No Skin in the Game?
Having started my career as a business reporter right before the good times ground to a halt in 2008, I'm especially sensitive to the warning signs cropping back up in the economy. The latest? Franchisors offering enormous discounts or even waiving the franchisee fee altogether. This cannot be a good thing.
Back to the general economy, some of these warning signs were hard to decipher as we dug out of the recession. Were rapidly escalating housing prices a welcome sign of economic recovery or us getting back to our old, very bad habits? I haven't seen any suburban housing tracts offering a free car with a new home purchase yet, so that's at least good.
In the automotive market, one of my side passions, the industry is riding high after 2015 car sales set new records. Incentives have crept up once again—the topic of my very first business story in the St. Paul Pioneer Press back in 2004—but I've yet to see free Chevy Sparks thrown in with the purchase of a new Escalade. Hopefully the collective near-death experience of the auto industry has knocked them sober for a few more years.
But seeing this trend in franchising, where prospects aren't being required to put adequate skin in the chain, is very troubling. With so many new and innovative concepts out there, it's got to be difficult luring in quality franchisees to your system.
It's a free country, so there's nothing stopping companies from offering steep (or total) discounts ... aside from good sense. Just say no.
What are you seeing out there? Is attracting prospects tough enough that these sort of tactics are becoming essential? Are franchisors about to start handing out free vacations to Hawaii for nothing more than a signature?
I hope not, and I'll be watching.