Monday, April 25, 2011

How the Franchise Industry misused the Internet

This is the first of five articles that comprise a White Paper titled The Internet and the Franchise Industry - How an industry misused the Internet. This paper describes the history of Internet communications in the Franchise Industry and suggests ways to improve the current situation.

Part 1 - Introduction
Part 2 - Internet Communications in our Society
Part 3 - Understanding Institutions that Support the Franchise Industry
Part 4 - Impact of the Internet on the Franchise Industry
Part 5 - What can be done in the Current Reality and Conclusion
At the conclusion of this series, the entire While Paper will be published on the FranchiseFacts web site at

The Internet is now an accepted part of the way in which we all communicate. Low cost computers, cell phones and networks have allowed this technology to become ubiquitous. We access more information than ever before at lower (or no) cost. Industries and institutions have changed to embrace this technology. Yet our ability to manage and understand this information has not improved. In many ways, much of our society has lost the ability to critically evaluate information.
It has been nearly fifteen years since I wrote about technology. Back in the 1990s, I published approximately two dozen articles on how to best utilize technology for business and investing. My focus was on the use of the Internet and information technologies. I was also a public speaker on these same topics at technology conferences in Canada and the USA. Since 1998, I have been part of the franchise industry.
Today, I look back on how the Internet has developed over the past twenty years with disappointment. The Internet is, first and foremost, a mechanism for communication and the sharing of information. So how is it, in the Franchise Industry that I have been part of for more than a decade, that during this same time franchisees seem to have lost ground during a period when the ability to communicate among themselves has improved so dramatically? Why is it that franchisors are now perceived as being more ruthless in their dealings with franchisees than ever before? Is this perception correct? This paper documents the way in which I have come to understand what has happened these past twenty years. Through this process I have come to three conclusions.
A. Franchisors have not changed in the way they work with their franchisees. Franchisors have adapted, out of necessity, to changes that have been forced upon them by the franchisee community.
B. Internet technology was never envisioned as a way to destroy institutions that have existed for decades. Yet that is exactly what has and continues to occur in the Franchise Industry. This situation has come about by decisions made by a very significant proportion of individuals (franchisees) to no longer support their own institutions.

C. The necessary equilibrium in franchise relations has been disrupted. Franchisors no longer have the opportunity to work with franchisees speaking with a single voice. The organization tasked with this responsibility, when it exists, no longer has the financial resources and intellectual capital needed to fulfill this role.

This paper provides an overview of how the Internet has affected overall communications and flow/quality of information. It then addresses how these changes have become entrenched in the Franchise Industry. Finally, recommendations are provided for improving the current situation.

About the Author

Perry Shoom is the founder of FranchiseFacts, a company that provides research services for the Franchise Industry. The company also publishes an Annual Report of the results from its National Franchisee Survey. The 2010 Annual Report, and the 2011 Franchisee Survey that is currently in progress, can both be found at The survey is open to all franchise owners and store managers. FranchiseFacts does not disclose identifying information that may be provided by survey respondents.

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