Monday, February 14, 2011

Brand Pollution

One of the advantages to franchising is the ability of a business owner to immediately become part of, and benefit from a well-known national brand. It's instant brand equity, bought at a discount. But what if the brand goes bad? What another franchise operator pollutes the brand?

What if you buy a franchise and a nearby franchisee has problems? Worse, what if the franchisee goes bad and it gets picked up by the media, making the brand toxic? Your operation could be golden and yet, your reputation could be tarnished by someone else carrying the same brand in an adjacent territory.

The nearby operator may not do anything wrong. He may merely be the subject of a witch hunt by an overzealous prosecutor out to make a name for himself by attacking a business. You can be sure a compliant media will be ready to pile on, calling the business, "unscrupulous," "greedy," and so on.

A recent example can be found in a Minneapolis Star-Tribune report on the operation of a national plumbing franchise. I don't know whether the local operator actually did anything wrong or not. After all, many in the media and government consider profit to be wrong. Regardless, the brand as a whole was attacked, not just the local operator.

Justifiably or not, consumers piled on. Their comments were harsh and overwhelmingly negative.

In today's wired world, this story and accompanying comments won't merely affect franchisees within the readership range of the paper. The story will come up nationwide on Internet searches. It's going to hurt business owners operating under the brand a thousand miles away and could haunt the brand for years.

The argument a franchiser will offer in defense is that headquarters monitors franchisee quality and reputation. In practice, for many franchisers, such monitoring is limited. Consumer complaints that reach headquarters are typically turned back to the local franchisee. If complaints get excessive, the power to act is limited by the franchise agreement.

The franchise laws that are designed to protect the rights of franchisees can limit the ability of the franchisor to take action. Not only is it legally difficult to remove a franchise, it's expensive. Franchisers will think long and hard before stepping in.

If you're considering franchising or licensing a brand, the risk of contamination by other operations using the brand should be factored into the decision. In the case of an extremely well-known and advertised brand, the risk might be worth it, especially if the brand enjoys a stellar reputation. If the brand is one you will be investing in, that is not already established in your market and that requires your efforts to build awareness, why assume the risk that the brand might be polluted by another company?

Why not build a brand that you control and that can't be polluted by another operator instead? Why not build your own brand?

1 comment:

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