Franchising What are some of the worst Franchises ??

Nando's is having some trouble
Nando’s in crisis as stores go under

 

An older article from the US.
Americans are ditching Subway, and franchisees expect a wave of store closures -- here's what went wrong

 

Subway is cheaper to get into than many other franchises, but ongoing costs typically are higher. Advertising used to be a much more effective spend when there were very few avenues for advertising. Now, I don't often see Subway advertising anywhere.

I don't think that markup on stock is anywhere near that of some of the franchises I've heard about.

The old loyalty scheme was awful. The franchisee bore the cost of free subs. Some franchisees were selling rolls of loyalty stamps on ebay - leaving other franchisees to bear the costs.

$50pm plus 1.5% of turnover of the app isn't that bad. I don't know though if there's a reimbursement for redemptions though. Though, as a customer, I don't see the scheme as particularly good value. It doesn't encourage me to join up.

The franchisor organisation wasn't too worried about profitability of franchisees. They got their fees based on turnover, and as long as total turnover was increasing, they were happy. There was a big expansion of the store numbers.

I think that, like many large organisations, they couldn't pivot rapidly enough. Their formula was working well, so they did little to change it. I recently visited a store for the first time in a long time, and I saw a lot of new products- this is something that would not have occurred some years ago. So I think they're trying to change. Some of the changes should have been made a long time ago - promoting new ways of upsizing the basic product.

 

Yes, but that's 1.5% of the transactions which go through the app, not of the total turnover.

More stuff about Subway today
https://www.smh.com.au/business/sma...-over-staff-underpayment-20190809-p52flv.html

However, this is not the franchisor which is at fault - except if you accept that the franchisor should be a policeman of wages, in which case the percentages taken out would be much higher. Franchisees are like any small business - they are responsible for their own staff payments. They can't blame anybody higher up. The ombudsman used to inspect businesses regularly. A franchisee who did the wrong thing got the chance to put it right - back payment for a limited period, and a subsequent audit. There is not franchise wide staff agreement - each franchisee is responsible for their own staff conditions and agreements, although there are recommended providers who can help with the process if required.

 

A franchisee is like any business owner. They must abide by the law. When I had my business, I had to pay according to the award, or I had to have a workplace agreement - where the conditions overall couldn't be worse than the award. There could be some variation for penalties or base rate, but the overall rate must be at least the same. The workplace ombudsman could, and did, come in to inspect the books at random at any time. Any employee could also complain to the ombudsman if anything wasn't paid legally. Though I know one business owner who didn't pay superannuation - by the time a complaint was submitted, he was already bankrupt (incidentally owing me a stack of money for his purchase of my business).

 

I think if you're a franchisee, you have to be more careful than if you had your own independent business. Franchise chains are much more often the subjects of investigations than the little guys - by the media as well as by the authorities.

One of the reasons franchisors like to control the supply chain is not the profit so much as the information. They have a good idea from the amount of produce you are buying how much you're selling. Discrepancies ring bells.

Small guys have a much bigger scope to break the rules. In backpacker areas especially it can be really difficult for a jobseeker to find a job paying the award. Cash in hand is rife. But Joe's cafe underpaying doesn't make the headlines like 7-11 or Subway underpaying.

 

Franchisors may tell franchisees where the legislation is, they tell them what their obligations are (not just employment), they give guidance as to where to get help. They have preferred suppliers who know something about that franchise. They may even harp on about the importance of doing things the right way. They don't however actively police or enforce.

In the end, it is the franchisee who is responsible for breeches, although it's the franchisor which cops the flak.