Buying a Franchise

The concept of franchising is a couple of centuries old. The franchising business and world economies have developed simultaneously. The term 'franchise' comes from old French where it meant freedom, or privilege. Franchising goes back to the feudal times when the feudal lords granted permission to their slaves and common men to hold fairs, markets, ferries, and even allowed hunting on their lands.

In the middle ages, kings used the concept of franchising when they gave contracts, or franchises for most of the commercial activities like developing roads, wells, and brewing ale.

As the concept of franchising developed further, it was seen as the right to monopoly that a person got to perform any kind of a commercial activity. As time passed, several franchises became a part of the European Common Law.

Singer Sewing Machine Company is considered to be the father figure of franchising as most of the concepts of franchising developed by them, form a part of modern day franchising contracts.

The way in which Singer made its sales and provided services is considered to be modern retailing that is a part of franchising. In the 1850s, Singer brought together teams of salesmen and dealers who were given the rights to distribute sewing machines in different regions. They made written contracts for franchising, which are the basis of modern-day franchise agreements.

At this point in time franchising was seen as the right granted by the manufacturer to sell and distribute products and service to the franchisee. Big oil refineries, automobile manufacturers, and many others also started following the concept of signing written agreements for franchisee distribution.

Proper business format franchising came into being, in the United States and other countries of the world, after World War II. This was the time when soldiers returned from the war to be back with their families and the baby boom took place because of which different and newer products and services became essential.

This was when the concept of franchising developed the most. It made its presence felt in the U.S. economy. This was also the time when most of the hotels and motels developed. With the increase in the number of franchises, the 60s and 70s saw a time when every second person was into the franchising business.

The decades of 60s and 70s also brought about a number of frauds in the franchising business. There were people who duped many others by taking money from them in return for a franchisee that did not exist and escaped with the money. On the other hand there were also many franchise businesses that went bankrupt. This was when the need for strict regulations for franchising business was given a thought.

In the year 1978, the Federal Trade Commission ordered that all the franchisers/manufacturers were supposed to submit the Uniform Offering Circular or UFOC before receiving money from the prospective franchisers. The UFOC provides the details of the franchise company, gives their history, audited financial statements, information of the officers, and the contract, or the franchise agreement.

At present, the franchising is seen as the most lucrative business option for many people who aspire to own a business.

China Media Booms

No one really knows how many television stations there are in China. Best estimates put the number at 5,000. Yet, just over ten years ago there were no more than 40. The number of newspapers has increased from around 200 to more than 2,500, radio stations have blossomed from a 100 to 1,200 and TV and radio penetration is now over 85 percent.

In just, 10 years, the media in has exploded. But it is still heavily regulated and owned and controlled by the state run Communist Party. Most local media is pro-China in its content and style and is used as a tool for control and influence over the country's huge population.

There are also limits on foreign journalists - where they can travel and to whom they can speak. Overseas media regularly have their offices screened and their activities are closely monitored.

Taiwan, Tibet and human rights issues are strictly off the editorial agenda.

Despite this, consumerism has well and truly arrived in China. There's now an increased sophistication in the market - and marketing communications, brand management and reputation building have become big business.

There is no such thing as privately owned media in China - and foreign companies are restricted. Consumerism is driving up advertising revenue. The dominant Chinese television network, CCTV is said to earn a total of 1 billion yuan or A$200 million a year.

So in this environment how can Australian companies effectively get their message across and plan marketing communications strategies in China?

The first thing to understand is how companies will have to work in a very complex and constantly changing regulatory environment.

"China is very conscious of reforming its media and has some relatively progressive thinking internally about where to take it," said Gary Davey CEO of Star TV in Hong Kong. "But it's going to take a very long time because they are equally sensitive about the importance of control."

An older generation of bureaucrats still sees the media, and television in particular, as a propaganda device and any attempt to reform it into a commercially driven business raises great suspicion amongst the Chinese leadership.

In the past the News Corporation owned STAR TV has upset Chinese authorities and Davey is quick to point out the sensitivities of the Chinese marketplace, especially when it comes to cultural differences.

"You might be able to run a successful State-run security operation by trying to force your own cultural values down someone else's throat, but you certainly can't run a business doing that."

STAR TV has had to develop strategies that fit these realities. "We've created new companies with Chinese partners to play a part in the evolution of the policy," Davey said.

The days of handing out long red envelopes filled with cash to journalists at press conferences in China could also well be over. The industry is trying to clean up its act and has recently released a new code of practice for both public relations professionals and journalists.

The local media is still very pro-China in its content and style but the practice of accepting cash and gifts in return for running positive stories is now being phased out.

Tony Turner has worked in corporate communications in China for over 25 years and is the Hong Kong based Chairman of the Rowland Company.

He says in the past there has been a degree of cronyism, corruption and lack of transparency in the media but that is changing as Western-based multinationals entered the market with a new set of communication standards.

"What we've got today in Hong Kong is a highly professional, highly inquisitive and free media," he said.

Turner believes many multinationals don't want their name tarnished by being caught for paying journalists.

"The opportunity for PR and professional PR is as great as it ever could be," Turner said.

This view is reflected in Beijing where Gua Hu-ming heads up the China International Public Relations Association. He says PR as a profession, started in China 15 years ago and first appeared in joint venture hotels.

In the past it has been standard practice for reporters to accept cash and gifts in return for running positive stories or even working in conjunction with investors to ramp up the stock market.

But this is changing Mr Gua believes the Chinese media and journalists are becoming more professional.

But what impact is the Internet having on traditional news sources and PR campaigns?

Dr Xueli Huang is an expert on Internet marketing based at Edith Cowan University in Perth.

He says Internet usage is growing in China with 60 million users but news content is still heavily controlled.

Most users are young and cannot afford a computer. Instead they use Internet cafes to send emails and their main news sources are limited to international news sites such as the BBC World Service and CNN.

"I don't think the Chinese Government will ban all the news sites, but Government will certainly want to control political sites."

Bandwidth is also a problem in China. Huang believes newspapers, radio and TV will still provide local news because of the time in downloading information from the Internet and the lack of infrastructure.

So if you are doing business in China here are 12 success tips for implementing a successful marketing communications plan:

1. Understand cultural differences. Be sensitive to local communities and understand the complex and varied structures of the Chinese media. They are not uniform and often controlled at a local, provincial and national level. I will never forget the cultural shock of seeing an armed red-guard standing on a pillbox outside a TV studio in Guangzhou asking for my official ID. Improve your cultural literacy by understanding the culture and history of those you're doing business with. Respect these differences and don't impose your own values & perceptions on how the local media should treat you.

2. Use a local spokesperson. Depending on the news value of the story, you will have a better chance of gaining media coverage the more Chinese you make your message. Using a local spokesperson will give you greater credibility. For example in PR campaigns for Nokia and IBM in China, they use local Chairmen who are Chinese because they are well respected and have deep Chinese roots.

3. Know your point of difference - what you do in your own backyard you also have to do in new markets. Find out what makes you or your service or product unique in the marketplace? How will it stand out from the competition. In the past cultural differences have been used as an excuse for dubious practices not acceptable back home. This has changed.

4. Clarify your communication objectives? What do you want to achieve? To inform or entertain? To provide information? To build a profile? To influence public opinion? Personal marketing? Marketing or launching a new product or service? How will cultural diversity and differing news values influence this? News values differ in China. Often issues will be reported one or two days later and not with the urgency or timeliness of the Western media.

5. Define your target audience? Who is your target audience? General public? Customers? Competitors? Suppliers? What age are they, what level of education, what beliefs and values, geographical location, how do they use the local Chinese media? How credible is the media your target audience uses? Does it still have credibility even though it is controlled? The media is evolving and becoming more respected.

6. Identify the best channels of communication. What is the best way to reach your target audience? TV, Radio, Internet, newspapers - local or national? Do your homework on how news is structured and gathered. Investigate who is reporting on what. Find out the nuances. TV has the highest penetration, while the Internet is growing amongst younger Chinese.

7. What is your key message? The media is becoming more competitive and market driven. They need readers and viewers to stay viable in the new economy. How can you make your message appealing and newsworthy? Distill what you want to say into three key points. Always check translations of media releases. Have them retranslated back into English to check for accuracy.

8. Build your case? When building your case look for the China angle. What are the features, advantages and benefits of your message for your Chinese targets? What evidence and proof do you have that is seen as credible and independent within their cultural belief system?

9. What is the China hook? What will make your message or news release stand out from the rest and appeal to the values of Chinese journalists. You are not successful in China until the local market tells you. Giving money to Chinese journalists is no longer acceptable. Use more legal and ethical incentives such as providing transport, lunch or a gift or souvenir item.

10. Develop long-term relationships with the media. Visit and meet journalists face to face. Network, get to know them and involve them in the story. There is now a focus on the interactive brand experience. For example in a recent mobile phone campaign local journalists were involved in trailing the product prior to launch. They were asked for their feedback and engaged proactively in its development providing them with ownership of the product and subsequent story. Relationships and personal connections, or guanxi are very important in China and especially so in cultivating good media contacts.

11. If you have to face the media yourself ... Use the Three Golden Rules to Perform at your Best = Know Your Topic, Be Prepared, Relax.

12. Seek Professional Help. For maximum impact, effectiveness and value seek the advice of a media and communications professional that can help your company see the media as an opportunity not a threat.

The Pains of Change with Clients

This month we discuss what so many professionals miss with their prospects and that often cause surprises after the project has started.
It is discussing the pains of change with clients. The problem is that very often clients invite your to their sinking ships hoping that you get their sinking ships into smooth cruising mode again within a day or two, and often for a competitive(ly low) fee.And when this doesn't happen (According to Dr. Edgar Schein, over 90% of consulting projects fail because of undisclosed events, non-discussable and lack of action on clients' sides), very often consultants get blamed for failing to achieve the projected results. But who is in the driving seat? You or the client? Who is the decision maker? No, not you? Thus final outcomes cannot be in your hands. And you must communicate this to your clients.
However, making consultants responsible for the outcomes of their clients' projects is just as futile as making parents single-handedly responsible for their kids' accomplishments. Consultants, just like parents, are not the ultimate decision-makers.
You can't even guarantee whether or not your clients get out of bed in the morning let alone whether they use or discard your advice. In plain English: You are NOT in charge. The client is.
Regardless of what parents do for their kids, and regardless of how much they help their kids to achieve it, if the kids consciously DECIDE to get involved in crime or drugs, the is not a dickybird parents can do about it. Responsibility for achieving results and authority for making decisions come hand in hand. You can't separate the two.
By nature people are scared of the unknown aspects of change, and, interestingly, when the change process is promoted to be a smooth ride and a neat slope with a steady gradient, some people get excited and jumps on the opportunity, but some people become extra cautious.
So, how does the military handle total buy-in from new recruits? Read the next paragraph from General Patton preparing his troops for battle.

"You are not all going to die. Only two percent of you right here today would die in a major battle. Death must not be feared. Death, in time, comes to all men. Yes, every man is scared in his first battle. If he says he's not, he's a liar."

The US Navy's SEAL Unit vehemently promotes the most intense part of their training, called "Hell Week". They tell potential recruits about all the pain and suffering they have to endure in order to become full-blown members of one of the most respected units in the American military machine.
And guess what, when people are mentally prepared for the hardship, they can better take it. And attrition rate in the military is a lot lower than project failure rate in the world of consulting.
In the world of professional services there is the current situation, the desired situation and the unknown "swamp" clients have to go through to reach the "promised land."
The key is to tell clients that it is a swamp full of alligators and mosquitoes not a rose garden with colourful butterflies, the journey to cross the swamp to the promised land will be more of a tough hike with blood, sweat and tears than a pleasure cruise with cute waitresses and celebrity hunks.
Clients know what is happening to them right now, and often can get a concept of what can wait for them in the promised land, but still, they are scared to death of crossing the swamp. And since you have crossed many swamps many times and arrived at many promised lands, you can tell your clients about what to expect on the journey and what to take with them. You can recommend them to take a rifle and a big knife, and leave their make-up sets and iPods at home.
When I defected from Hungary in 1988 with no money and no English, I knew I was in for a pretty rough ride. I knew I could end up being deported right away or being dumped into a refugee camp living like a rat until I would have a chance to find work and be released to the normal world (a.k.a. the rate race. Oh these fiendish vermin are everywhere). Just like me, many of my friends were fed up with the communist system, but unlike me, in spite of knowing the beauties and benefits of the promised land, they found the swamp too scary to cross, and decided to stay.
Many prospective clients are like that too. And the sooner they decide whether or not they are willing to cross the swamp with you, the better it is both for your piggy bank and sanity. Imagine you go through several meetings, write a proposal and then the prospect pulls back. A sort of "projectus interruptus" when a prospect withdraws before something "serious" happens. Arrrrrg!
So, during your initial discussion you've outlined and evaluated clients' cost of staying where they are right now, and the value of getting to the promised land. This actually establishes your value, which is a basis of your fees. (For more on this see "It's All About Your Value: Service Professionals' Guide to Setting, Raising and Safeguarding Fees"
So, now clients is excited about the opportunities waiting for them at the promised land, and mistakenly assume that you do all the necessary work and you actually carry them on your back to the new destination. This sets up false expectations, and if something unexpected happens (always does), you get blamed for everything, including the Spanish inquisition.
So, let's start and communicate this pain of change.
Ask prospects about their concern and worries regarding the change effort, and then elaborate on each item to the level of details as necessary. Then bring up whatever has been missed. If prospects express concerns about mosquitoes only, then bring up the alligators. Tell prospects that if they step off the path, the swamp can swallow them. These are not scare tactics, like "Unless you buy my fire alarm system, your kids will burn alive and you will hear them scream for the rest of your life." This is different. Here you use fear to make a buying decision.
Your prospects have already made a buying decisions based on their values. All you do is just fill them in on the details of what may or may not happen during the journey across the swamp. Take some time together to discover all the perceived dangers. If they don't happen that's great, but if they do happen and your clients are not properly prepared, then they freak out like injured animals, they can become totally unpredictable and you can be in pretty deep yoghurt. That is what some clients demand their money back or threaten to take you to court. It can be pretty nasty.
So, for a moment remember your first day at university.

"People, you may feel a bit crowded right but relax. In a few months half of you will be out of here."

So, students understand that unless they are willing to work their butts off, they will soon be out with no hope in hell to retrieve the tuition they paid at the beginning of the course. And if they want to come back later, they have to pay again.
The other important point is to make buyers understand that before the situation improves, it will worsen. It is the same as people shortly before dying often get seemingly better get, and then without much fuss, song and dance they irreversibly kick the bucket.
Therefore you must discuss the pains of change while making the conceptual agreement with buyers. They must know what they are about to get into. Remember, fear of failure is a huge withholding power in people's lives.
In most organisations change takes place at five levels:
1. ASSET LEVEL: For industrial organisations assets are the buildings, computer systems, production lines, the fleet of company cars and the photocopier. For a professional service firm it is their people. This is such basic change as buying a new photocopier. However, some people may insist on keeping the old copier because they are used to it.
2. ROAD MAP LEVEL: This is plans, systems and processes that enable organisations to go from A to B and actually navigate through the jungles of commerce throughout its lifetime. The road map also includes, policies, procedures, code of conduct, scripts and every piece of information that can be codified into written documents. Change at this level seems to be easy, but at this level we don't know whether or not people are interested in changing at all.
3. CAPABILITY LEVEL: This is the skills and competencies of the people organisations employ to produce what they produce. This includes both explicit (learnt through memorising information) and tacit (intuition, finesse, gut feeling, "trench work." Basically cellular level knowledge) experience. Two police officers can have the same level of explicit knowledge, but the one who has personally led numerous raids on drug operations where the bullets were flying has significantly more tacit experience.
This is why it is huge mistake to hire people (employees, contractors or advisors) based on resumes (explicit knowledge). I dare to say Donald Trump's assistant knows more about real estate than most realtors out there who are certified to the hilt and registered with every association that has something to do with real estate. The person can be explicitly amazing but tacitly amazingly incompetent. Your expertise is about 20% explicit knowledge and 80% of tacit information (intuition and gut feeling, trench work, basically cellular level knowledge).
The mistake here is that by sending people to training courses, managers expect instant performance improvement from their people as soon as they return from the course. But people do need time to turn the new information into new skills. For a doctor a fairly long time goes by between the first anatomy lesson at medical school and the first real heart surgery. I've never come across a doctor who can operate on people one day after graduation. A law school graduate must be invited to the bar to practise. It can only happen in the world of commerce that after graduation a freshly minted MBA demands, and often receives a senior management position with a corner office a personal secretary, some mind-numbing bonuses (on what?) and a company Mercedes.
4. INTENTION LEVEL: This is the major driving force behind and change initiative. It is fairly easy to change things, but changing people is a horse of a different colour altogether. We have discussed many times how important it is to align organisational objectives and strategies with personal goals, and this is the perfect place to see this alignment in operation. When it exists, people buy into the change relatively easily (All right, let's factor in the general fear of change), especially if they see that everyone around them will go through the same change process.
For every desire for change there is an opposing desire of keeping things the same. At this point the best thing you can do is to find the pros and cons for both situations.
5. VISION LEVEL: This is really the essence of the change effort. Many people say "I want to start exercising", but only a very few, who actually start, have overarching reasons, let's call it visions, to actually get started and maintain it in the long run. I know a company that espouses on its website that they are the best IT firm in the vicinity, while the president is encouraging people to do half-repairs, so they can return and milk clients over and over again. He himself lives pretty high on the hog and works hard on how to explain to his people why there is no pay increase and, again, the company can't afford to pay bonuses. Basically, he is a rotten lying SOB.
Post-Reading Provocation
* Look back on your projects and try to count how many times your clients have been surprised and even shocked by unexpected setbacks. Have you ever been blamed for these setbacks?
* After discussing the current and the desired situations, how could you discuss the potential pain based on the five change levels listed above?
* How can you communicate more effectively that creating the desired results, while you and the client are mutually accountable to each other, is the client's sole responsibility since s/he is the final decision-maker.

Productivity on the Job

Increased productivity means people like Jane and Phil earn effectively higher wages than their parents.
Here's why: Every time a company makes an improvement, a productivity improvement, it increases its value and its income. Whether it reduces a cost or adds value for which consumers will pay more, it increases its earnings.
Some of those increased earnings go to higher (real) wages for employees, some goes to investors, and some goes back into improving the business. When we say real wages, we mean after inflation.
Consider this: Phil, a carpenter who builds homes, buys a new, compressed-air nailing gun, and now frames a house in 18 and a half days, rather than 19 days as he did with his old nailing gun. He still gets paid the same amount for framing a house, but his productivity went up, so he gains (in effect) a half day's pay. Part of that gain helps pay for the new nailing gun, part goes toward other new tools, and part goes into his pocket since he's an employee and owner of the business.
In time, of course, all Phil's competitors will close this productivity gap by getting new nailing guns of their own, and that will push down the price that homeowners pay for framing. But, for now, Phil's productivity advantage increases the amount he earns as an employee and owner.
Productivity improvements don't come only from better technology, like better nailing guns. They also come from improvements in processes that allow employees to work more effectively. In many cases, that's as simple as improvements in communication between two people who work together.
Probably the most important thing to know and remember about productivity improvements is that there are so many little ones. Sure, we all know about the big breakthroughs like electric lighting, the automobile, and the computer (well, some of us might argue about that)), but just as important, or perhaps even more important, are the literally millions of small improvements made every year. Individually, they don't mean much, but collectively they've generated an enormous increase in our productivity.
Because of productivity improvements he made at work, Phil's real wages have gone up. Because of the millions of big and small improvements throughout society, just about everyone else's wages have gone up, too.