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Do You Want a Controversial Franchise?

By: Bill Bradley


Once upon a time there was a little boy in India who cleverly tricked tigers in the jungle into running so fast that they turned into butter instead of eating him. And once upon another time—1957, to be precise—there was a pair of Italian immigrants in California who combined their nicknames (Sam and Bo) to create the name for a pancake house that used that story for branding. Sambo was the name of the little boy in a Victorian children’s book written by Helen Bannerman, and Sambo’s was the restaurant that offered a 10 cent cup of good coffee, delicious pancakes, and “tiger butter.” Local artists created murals of the Bannerman story on the walls of the restaurant, and the owners made their Sambo as popular as Tony the Tiger.

A few decades later, there were 1,117 Sambo’s restaurants in 47 states. Every one was mired in controversy over a name and visuals that seemed offensively racist to people growing up at a time when the storybook was banned. By 1983, in spite of efforts to reframe the pancake chain, only the original restaurant remained.
You might not even know that the franchise you’re considering is controversial or has been controversial in the past. Here are some examples of franchise controversies:
  • Chick-fil-A got into the headlines when the company’s then-COO remarked that gay marriage was “inviting God’s judgment” on the U.S. That was 2012, and now in 2015 the chain has largely put that controversy behind them.
  • Jack in the Box had the worst E. Coli outbreak in the nation’s history in 1993, with 600 ill and four dead. Adding to the problem, corporate headquarters initially denied the problem and only a week later expressed concern for the victims of the poisoning. Changes in food safety laws followed.
  • Gold’s Gym got into hot water with franchisees over political donations. Not political donations from the corporate office, though. It turned out that the donations in question had been made personally by an individual investor. Gold’s statement included this unequivocal statement: “Gold’s Gym is a non-political organization and our member’s dues are not used to fund political candidates.” However, social media spread the rumor far and wide before that statement was made.
When you check he background of a franchise business opportunity you’re considering, look for controversies. Then find the answers to these questions:
Was the franchisor at fault? Many of the most notorious franchise controversies came from events at an individual franchisee’s location. Franchisees are independent business people, and may not be reflecting the views of the franchisor, and the employees of an individual franchise may not reflect the views of the franchisee.
How did they respond? Jack in the Box was involved in another potential public relations disaster in 2011, when a customer sued, claiming the chain wasn’t using real beef. This time, they stepped up and took the issue public quickly, with transparency and success. They learned their lesson. You’re looking for evidence that the franchise acted quickly and honorably to deal with the controversy.
Have they recovered? Chick-fil-A faced protests at their stores in 2012, but three years later their company is doing well. Sambo’s went into bankruptcy and their later attempts to fix the problem failed. Look at the company’s financial information and ask current franchisees whether they still deal with reputation issues.
Controversy doesn’t have to be a deal breaker, but it’s worth looking for and it’s also worth checking to see how the issue was handled.
This article was originally published by America’s Best Franchises
Published: April 23, 2015

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Bill Bradley

Bill Bradley

Bill Bradley is founding member and CEO of America’s Best Franchises, LLC.  Bill founded three financial services firms, Ocean Shores Ventures, Denali International and William Bradley Enterprises. In addition, to launching America’s Best Franchises in 2005, Bill orchestrated approximately 20 private equity transactions in excess of $31 million, and launched five specific purpose private equity partnerships.

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