Reference no: EM13225101
Case Study: Thought It Was Safer Than Starting His Own Business
After nearly thirty years of employment which ended as a senior executive in the automotive parts industry, Fred wanted to make a change in his life pattern. To quote: "I was tired of moving at such a fast pace and sick of traveling ten to twelve days a month." He wanted to go back to his hometown of Indianapolis to pursue semiretirement and stay the rest of his years there running a business.
When his former employer, a midsize firm in the automotive supply industry, was acquired three years ago, Fred took the buyout funds and bought a car repair franchise in a close-in suburb to Indianapolis. He expanded over the next seven years and now has five franchised locations in the greater Indianapolis market. The last two businesses he financed primarily by revenues generated from his first two car repair locations.
The transition from being a senior executive to a jack-of-all-trades franchised business owner has been bumpy. Even with twenty-seven full-time employees (not counting himself and his wife), Fred is putting in long hours and feels stressed on a daily basis. Though his businesses are making money, Fred frequently works ten-hour days and spends evenings submerged in paperwork. Fred sighs, "I am supposed to be semiretired, but I am working as hard if not harder than ever before."
Fred's plight is not uncommon in the franchise world. Buying a franchise can ensnare would-be entrepreneurs that have a dream of business ownership-while someone else collects loyalties on every dime that comes through the door, not to mention advertising and other fees: and all the while the franchisor dictates most every detail of what Fred can (and cannot) do, including the types of signage to put up, how to price services and parts, how much overtime to pay employees, and who will be his suppliers. As Fred states, "Violate the agreement, even in some small way, and the franchisor can take the franchise back. Then, where would I be? I am stuck. I feel captured. I am unhappy."
Fred believed that running a franchise business would mean being his own boss and running his own company, which he now believes is a misconception. Fred believes that, in reality, his business venture of five service centers is more like leasing a trademark and the real boss is the franchise system that sold him the privileged.
Case Questions:
Is Fred ill-suited to be a franchisee, or, perhaps, did he just not understand what he was getting into at the contract signing?
Could Fred's misconceptions be common among franchised business owners?
What would Fred have done prior to signing the contractual agreement to better inform himself about the business relationships?
What would Fred do now, if anything?
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