were business format franchises and 14% of those were owned by the franchisor, 86% by franchisees. http://www.buildingopportunity.com/impact/overview.aspx Accessed 10 April 2012

  9. 9.

    Lorelle Frazer, Scott Weaven and Kelli Bodey Franchising Australia 2010, Asia Pacific Centre for Franchising Excellence, Griffith University

  10. 10.

    Enquette Annuelle sur la Franchise, Résultats, 2010

  11. 11.

    Susan Flint-Hartle, Lorelle Frazer, and Scott Weaven Franchising New Zealand 2010, Massey University and Griffith University

  12. 12.

    See, for example, Marko Grünhagen and Robert Mittelstaedt Entrepreneurs or Investors: Do Multi-unit Franchisees Have Different Philosophical Orientations? (2005) 43(3) Journal of Small Business Management 207–225

  13. 13.

    April 16, 2012, Business Wire, ‘Burger King® Franchisee Guillermo Perales Acquires 96 Restaurants in Central Florida: Becomes Largest Minority Franchisee in the US’ http://businesswire.com/news/home/20120416006453

  14. 14.

    Frazer, Weaven, Bodey, Franchising Australia 2010, 118

  15. 15.

    Frazer, Weaven, Bodey, Franchising Australia 2010, 116–117

  16. 16.

    Frazer, Weaven, Bodey, Franchising Australia 2010, p. 116–117 figures drawn from Australian Bureau of Statistics ‘Counts of Australian Business Operators 2006-7’ Catalogue number 8175.0

  17. 17.

    Lorelle Frazer, Scott Weaven, Owen Wright, Franchising Australia 2006 (Griffith University, 2006), 34

  18. 18.

    Australian Competition and Consumer Commission v. Chaste Corporation Pty Ltd (In Liquidation) (ACN 089 837 329), Braddon Ralph Webb, Orlawood Pty Ltd (ACN 059 294 334), Peter Clarence Foster, Sean Petrie Allen Cousins, Kevin Anthony McMullan, Alan Kenneth Cooper, Stephen D’alton, Qud 252 of 2001

  19. 19.

    Australian Competition and Consumer Commission v. Chaste Corporation Pty Ltd (In Liquidation) (ACN 089 837 329), Braddon Ralph Webb, Orlawood Pty Ltd (ACN 059 294 334), Peter Clarence Foster, Sean Petrie Allen Cousins, Kevin Anthony McMullan, Alan Kenneth Cooper, Stephen D’alton, Qud 252 of 2001 [22], [24]. For a discussion with conman Peter Foster see http://www.abc.net.au/sundayprofile/stories/2578118.htm.

  20. 20.

    It should be noted that where a franchisee needs supplies of highly perishable stock like fruit to make fresh squeezed juice with the franchisees may be required to source their own local suppliers of this item

  21. 21.

    Lisa Bruttel and Simeon Schudy ‘Competition within Firms’ (2012) 8 Journal of Competition Law and Economics, 167

  22. 22.

    Stephen G Corones, Competition Law in Australia (5th ed, Thomson Reuters, 2010), 618

  23. 23.

    Andrew C Selden ‘Beyond the Law and Contracts: Strategies for Effective Franchise Relationship Self-Management’ in Elizabeth C Spencer (ed) Relational Rights and Responsibilities: perspectives on Contractual Arrangements in Franchising, (Bond University Press, 2011) 161

  24. 24.

    Notification N92536 under s 47 Trade Practices Act 1974 (Cth) < http://www.accc.gov.au/­content/index.phtml/itemId/750777/fromItemId/729985> Accessed 17 June 2010

  25. 25.

    Letter Deacons to Australian Competition and Consumer Commission 23 June 2006. At http://www.accc.gov.au/content/index.phtml/itemId/750777/fromItemId/729985/display/notification

  26. 26.

    Letter 21 April 2007 Narelle Walter to ACCC re Third line forcing notification N92536 lodged by Bakers Delight Holdings Ltd http://www.accc.gov.au/content/index.phtml/itemId/750777/­fromItemId/729985/display/submission

  27. 27.

    Letter 25 April 2007 Paul Costanzo to ACCC re Third line forcing notification N92536 lodged by Bakers Delight Holdings Ltd. http://www.accc.gov.au/content/index.phtml/itemId/750777/fromItemId/729985/display/submission. Costanzo’s company, franchisee PAKAMALA PTY LTD, was registered on 6 August 2004 and commenced trading as Bakers Delight Ulladulla in September 2004. It is now (2012) in external administration

  28. 28.

    Doug Frazey, ‘Case Note: When ‘Good Cause’ Goes Bad: Minnesota Restricts Protection for Dealers under HUMEDA – River Valley Truck Ctr., Inc V. Interstate Cos’ (2006–2007) 33(2) William Mitchell Law Review 711, 728 quoting ABA Antitrust Section: Monograph No 17, Franchise Protection: Laws Against Termination and the Establishment of Additional Franchises 19 (1990). We see the extent to which the franchisee may rely on the franchisor for access to premises in Chap. 2

  29. 29.

    See EF Fama and MC Jensen, ‘Separation of Ownership and Control’ (1983) XXVI(2) Journal of Law and Economics 301, 304 who do not include franchise networks in the spectrum of organizations discussed

  30. 30.

    Franchisors are not always solvent when they sign franchise agreements. Franchisors’ insolvency is discussed in detail in Chap. 8

  31. 31.

    Shelley Lynn v. Keith Handley, Ivernia, Inc., McDonald’s USA, LLC, Does 1–10 Complaint and Demand for Jury Trial, CV12-02140 Filed Central District of California, March 14, 2012, para 103

  32. 32.

    Jacqui Walker, Small Business Does it Tough … Hardie Trio Quit … Economists Tip Wages to Firm … Gloria Jean’s Tax Trouble … Domino’s Setback … Small Biz Stats … Commander to Franchise … Economic Roundup’ (2007) Smartcompany <http://www.smartcompany.com.au/retail/small-business-does-it-tough-hardie-trio-quit-economists-tip-wages-to-firm-gloria-jean-s-tax-trouble-domino-s-setback-small-biz-stats-commander-to-franchise-economic-roundup.html> Accessed 17 September 2009

  33. 33.

    Tony Boyd, ‘Employees from collapsed telco Commander Communications hit out at receivers’ Smartcompany.com.au 25 March 2009

  34. 34.

    Ferrier Hodgson, Administrators appointed

  35. 35.

    Frazer, Weaven and Bodey Franchising Australia 2010, 123

  36. 36.

    Franchising Australia 2010, Griffith University. 47% of franchisors, closely followed by 45% who chose franchising to achieve rapid market penetration

  37. 37.

    Michael Webster, ‘Fair Franchising Bill Will Create Jobs for California’ on Bluemaumau.org.au (17 April 2012) http://www.bluemaumau.org/fair_franchising_bill_will_create_jobs_california

  38. 38.

    Michael Webster, ‘Fair Franchising Bill Will Create Jobs for California’ on Bluemaumau.org.au (17 April 2012) http://www.bluemaumau.org/fair_franchising_bill_will_create_jobs_california

  39. 39.

    Patrick Stafford quoting Homschek in A Bigger Slice of the Pie (2009) SmartCompany <http://www.smartcompany.com.au/food-and-beverages/20090821-a-bigger-slice-of-the-pie.html> on 22 September 2009

  40. 40.

    Letter Mills Oakley to ACCC re Exclusive dealing Notification N92650 dated 20 September 2006 filed on the Australian Competition and Consumer Commission website

  41. 41.

    Frazer, Weaven and Bodey Franchising Australia 2010, 112

  42. 42.

    Susan Flint-Hartle, Lorelle Frazer and Scott Weaven Franchising New Zealand 2010, 108

  43. 43.

    Enquette Annuelle sur la franchise, Résultats, 2010, 1. ‘des réseaux matures (l’enseigne a 20 ans, le réseau 11 en moyenne); de grosses PME très majoritairement détenues par leurs dirigeants d’origine, qui ont choisi la franchise pour accélérer leur développement, mais aussi parce qu’ils ont confiance en les qualities intrinsèques de la franchise : effet réseau, services aux franchises’.

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Authors and Affiliations

  1. Australian School of Business, University of New South Wales, Kensington, New South Wales, Australia

    Jenny Buchan

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Buchan, J. (2013). The Franchisor. In: Franchisees as Consumers. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-5614-8_2

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