Large Franchisors - Publicly Traded Or Closely Held

Most really large franchise chains are publicly traded and this is because the franchisor at one time or another needed a lot more capital to rapidly expand and to continue accelerating their growth in the marketplace. Of course, there are a few large franchise chains that are closely held but that is not typically true.

It does matter if you buy a franchise from a large corporation that is on the stock market or if you buy a franchised outlet from a closely held franchisor. Why you ask? Let me explain; a large corporation is beholden to the shareholders and their job is to increase shareholder equity and quarterly profits.

The shareholders generally come before the franchisees in decision-making. And the franchisees become the customer. To make more money from each one of the publicly traded franchisor's customers they have to raise the price of things like straws, and paper cups. Often they raise the price of their logoed material that are required purchases for their franchisees to a cost that is greater than if the franchisee just went down to the local Sam's Club or Costco and bought the non-logo'ed equivalent directly.

The dilemma for a large publicly held franchise system is they must keep their shareholders happy, the franchisees happy, and the franchisee's customers happy; that is indeed a whole other people to juggle, and satisfied and still retain a profit.

A smaller closely held franchisor only has to answer to themselves and they are probably more focused on growth than pure profits. After all, they will make a lot of money if and when they ever go public. I hope you will consider all the ramifications of these facts, and how they relate to your costs as a franchisee. Please consider all this.

Lance_Winslow

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