Franchisees who invest in publicly held companies should have a line of communications with the investors in their system that is uninterrupted by corporate management.

After forty years of successful growth the McDonald's restaurant system hit some potholes in the 1990s. Coincidentally we had just launched Franchise Equity Group and were in a position to monitor the trauma that the second generation of McDonald's managers were inflicting on the system.

After our efforts in the interests of McDonald's franchisees were mentioned in the major media we were contacted by Wall Street analysts and institutional investors. Working with these people was an extraordinary learning experience.

At that time McDonald's had been an NYSE listed company for over thirty years, had a market cap of over $30 Billion, and yet there was an stunning lack of knowledge among investors. Our discussions covered franchisee profitability, the results of an unrealistic growth program intended to impress investors, management's history, franchisee morale, and other basic topics.

Over these past fifteen years I've had the pleasure of assisting many investors in learning about not only McDonald's but the franchised industry in general.

Franchisees in publicly held brands should develop the philosophy that the corporate people (who are temporary employees) don't own the company.

The only significant investors in the brand are franchisees and shareholders - two entities that should be in constant communication.

FAQs About Franchisees Communicating With Investors.

1. Should franchisees attempt to influence the value of the corporate stock?

Absolutely not - If your brand is to be a good opportunity for franchisees it must be healthy at all levels. However, problems develop when management uses short term strategies that might help the share price but damage franchisees. Think about this activity as the education of investors for the long term health of the entire system

2. know my business intimately but don't know much about high finance and Wall Street?

Hey, join the club. I've rarely been asked about a stock price or P/E, ratios. The analysts want to know about commodity costs, minimum wage issues, management changes, remodeling programs, franchisee debt, etc.

3. How will corporate management feel about franchisees chatting with investors?

They won't like it but won't say much. This activity is most effective in those franchise systems where management controls 100% of the information about the franchised side of the business. In those cases they've told investors franchisees are supportive of management's initiatives and there is complete "alignment"between management and franchisees. Of course they want franchisees voiceless.

4. Will I be divulging proprietary information?

If you think you are walking around with a lot of proprietary information you should consider canceling that speech to the local Kiwanis Club. Discerning franchisees would never divulge information that would benefit their competitors.

5. Do Wall Street analysts care about my personal success as a franchisee?

Not so much - But they want to know if the corporate initiatives will be successful and if resistance to management's direction might retard corporate growth. As analysts they understand the franchise model must be a good investment but they
won't fuss over every franchisee's survival. Especially if all they hear is corporate's side of the story.

In summary, most publicly held franchised systems operate with a few corporate people strutting around like they own the brand while the real investors are franchisees and shareholders. In most cases management has been successful in building a towering wall between the true owners of the brand.

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